Congressional leaders announced an agreement on a new stimulus package. What will that mean for delivery contractors in the gig economy with apps like Doordash, Uber Eats, Grubhub, Instacart and others?
The new package includes direct payments, extension of the Pandemic Unemployment Assistance program, and a new round of funding for the Paycheck Protection Program.
Independent contractors in the delivery space were often able to benefit from these programs in the past. For many, it could be a shot in the arm now.
As this is written (Monday evening, December 21) an agreement has been reached on the terms of the stimulus but we are waiting on the official vote.
You can read details the text of the bill if you have time to wade through all 5,000 pages. I'm sure some are working on pulling details. I'll do my best to update with details that might make a difference to self employed contractors with the delivery apps.
Here's a summary of the main parts of hte stimulus that would impact us as delivery contractors.
Direct payments of $600 to adults and for dependent children.
The part that's getting everyone's attention is the $600 per adult.
The amount will come as a disappointment to some who were hoping for something like the $1200 per adult that was paid out earlier in the year. The amount per dependent child is actually a little higher, at $600 instead of the earlier $500.
The earnings limits will be similar to what they were in the earlier stimulus. $75,000 AGI for single persons, $150,000 for couples filing a joint return, or $112,500 for a head of household.
As an independent contractor, the portion of your income that applies against those limits is your profit (what's left over after expenses) and not your overall pay and tips from Doordash, Uber Eats, Grubhub, Instacart or any other gig apps.
Whether this is the last of the direct payments is unknown. President Elect Biden has called this a “downpayment” on recovery. The big question is whether the two sides can come together enough to come up with anything more.
How will the direct payment impact delivery contractors for Grubhub, Doordash, Uber Eats, Instacart and others?
Obviously, any bit of money coming in is going to be a shot in the arm.
Of course, this has to get passed and the bill get signed into law before anything else happens.
Then we're probably looking at two weeks or so before payments begin coming out. This depends on how quickly the government can get things in motion.
I think the bigger picture is whether this might lead to an increase in business for delivery contractors.
For many of us, parts of spring and summer were really good months to be delivery contractors. Business was booming with people being locked down, and there was all that stimulus money out there.
Will that be the case now? I'm noticing that things are slowing way down for a lot of drivers. I think that's because of two factors:
- There are a lot more people delivering these days, so more competition for delivery orders. As things slowed down after the initial boom, there were fewer orders divided up between more drivers.
- People were running out of discretionary money. The direct stimulus payments had dried up, and then extra unemployment funds from the PUA ran out in August.
Does the shot in the arm mean more people will order out for deliveries? Does it mean they'll tip better?
On the flip side, are people a little more cautious this time around and will they be more careful in how they use the funds?
Extension of the Pandemic Unemployment Insurance benefit with $300 per week additional.
This one can be huge for independent contractors.
Normally we don't qualify for unemployment. Under the CARES act, unemployment insurance benefits were extended to independent contractors.
The protections for independent contractors would have expired on December 26 (Merry Christmas). In fact, unemployment for a lot of people would have run out on that date.
As I mentioned above, the extra $600 per week in unemployment benefits expired back in August. Under the new stimulus program, an additional $300 in weekly benefits will be added.
As it appears right now, benefits including the additional $300 per week will be extended by 11 weeks.
A warning for those already on unemployment.
Even though this has passed, there is a high probability that those on unemployment may have their weekly benefits disrupted.
If you remember when this started, it took awhile for the states to get on board and be able to provide the additional benefits. That's because each state has its own system, each programmed according to the state's rules and benefits.
It's a monumental task getting the state system to work with changes like this. As it is right now, it might not be possible for many states to update their benefits in time to avoid benefits being cut up after the 26th. You may see benefits end for a week or two before they can get up to speed.
Possibly longer in some states.
How will the unemployment extension impact independent contractors for Uber Eats, Doordash, Instacart, Grubhub and others?
There are two areas where this will make a difference.
One is on the side of those receiving benefits. The other is related to how it will impact our businesses.
Let's talk about receiving unemployment as a delivery contractor.
If business was booming because of the increase in delivery, how is it possible that delivery contractors are taking unemployment?
Delivery can be a high risk activity. Many contractors may be staying home when possible rather than going out delivering.
I personally have been off the streets for a month now. Half of that was quarantining when my daughter tested positive. The other half has been just for the sake of staying safe with the huge spike in cases lately. While I'm not applying for unemployment because of this, some may need to do so.
The other factor is that while delivery as a whole is up, delivery opportunities for individual contractors are often going down. Couriers are reporting slowing delivery demand in several platforms.
Will this new unemployment benefit mean more business?
I think it will.
But I also think things may slow down dramatically before that happens.
Be ready for things to get bad for a couple weeks.
That warning to those already on unemployment. Chances are, unemployment money is going away for a few weeks for a lot of people.
A lot of people are going to be barely hanging on for a couple weeks while waiting for their states to get things going. They're less likely to have the money to be able to order delivery.
Hang on tight everyone.
Once the money starts hitting the banks, we may see an increase in deliveries.
The question is, will we also see a saturation of new drivers?
Renewal of the Paycheck Protection Program.
Actually there are two things of note regarding the Paycheck Protection Program.
The first on has to do with taxes.
As it stood recently, the IRS was taking the stance that forgiven balances from the Paycheck Protection Program were taxable.
So if you had a $5,000 PPP loan forgiven, you would owe tax on that. Someone in the 12% tax bracket would owe an extra $600 in taxes on that.
One part of the new stimulus package was to declare that forgiven loan balances are not taxable.
It may be possible for some to take additional loans. In particular they are focusing on smaller businesses and businesses harder hit.
I'm sure there are more details to come. As it stands right now, if your revenue was down 25% you have a higher possibility of a second round of funding through this program.
As I learn more, I'll update you with how the different programs will play out.
Should you take advantage of any of these programs?
Obviously the direct payment is a no brainer. They're going to just send out the payments. No decision needed there.
Should you apply for unemployment as an independent contractor with Grubhub, Doordash, Uber Eats, Instacart or others? That one depends on if you see a significant loss in income on the horizon.
If your delivery business was adversely affected by the pandemic, you might qualify for some of the PPP benefits.
I honestly don't know what to expect going forward. There's a new strain of this bug in the UK that's throwing a wrench in the works. How fast will the new vaccines make a difference?
Hang on, my friends. The wild ride from 2020 isn't over yet.