How Payment Flexibility Eases Independent Contractor Cash Flows

The proliferation of the gig economy and dramatic shifts in professionals’ expectations for their own career paths have begun to carve out a larger space for the independent contractor — and for regulations surrounding them.

The logistics and delivery space is primed to embrace the independent contractor model, which, in theory, can provide the kind of flexibility in talent availability needed for the ebbs and flows of demand.

In reality, however, the logistics industry continues to be plagued by a talent shortage, especially when it comes to drivers and delivery personnel. According to Louis Esbin, CEO of Loadchief, addressing that bottleneck has more to do with supporting independent contractors and perfecting the independent contractor model than it has to do with flooding the market with more drivers.

B2B payment and cash flow management strategies play an integral part in helping couriers and delivery drivers optimize their relationships and productivity.

“We want to be able to further the perfection of the independent contractor business model,” Esbin told PYMNTS in a recent interview. “The way you do that is by giving drivers and courier companies the ability to decide the frequency by which payments are made.”

Addressing Cash Flow Speed Bumps

Shifting regulations around independent contractors continue to have profound impacts on the workflows of industries that rely on this workforce, including the parcel delivery space.

Historically, drivers were employed by a courier or logistics company that would pay those professionals as they would any other employee: on a weekly or biweekly basis. But Esbin said that the rise of on-demand service apps coincided with a growing demand among drivers for more frequent payment. The emergence of legislation, like California’s Prop 22, also means firms can continue classifying their Delivery Network Company (DNC) drivers as independent contractors, with implications for wages, benefits and more.

As independent contractors, he said, drivers can struggle to manage the financial health of their operations.

“These people who are doing the driving are [often] paying for their own insurance, paying for their own gas, auto repairs,” he said. “Very often, they are not the best at managing their cash flow. They need to have more frequent payment because they need to cover … expenses that they are incurring right away.”

At the same time, the evolution of the on-demand economy has also created a fragmented ecosystem of drivers and couriers that are not maximizing productivity.

A driver may complete a route or delivery and then have to deadhead home to scout their next gig, creating unused time and energy that could be optimized for another delivery. It’s this inefficiency that led to the creation of the Loadchief marketplace, streamlining the ability for drivers and couriers to connect.

Fine-Tuning The Indie Contractor Model

The cash flow lumps that independent contractors can experience created an opportunity for the Loadchief marketplace to strike a partnership with Velo Payments. Velo Payments Head of Corporate Sales, Business and Product Development Eric Fox told PYMNTS that this allows drivers to choose the frequency and method of their payment.

“Giving that option to the driver as to how they want to receive their payment or giving the option to the courier as to how they want to make their payment creates a much richer experience between the two,” Fox explained.

This kind of flexibility contributes to what Esbin referred to as a perfecting of the independent contractor business model. A courier can post a job within the marketplace at its determined rate. But an agile payment strategy means that rate can rise or fall depending on whether a driver needs to be paid sooner or can wait longer — a faster payment means a lower rate, while a longer payment term can yield a higher rate.

It’s a function that is only possible through the independent contractor model and not when these professionals are classified as employees, noted Esbin.

With regulations continuing to shift and adjust the definition of gig worker and independent contractor, these professionals and the businesses that rely on their talent won’t just be looking to FinTechs and marketplaces to support matchmaking and cash flow management needs. They’ll also be seeking out technology partners that can support regulatory guidance and compliance.

Esbin highlighted other opportunities to support the independent contractor business model through fostering the development of an ecosystem of services and support within the marketplace. By promoting compliance while driving the financial health of all participants in this system, this model has the potential to work for all stakeholders.

“It’s all about perfecting the independent contractor business model and allowing these drivers to be independent businesses and operate themselves independently,” he said. “At the same time, it’s about allowing the courier industry to fulfill the needs of its customers and the demands in its market that otherwise are stymied by its inefficiencies and fragmentation.”