Getting 1099 Workers Paid

The contractor workforce is growing, but with that growth comes more complex issues related to the payments solutions needed to ensure 1099 workers are being paid on time. PYMNTS sat down with Tad Milbourn, co-founder & CEO of Payable, to discuss why a unique approach is needed in order to serve this dynamic and booming market.

PYMNTS: You built a platform called Payable designed to help contractor-based businesses manage their payments. How does your platform work and what problems does it solve?

TM: At the end of the day we are trying to be the easiest way for companies to manage and pay their contract workforces. The way that it works is that a company will sign up for Payable and they can set their company up to track work however they do it. A lot of companies have hourly work or they have expense reimbursement or mileage or projects, it’s always some different mix and always some different combination of variables. To address this we have created these LEGO block pieces, which is kind of a unique approach that allows each company to configure their own setup. We have people that are paying their contractors by the tweet, it’s stuff we never thought would happen but it’s actually going on and we are really the only system that can reflect the flexibility and fluidity going on in the contract workforce.

That’s component No. 1, component No. 2 is our unique calculation engine that allows us to do some more advanced things with that work data. If you have a notion of surge pricing where some hours worked during the day are more important than others, or have hourly floors that provide a minimum that can be beat if you have a sufficient number of deliveries. All sorts of crazy stuff, or calculations that seem crazy on the surface because usually people just think in terms of hourly work but there’s really complex things going on out there. This creates new ways of paying individuals. That’s typically happening in the contract workforce and we built a platform that uniquely solves for it.

PYMNTS: Why did you decide to serve the contractor-based business and what is your business model?

TM: The team is founded by former Intuit employees but we worked there, had a great experience and got to see small businesses at scale, millions of them across the U.S. A common theme we saw were struggles around tracking the work and challenges, either for the contractors themselves or the companies managing them, to get payments to happen on time. It really stemmed from that insight. We then decided to form a company to go tackle it. We looked at the marketplace and didn’t see a lot of great solutions and thought we would step into that void and ultimately help these companies have less operational burden on their shoulders and help the contractors to get paid faster. The model for that approach is SaaS-based, so, depending on the number of contractors a company pays in a month, we charge $8 per month. A company may have 50 contractors but may only use 15 of them in a given month — in that case it would be the 15 times $8.

PYMNTS: How are you going to invest the $2.1 million Payable has just raised?

TM: There’s no real surprise to the news that we are focused on building the product and growing the business. We are looking to hire some engineers and we just brought on a new head of marketing. We would like to do a few more of those types of hires to allow us to go after our grand ambitions for the space and to get the word out about what we are doing.

PYMNTS: Outside of the labor market, what other sectors do you believe can benefit from your technology, and what is your expansion plan?

TM: Yes, we have a plan for expansion, but I would say the labor market is a pretty broad sector of the world to go after, so we are very much focused on contract-type work as opposed to more W2 type work. W2 tends to be more stable, repeatable and there are a lot of great payroll solutions out there. But contractor payments are by definition fluid and flexible, and I think that calls for a different approach to the software. That’s why we built those LEGO blocks and calculation rules, because those are the things that are necessary to serve this market.

The market is growing at 6.2 percent a year, far faster than the workforce in general. That’s why a growing proportion of the workforce is going to be done with contract labor. Let alone the macro trends of technology-enabling platforms that allow contractors to get more business. One of the things we learned at Intuit is one of the hardest things about running a business is getting customers. Now there are ways to plug into this customer stream and just focus on doing the work as opposed to searching for clientele and building out that book of business.

Additionally, benefits are becoming decoupled from employment. The Affordable Care Act doesn’t necessarily make it easy to get health insurance but it sure is easier than it was before. This puts workers in a position of being less inclined to just stay in a job (when they would rather be their own boss) just to keep the benefits. Once again, not necessarily easy but getting easier and you’re going to see those trends continue over time that make it more attractive to be a contract worker, to be self-employed, to do the work that you want to do in the way that you want to do it.