What happens when the sharing economy meets up with home care?
As the economy shifts to one based on sharing, consumers are increasingly seeking more convenience and flexibility in their transactions. These desires drive the success of companies like Airbnb and Uber, the two main platforms that have given rise to the sharing economy approach for service.
It’s worked well for ride sharing, vacation rentals, and even handyman work. Could the care industry be next to embrace a sharing economy model?
What is the Sharing Economy?
Social enterprise The People Who Share defines the sharing economy as “a socio-economic ecosystem built around the sharing of human, physical and intellectual resources.”
In a traditional economy, one person (or organization) sells a product or service in exchange for money. In a sharing economy, actions lean more towards shared ownership, collective purchasing, swapping goods, recycling, borrowing, and renting.
This can include open source data, user-generated content, and crowdfunding. It’s a hybrid model where consumers share goods rather than own them.
Take Uber, for instance: instead of providing its own full fleet of chauffeurs, Uber allows licensed individuals to offer their services as drivers to consumers. The freedom to control your own work schedule makes the job attractive to drivers, and the low cost of the service is attractive to consumers.
In this way, Uber provides a platform to facilitate a transaction between two people that would otherwise be difficult to coordinate.
TaskRabbit is another great example of the sharing economy in action. The online platform connects those who are looking for help around the house with those who possess the relevant skills, have available time, and want to make a little cash doing odd jobs.
As with Uber, TaskRabbit’s success comes from fostering the sharing of services between people.
So why would the care industry be next to adopt this sharing model?
As our society advances and our overall population ages, we’re seeing more and more elderly citizens requiring professional care and assistance. The desire for home-based care is booming, while low supply of care providers, and high cost of care are making it harder for many elders (and their families) to access the care they seek.
This causes a very common care dilemma among families looking for elder care: cost vs. quality. This problem that will only grow if the care industry continues to operate the same way it is now.
When it comes to hiring care, families often face a tough decision: hire trained staff to provide care for elderly relatives in their own home, or send their loved ones to an assisted living facility. While most seniors prefer the comfort and familiarity of their own homes, their families often battle the reality of whether it’s logistically and financially feasible
Home care involves more individualized planning, specific legal guidelines, and fees, given that traditionally, the only practical option for families has been to hire through homecare agencies.
Most of us agree that we’d go to any lengths for our beloved parents, grandparents, and relatives. Despite the high costs and legal intricacies of home-based care, many families opt for it anyway.
The Status Quo: Agency Model
Historically, when it came time to hire an in-home caregiver, families had one option—they could call a home care agency, and request the appropriate care to meet their needs. The agency would send one of their many employees to the household, where the worker would perform duties as instructed by that agency.
While the family had control over which agency they chose (assuming there were multiple options in their area), they had very little control over the actual caregiver assigned to their loved one.
Although happy to receive the comforts of home care, families often struggled to pay the high agency fees. But it’s worth it to pay your home caregiver more for their individualized attention to your loved one, right?
Not exactly. The caregiver you hire through an agency doesn’t see all of the money you pay; agencies use a bulk of these fees to pay for overhead and other fixed costs. In fact, caregivers on agency payrolls see very little in actual wages, earning less than $25,000 a year on average.
Further complicating matters, the Department of Labor recently adjusted the Companion Care Exemption—this law deemed many caregivers exempt from receiving overtime pay, but now declares that only certain caregivers employed directly by a family are exempt from overtime.
Since caregivers employed by agencies must now be paid overtime wages, the costs for families hiring through agencies have skyrocketed.
Fast forward to 2016: more seniors are requiring care, the cost of healthcare is at an all-time high, and the sharing economy is exploding into new industries. Inspired by the recent success of sharing platforms like TaskRabbit and Uber, we’re seeing innovative new developments that aim to solve the inefficiencies and high cost of traditional home care models.
Rapidly growing companies like CareLinx and KindlyCare offer users a marketplace (or registry) to privately meet, interview, and hire their caregiver. Additionally, they provide clients and families access to customized mobile technology in order to track and manage the care performed in the home.
Picture a blend of Match.com’s relationship focus with Uber’s smooth facilitation of services; what you get is a platform designed to help you find the caregiver that best fits your family, organize that caregiver’s schedule, and track the quality of care provided.
Since CareLinx and KindlyCare require very little overhead, they only charge a small fee to ensure the caregivers on their platform are vetted, as well as covered with liability insurance. These fees are generally around 15 percent of the total cost; a savings of 30 to 50 percent for families that use their service.
And because the platforms have such low overhead costs, more of your money goes directly to your caregiver—providing adequate income for those who work in home care. A study completed by the National Employment Law Project showed a variety of benefits for home care workers and employers if a higher wage (in this case, they suggested a wage of $15 per hour) is standardized across caregivers.
The benefits listed include an increase in workers as demand rises, a benefit to the economy, a lower reliance on public assistance, and a reduction of turnover. Just as TaskRabbit creates a happy agreement for both service providers and consumers, platforms like CareLinx and KindlyCare offer affordability for families seeking care and more substantial wages for care providers.
Challenges to the Sharing Model
While the sharing economy enables many people to find and offer affordable services, there are still some kinks to smooth out in this new model. Some sharing services have attempted to pay employees as 1099 contract workers (essentially, treating each service provider as an independent contractor).
The government is cracking down on these cases, after clarifying that nearly all of these caregivers are actually employees of the household.
When you hire someone to provide care in your home—even if you do so through a third-party sharing platform – that caregiver is legally your employee, and should be paid as such. That means you are responsible for withholding appropriate taxes from their pay, and keeping accurate records.
Fortunately, most platforms in the care industry are quite savvy when it comes to home employment. They’re getting ahead of the curve by offering resources to guide users through the process of paying caregivers legally.
Both CareLinx and KindlyCare (among other care platforms) offer tools for families to navigate tax responsibilities, provide W-2s, and keep reliable records. There are also outsourced payroll companies who specialize in tax requirements and home employment.
Many families use third-party experts to ensure they’re doing everything by the books and paying caregivers fairly. As payroll services become more popular, and care platforms expand to offer a wide breadth of support for managing home care, the obstacles blocking the success of this sharing model are beginning to come down.
Much in the same way that Airbnb acts as a vehicle to connect “guests” with “hosts”—who transfer payment securely through the Airbnb platform—families are using new platforms to find and pay their caregivers through a dedicated system.
These sharing services not only provide secure means for delivering caregivers’ paychecks, they also support families in managing taxes appropriately, and fostering the employer to employee relationship in the home.
Companies supporting the home care industry are beginning to introduce efficiency much like Uber’s and Airbnb’s roles their respective industries by offering a safe, stable, and affordable way to connect people who need care with people who can provide it.
The sharing economy has grown by leaps and bounds, and it’s so popular that some share-based services have grown in value over their competitors in traditional markets—Airbnb is now worth more than Hyatt hotels.
It looks like the care industry will be the next to adopt this strategy at full force, with the aim to develop better-fitted and more affordable care for American citizens.
Kathleen Webb co-founded HomeWork Solutions in 1993 to provide payroll and tax services to families employing household workers. Kathleen has extensive experience preparing ‘nanny tax’ payroll taxes.
She is the author of numerous articles on this topic and has been featured in the Wall Street Journal, Kiplinger’s Personal Finance, and the Congressional Quarterly. She also consulted with Senate staffers in the drafting of the 1994 Nanny Tax Law.
She currently serves as Co-President of the International Nanny Association, the leading professional association in the in-home childcare industry.