Third-party assurance

A way to increase the transparency of gig platforms

In recent years, gig platforms have become regularly used services within society. These digital platforms make it possible for people to take on single projects or tasks from other people whilst getting a (monetary) reward in return. Well known examples of these platforms are Uber, Fiverr, and Amazon Mechanical Turk.

These platforms bring many benefits to consumers, such as new propositions and lower prices. Take Uber, for example, they made it possible for people to request a ride using their phone, while also being able to offer a lower price than conventional taxi services.

This sounds great, however, gig platforms also have a darker side, especially for the gig workers of platforms such as Uber and Deliveroo. On these platforms, gig workers complete physical tasks and have to be stand-by to receive them.

Exploitation of gig-workers via false self-employment

These sorts of platforms have seen a lot of media attention as critics say that they indulge in false self-employment. This happens when someone is registered as self-employed but is de facto treated as an employee by an organisation. False self-employment results in gig workers not receiving the social securities associated with being employed, nor experiencing the freedom of being an independent contractor.

These platforms restrict the freedom of gig workers by determining how many and what ‘gigs’ these workers have to accept, for example, Uber drivers can’t choose what customers they want to pick up, the platform decides for them. Additionally, gig platforms enforce punishments, such as bans, when workers get bad reviews; both things that true independent contractors don’t experience.

Third-party assurance (TPA) as a solution?

Policymakers have a hard time determining if gig workers are treated correctly, as gig platforms are very secretive about their processes. Experts argue that this lack of transparency needs to be addressed to solve false self-employment problems on gig platforms. One way they suggest that this can be done is by introducing third-party assurance (TPA). TPA is the process of including an independent party that can give assurance on something that will help increase transparency between two parties.

TPA is used in many different industries, such as in sustainability reporting and outsourced service provider (OSP) industries. In the sustainability reporting industry, TPA is used to give assurance on the sustainability data organisations publish about themselves. In the OSP industry, TPA assure clients on the processes they outsource. The clients want to know if the OSP is in control over the services they provide to minimize risks on their side.

During my thesis, I analysed the sustainability reporting and OSP industries by conducting interviews with TPA experts and analysing secondary data about these industries. These industries were chosen as they both experienced transparency issues that were solved by third-party assurance. I compared the conditions that allowed TPA to spread in these industries with the gig economy’s current state. Learning from these two industries, it became apparent that the gig economy has the conditions that could benefit the spread of TPA throughout the industry.

Conditions of the current gig economy allowing for TPA

#1 Increased pressure from stakeholders on gig platforms to become transparent

As stated, there has been a lot of media attention on gig platforms and whether they are treating their gig workers fairly. The media’s increased attention has led to more awareness about these issues from both the general public and policymakers. This increased awareness will put pressure on gig platforms to become more transparent about their processes.

When looking at the other two industries, pressure from stakeholders has been the main driving force behind the spread of TPA. In the OSP industry, digitalisation made it technically feasible to outsource processes digitally. However, clients wanted insights from OSPs as they are legally responsible for the processes, even when something goes wrong at the OSP. In the sustainability reporting industry, the general public had no way of knowing whether a company’s sustainability reports were reliable. TPA played a large role in solving these transparency issues.

#2 New regulations will be instated driving the creation of frameworks used during TPA

TPA needs a certain framework that can be used by assurance firms to give assurance on a specific process. It can be difficult to create these frameworks for industries where there are little regulations, such as the gig economy. However, TPA experts interviewed during this study stated that regulations are a good starting point to create these control frameworks. Therefore, the increased attention from policymakers on the false independent contractor issues on gig platforms will likely result in regulations that will make TPA a feasible solution.

#3 Gig platforms can use TPA as a means to differentiate themselves from competitors.

When analysing the industries, it became apparent that companies voluntarily engage in TPA. This surprised me, as TPA is common but also costly for organizations in both analysed industries. The main reason organisations engage in TPA is that the increased transparency outweighs the costs of the engagement. The increased transparency resulted in an improved reputation and differentiation from competitors.

This can also apply in the gig economy and might be particularly interesting for market entrants to differentiate themselves from incumbent platforms. By getting assurance from an independent party on business processes related to labour regulations, new gig platforms might be able to disrupt network effects. However, this is just an assumption and should be researched further.

All in all, this study showed that TPA has the potential to contribute to solving the transparency issues of the gig economy. The increased awareness about the false self-employment issues by the media and policymakers pressure gig platforms engage in TPA and potentially shape the gig economy into a better place.

About Clemens Florian

Clemens has just finished his master’s degree in Digital Business & Innovation at the Vrije Universiteit Amsterdam and is looking for an interesting and challenging junior position. He has a passion for digital transformation, business model innovation and IT-consulting, and hopes to find a job within these fields. Should you know interesting opportunities, don’t hesitate to contact him on LinkedIn.