CEO Kevin Gibbon On Why Shyp Is Converting Its 1099 Workers Into W2 Employees


This morning, Shyp, the San Francisco-based shipping services company, announced that, “After careful consideration, we’ve decided to transition Shyp couriers, the individuals who complete pickups at our customers’ homes and offices, to W2 employees.”

The move, wrote CEO Kevin Gibbon in a blog post, “is an investment in a longer-term relationship with our couriers, which we believe will ultimately create the best experience for our customers.”

Shyp can afford to make the switch, seemingly. In April, it closed on $50 million in Series B funding led by Kleiner Perkins Caufield & Byers — a round that pushed its total funding to $62.2 million. The company also says that the number of shipments it’s making has increased nearly 500 percent over the same period last year, suggesting it can’t gamble on what’s become a very hot labor market.

Gibbon shared more about the company’s decision with us just now. Our chat has been edited for length.

TechCrunch: How long have you been thinking about doing this?

Kevin Gibbon: Really since we launched in San Francisco. Like everyone else, we’re always looking at ways to improve the service and be an employer that people want to work with.

TC: A lot of startups seem to be waiting around instead for some “third” classification of worker. Did that seem impractical to you?

KG: Really, this isn’t a response to the lawsuits or anything else having to do with the broader conversation about 1099 workers. Operationally, we get a lot of benefit from it. Our service doesn’t just involve dropping off an item; our customers need to be comfortable with [the person] who is picking up their $10,000 painting.

We were also getting a lot of requests from drivers who wanted to be more a part of the company.

TC: How many employees do you have?

KG: We don’t disclose exact numbers, but we have hundreds of employees who make up three parts to our workforce: couriers who handle pickups, drivers who take items to warehouse, and employees at the warehouse who handle the packing and shipping. The last two have been W2 workers since we launched; this change turns our couriers into W2 workers, too.

TC: Can you give us some idea of how much more it will cost you to employ those workers? We’ve seen estimates that full-time employees cost roughly 30 percent more than 1099 workers.

KG: I don’t know exactly, but there’s additional cost. It’s still a positive for us. There’s an economics aspect to it. Demand for our service is pretty flat throughout the day, so we know how many people we need [to be working at any one time]; now we avoid the difficulty of being able to schedule people to cover that demand. We also think it will [enhance] our customers’ experience.

TC: Are you providing health care to these employees, or relying on the Affordable Care Act to do so?

KG: We’ll have a mixture of part-time and full-time employees, and any part-time employees will get [access to] Affordable Care [benefits] and full-time employees will get a [different health care package].

TC: How many of your employees will be full-time versus part-time?

KG: That will have a lot to do with what couriers want. Some will elect to be full-time, some will elect to be part-time. We still want to give them as much flexibility over their schedules as we can while also meeting our business needs. It’s a very competitive [labor] market, and it’s something we can do to stand out.

TC: Can they work for other on-demand services when working for you?

KG: They can. There are no non-compete clauses.

TC: Do you think others of your on-demand peers are likely to embrace the same path?

KG: I think it would be harder for other services. We don’t have the huge peaks and valleys in demand that food-delivery or ride-sharing companies see, where for certain hours of the day, they’re really busy. I think from a business standpoint, it would be extremely difficult if not impossible for [many others] to do this.

UPDATE: The lawyer suing Uber and Lyft in hopes of seeing them reclassify their drivers as full-time employees has filed similar complaints against Shyp, Washio and Postmates this week in San Francisco. The San Francisco Business Times has the scoop here.

More TechCrunch

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

19 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

3 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies