The PEO service model adopted for the independent contractor communityThe PEO service model has been utilized by the small business community for decades. Employers benefit by relying on the PEO to manage payroll, provide employee benefits, deliver human resource services, and share risk. Employees benefit too, given that employee benefits offered through a PEO are generally much more robust than they would be absent the PEO relationship.

Independent contractors, however, have always had to fend for themselves. According to Yuki Noguchi, one in five jobs in America is held by a worker under a contract. Managing tax liabilities, securing health insurance and other benefit programs have been issues that simply won’t go away—until now.

Independent contractors have always had to fend for themselves. Managing tax liabilities, securing health insurance and other benefit programs have been issues that simply won’t go away—until now. Click To Tweet

A Fidelity Investments company, bSolo, has been created to address the needs of the independent contractor, much in the same way a PEO does for the small business community.

Recently, I had a chance to discuss this new entry into the business services sector with Kim Langway, the company’s co-founder and Head of Product. Here is what she had to say.

A Conversation With Kim Langway

What prompted Fidelity to get into this space?

bSolo was created in Fidelity Labs, the new business incubator at Fidelity Investments. We were struck by the growth of self-employment in the U.S. and set out to learn more about the people choosing to forgo full-time employment for the freedom and flexibility of working on their own—as a business of one. We soon learned that many of them didn’t realize what else they left behind in addition to the 9-5 grind. Living the dream comes with unique financial considerations, including the responsibility for the back office work someone in HR used to do for you.

We’ve found that taxes have a massive impact on the way self-employed people manage their money and their time. Taxes consume too many otherwise-billable hours, instill a long-lasting sense of financial insecurity, and are the biggest obstacle to saving for contractors’ post-work years. We believe that relieving this tax pain is the best first step to leveling the playing field between traditional employment and self-employment.

At bSolo, our service is for self-employed people who are required to pay quarterly taxes. This includes paying both employer and employee halves of Social Security and Medicare obligations as well as the mental burden of deducting what they owe for taxes out of their client payments. Finally, quarterly tax payments are due every few months, based on an unintuitive schedule—the federal schedule is not based on even quarters.

What do you see as the real value offering for the independent contractor?

At bSolo, we want to automate the process of saving and paying quarterlies so that soloists can focus on finding and doing their work and enjoying the freedom that comes with managing their own schedules. We see this as phase one of creating a convenient, payroll-like savings and benefits system for the solo workforce.

What about the benefits for the companies they contract with?

We think we can also play a role in improving independent contractor tax compliance. We met so many people who wanted to do the right thing but were confused about what was required of them. And when they tried to ask, they were lumped in the same category as small businesses, which was doubly confusing to them. We think we can take the jargon and the mystery out of paying taxes.

What’s more, self-employment is a growing trend in the workforce. We’re going to see more and more people actively choosing to work this way. Firms that choose to offer bSolo to their independent contractors can demonstrate a real commitment to helping them be successful at work and in their lives.

How will bSolo help the independent contractor secure employee benefits?

Our goal is to create products and services that help reduce the hassles soloists face in their careers, so that we can help make self-employed life a viable option. This includes everything from savings to benefits to insurance—plus managing all of these things effectively. You’ll see bSolo focusing here as we look to introduce new products and services.

A recent bSolo press release identified these challenges for the soloist worker:

  • Saving regularly for long or short-term/unexpected needs.
  • Managing taxes and other business administration needs.
  • Finding and managing affordable benefits providers.
  • Building a strong brand reputation and finding work when you want it.
  • Achieving work/life balance.

It sounds like bSolo has taken a page from the PEO playbook. If the model succeeds as well as the PEO service offering does, bSolo’s future looks promising indeed.