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How Much Does On-Demand Labor Cost?

By Steven Calhoun on Oct 30, 2020 1:59:03 PM

If you’re in manufacturing or logistics, you understand how important balancing labor costs and productivity is to meeting your goals. Pricing models for on-demand labor can be confusing, and businesses like yours need to know if this new labor model can cut costs and fuel growth. Maybe you’re asking yourself if it’s even worth looking into on-demand labor.

Because Veryable wants to price usage of our on-demand labor platform competitively and with transparency, we have done plenty of research. We’ve looked at how companies are pricing on-demand labor, what other costs are associated with these services, and how the pricing compares to traditional staffing solutions.

The short answer is: Typically, you can expect to pay the worker’s wage plus 30-65% as a fee for using on-demand labor. However, there can be other costs depending on which platform you use.

This article will explore the different pricing models and compare the cost of on-demand labor to traditional staffing solutions. You’ll walk away with a clear understanding of what your business should expect to pay for on-demand labor and you’ll know if it’s a viable solution to your labor and productivity problems.

First we’ll dive into the two pricing models: fees based on worker pay, and hiring fees.

 

On-demand labor pricing model: fees based on worker pay

The price of on-demand labor typically follows a simple “fee” structure, where you’re charged a percentage of the worker’s pay. You as a business user pay the on-demand labor platform for both the worker pay and the on-demand labor fee. The on-demand labor platform in turn pays the worker their agreed upon rate and keeps the fee for itself.

We have found that fees for using on-demand labor can range from 30% to 65% of each worker’s pay. 

For example, if the fee is 30% of the worker’s pay and the worker completed 10 hours of work at $10 an hour, the total cost to a business user would be $130. That is $100 for the labor plus $30 for the fee. 

Your business would make one payment to the company running the platform, which would then pay the worker their $100 and keep the $30 fee as its compensation for maintaining the marketplace. 

Veryable chooses to charge a percentage fee based on worker pay for the use of its on-demand labor platform, due to the simplicity and transparency of this fee structure.

 

On-demand labor pricing model: hiring fees

Some platforms charge hiring fees when you decide to hire one of the workers as a full-time employee. 

The fees vary, and some on-demand labor platforms charge a higher fee based on how quickly those independent workers were permanently hired.

This fee is to discourage companies from using the platform as a hiring service instead of a new model for meeting temporary work needs. 

Veryable does not charge companies if they choose to hire workers who they’ve previously engaged with on the platform. While hiring workers from the platform is far from the ideal use case, we do not want to penalize companies for hiring a good worker.

 

How on-demand labor pricing compares to traditional staffing costs

One of many differences between on-demand labor and traditional staffing is the cost. Traditional staffing solutions often require upfront setup fees into the hundreds of dollars and come with a contract requiring your business to use a certain amount of work over a period of months. This means you might have to bring in workers at times when you really don’t need them.



 

Fees

Upfront Costs

Contracts

Traditional Staffing

Yes

Typical

Typical

On-Demand Labor

Yes

No

No



Another upfront cost is the more time-consuming process of using a staffing agency. You often have to speak with someone on the phone a few times before you can ever post a job or get help finding employees.

On-demand labor typically does not come with an upfront cost and many platforms let you post work opportunities right away. This way you can try it out and meet your labor needs quickly, then contact someone when you have questions or want to try something more advanced.

 

Can on-demand labor save you money?

To fully understand if on-demand labor could save you money, you need to understand when it’s best to use on-demand labor. This new labor model works best when combined with a smaller count of full-time employees. This combination enables fast flexibility based on the current demand for your products.

If your demand changes frequently, you could hire on-demand labor instead of paying overtime to your employees. This would save you money on overtime and could reduce turnover by avoiding overworking your full-timers.

If you miss shipments because you’re lacking labor, or have a backlog that keeps building up, on-demand labor can supply workers quickly and for just as long as you need them to fill those orders.

Still not sure if on-demand labor is worth the price tag? Check out our blog post on the top five benefits of on-demand labor. This article explores the ways on-demand labor can help your business beyond just the hard cost savings.

 


Photo by Dan Dennis on Unsplash

Steven Calhoun

Written by Steven Calhoun