Benefits for All
Benefits are a critical part of employees’ compensation. While people always harp about receiving salary that is fair and that can support the lifestyle they want, what they often don’t say is how important it is for them to also receive in-kind benefits. Life insurance, health insurance, memberships and privileges — all these are sought by employees without them saying, or sometimes even being aware of it.
The curious thing is, as the world shifts into the gig economy, more and more people are foregoing these in-kind benefits. As a driver on Uber, a freelancer on Upwork, a property lessor on Airbnb, or as a solopreneur in our ultra-connected and internet-driven world, they opt to receive compensation purely in cash and resort to availing of benefits on retail instead.
Being in the benefits space for over a decade, we understand the importance of benefits in the lives of workers and people, in general. We’ve seen how it endears them to their firms, how it provides for their needs, and how it impacts their lives in a very positive way, giving them peace of mind and great value for “free.”
The challenge now is how to port these benefits into the world we are slowly shifting in to while still retaining the bang-for-buck that the traditionally-employed enjoy.
Benefits and Blockchain
While searching for a way to make this happen, we came across blockchain technology.
Blockchain has been the talk of the town these past few months — some praising it for the tremendous potential it has to improve the way people transact with one another; some calling it a scam because of the way the term has been carelessly used to hype projects and boost company share prices. While it cannot be denied that many have maliciously used the tech to falsely advertise value and fool the masses into contributing hard-earned cash to fake causes, we feel that the technology itself is NOT to blame. In fact, we sincerely believe that the technology opens doors to better solutions across a multitude of different applications.
To better understand how blockchain can help in the benefits space, it’s best to take a deeper look at the tech and see how it really works.
What is blockchain?
Blockchain is essentially a technology that builds trust. It makes it possible for people who don’t know each other to transact with one another and be assured that the transaction happens as agreed.
Traditionally, the role of ensuring fairness between two transacting parties lies with an intermediary. A bank assures a payor that his payment was deposited into the payee’s account; that same bank assures the payee that the payor already issued him payment. A lawyer assures a landlord the receipt of monthly rent from a tenant through a well-drafted contract (and the ability to enforce it, if needed); that same contract assures the tenant of the right to stay at the property under the agreed upon conditions.
Blockchain does the exact same thing that a bank and a lawyer do, but without the need for that bank or lawyer.
What blockchain gives us is the chance to replace the intermediary with unbiased technology that is not owned nor controlled by any single entity. This allows the same, if not a higher, level of trust between parties without the disadvantages of needing middlemen (e.g. high commissions; changing rules; being at the mercy of the middleman, especially in monopolistic situations).
While all this seems too good to be true, it makes perfect logical sense once you understand the clever design of the technology.
In essence, this is how it works:
- It maintains all transactions (payments, contracts, transfer of assets, etc) on a ledger that is visible to all (transparent)
- The data on that ledger cannot be destroyed, edited or changed, but only appended to (immutable)
- Each newly appended set of transactions (a block) uses a hash of the previous block as part of a unique key (like a complicated password) to encrypt itself. So each block is dependent on the previous (which is dependent on the previous and so on until the very first block)
- An exact copy of the whole ledger is stored and updated in up to thousands of various nodes (servers or even personal computers) owned by unrelated parties (distributed and decentralized)
- Transactions can be recorded by any of those nodes, provided that a majority of them validate the record as true (consensus mechanism). Note that the majority is determined in many different ways, the discussion of which is beyond the scope of this post
If it seems complicated, it really isn’t. There is a whole lot of written material online that seeks to explain blockchain. This is one I’ve come across that is able to simplify the tech in a way that even non-techies would understand.
If at this point, you feel that you don’t fully grasp the technical marvel of blockchain, that’s fine. Suffice it to say that because it is transparent (if you try to cheat your way out of an agreement, everyone can see it), immutable (a transaction can’t be reversed; an agreement cannot be changed), and decentralized (no single entity has control over the ledger of transactions or digital assets, including agreements and contracts. If you want to change a transaction in your favor, you have to edit the block it belongs to and all succeeding blocks (remember, each block is dependent on the previous) in at least 51% of the distributed copies of the ledger before the next block is created so it’s virtually impossible to hack and manipulate), it is able to establish trust between parties. And because the trust is created by technology and NOT a person or institution acting as a third party, it opens up a world of possibilities.
Why is this relevant to benefits for the gig economy?
One of the reasons why benefits are so difficult to come by for the non-traditionally-employed is because they are so expensive when bought at retail. For example, the cost of premiums for health insurance for an individual is almost twice as much than for a person employed at a 2,000-man company.
This is because large corporations are able to haggle down the price of premiums given the number of people they negotiate on behalf of. Also, because coverage is given to a group of employees with varying degrees of health, providers are able to spread the risk of coverage and further reduce the cost of premiums.
One way this advantage can also be enjoyed by individuals is by allowing them to band together and create an aggregated body of demand.
Ten thousand freelancers coming together and negotiating for the same benefit from a single provider would allow them to take advantage of economies of scale and get it for cheaper vs. if they bought them from the same provider individually.
Technology is well-suited to provide a vehicle for aggregation in a way that is much more efficient than manually managing lists of individuals. Blockchain, more so, because it allows this efficient manner of aggregation while:
- Assuring that each member of the aggregate is a legitimate and qualified individual
- Assuring that the identity and profile of the benefit seekers are reliable (something that is lost when the individual does not belong to a company that can vouch for him)
- Assuring individuals that the benefit provider has been vetted and will actually give the benefit when paid for
- And removing middlemen, like brokers or even tech platforms that are owned by corporations, which typically charge large commissions (sometimes upto 10–20%) just for bridging the benefit provider with the benefit seeker
This is what excites us over at ALLCARE. There is finally a solution that will allow freelancers, solopreneurs, even independent professionals like doctors and lawyers, to receive quality benefits at prices comparable (or perhaps, even less, because of the elimination of the middleman) than what the corporates enjoy. And this extends, not just to health and life insurance — though those are certainly key benefits which we know each individual needs and should prioritize — but also to other benefits that are relevant to the gig economy; benefits such as training, transportation and travel discounts, and even services like annual tax filing.
We’ve still got some work to do to make this happen. But the blueprints have been laid out, and the infrastructure is ready to be built on. We just need to get our heads down and pretty soon, we’ll realize our dream of giving access to Benefits for All.