First in Google’s history, contractors outnumber direct employees

By: | Published: July 26, 2018 3:58 PM

Every day, tens of thousands of people stream into Google offices wearing red name badges. They eat in Google’s cafeterias, ride its commuter shuttles and work alongside its celebrated geeks.

google, google direct employees, google contractors, google contract workers, Alphabet Inc, Zenith Talent Corp, TVCGoogle’s Alphabet Inc. employs hordes of these red-badged contract workers in addition to its full-fledged staff. (Reuters)

Every day, tens of thousands of people stream into Google offices wearing red name badges. They eat in Google’s cafeterias, ride its commuter shuttles and work alongside its celebrated geeks. But they can’t access all of the company’s celebrated perks. They aren’t entitled to stock and can’t enter certain offices. Many don’t have health insurance.

Before each weekly Google all-hands meeting, trays of hors d’oeuvres and, sometimes, kegs of beer are carted into an auditorium and satellite offices around the globe for employees, who wear white badges. Those without white badges are asked to return to their desks.

Google’s Alphabet Inc. employs hordes of these red-badged contract workers in addition to its full-fledged staff. They serve meals and clean offices. They write code, handle sales calls, recruit staff, screen YouTube videos, test self-driving cars and even manage entire teams – a sea of skilled laborers that fuel the $795 billion company but reap few of the benefits and opportunities available to direct employees. Earlier this year, those contractors outnumbered direct employees for the first time in the company’s twenty-year history, according to a person who viewed the numbers on an internal company database. It’s unclear if that is still the case. Alphabet reported 89,058 direct employees at the end of the second quarter. The company declined to comment on the number of contract workers.

Other companies, such as Apple Inc. and Facebook Inc., some of the most cash-rich public companies, also rely on a steady influx of contractors. Investors watch employee headcount closely at these tech powerhouses, expecting that they keep posting impressive gains by maintaining skinnier workforces than older corporate titans. Hiring contractors keeps the official headcount low, and frees up millions of dollars to retain superstars in fields like artificial intelligence.

The result is an invisible workforce, off the company payrolls, that does the grunt work for the Silicon Valley giants with few of the rewards. “Many of these workers don’t have a voice on the job. They don’t necessarily get the benefits that many of us think about when working at a big, glitzy tech company,” said Maria Noel Fernandez, campaign director for Silicon Valley Rising, a union-backed group based in San Jose, California that advocates on labor and housing issues. “And they’re not really part of this wealth.”

Contractors are on the rise at Google as the company spreads into new markets, such as devices and corporate services, which demand a larger salesforce. Conversations with more than 10 former contractors for Google and other Alphabet units paint a portrait of a permanent underclass. Google has a name for them: TVCs, or “temps, vendors and contractors.” They are employed by several outside agencies, including Adecco Group AG, Cognizant Technology Solutions Corp. and Randstad NV. Google declined to say how many agencies the company uses. Many current and former contract workers and full employees declined to speak on the record because they didn’t want to jeopardize their employment.

Some direct employees took unusual steps this year to go to senior leadership with objections about the company’s work with the military, its gender pay gap and its nagging issues with online harassment. Another issue Google employees are discussing bringing to management is the state of the contract workforce, according to four people familiar with the conversations. Yana Calou, an organizer with advocacy group Coworker.org who speaks with Google employees and contractors, said that both groups are concerned about the workers who aren’t full Google employees. “They feel isolated, precarious and like second-class citizens,” Calou said. “It’s a microcosm of what’s happening in the economy as a whole.”

In an emailed statement, a Google spokeswoman said the company hires TVCs for two primary purposes. One is when the company doesn’t have a particular expertise in-house, such as shuttle bus drivers, quality assurance testers and doctors. Another is for filling temporary positions to cover for parental leave or spikes in work.

Some contract workers viewed Google as a generous workplace that boosted their careers. Still, despite their ubiquity there, many felt peripheral. Several noted the subtle slights apparent from their arrival. The first thing people eye at work, one former TVC recalled, is the color of someone’s badge. TVCs aren’t trusted with tasks outside their limited purview. Four different contractors described the sinking feeling of clocking in at 9:00 a.m. only to see full-timers trickle in an hour or two later. The same staff would leave the office around 3:00 p.m., often after a midday gym break.

“People look down on you even though you’re doing the same work,” said one contractor who spent two years at Google managing multiple other employees. Said another ex-TVC: “You’re there, but you’re not there.”

Google’s initial flood of contractors came with its first “moonshot.” Dozens of temporary workers were hired, more than a decade ago, to photocopy dog-eared pages for the company’s free digital library, Google Books. Like the company itself, the number of temporary workers has grown wildly.

Like other firms, Google relies on outsourcing operations in Southeast Asia — rows of office workers in India and other countries that label mapping data and handle other relatively simple computing work. But Google also hires highly educated contractors in its backyard. Some TVCs arrive with advanced technical degrees and years of experience, working on niche efforts like renewable energy and sensor design.

The line between TVCs and full-timers is clear. One 2016 TVC employment contract from Zenith Talent Corp., a recruiting agency, states that TVCs “will not be entitled to any compensation, options, stock, insurance or other rights or benefits accorded to employees of Google.” The terms hold even if a court later determines the worker was legally a Google employee. Zenith did not respond to requests for comment.

Another clause hints at the type of work Google contracts out. The TVC agreement includes a release for any “adult content” contractors may encounter at work. In signing, contractors relieve Google of any liability related to the material. In 2017, the company pledged to hire up to 10,000 content moderators in 2018 after mounting criticism of offensive videos on YouTube. Some of these moderators are full-fledged staff, but Google declined to say how many or provide an update.

Several former contractors noted that Google does offer benefits for contractors that other large companies don’t. TVCs can eat at cafeterias for free and use some company facilities like its bowling alleys and gyms. For many, a TVC position offers a foothold for a permanent role at Google or elsewhere. Some highlights, however, come with an asterisk. To ride Google shuttles, which ferry staff to campus for free, TVCs must pay for each ride. In an emailed statement, a Google spokeswoman said that it charges TVCs less than $2 per ride, and if it provided TVCs with free shuttle service, that would be considered a taxable benefit. Several former TVCs said they did not receive pay for sick days.

The largest burden for many contractors is health care. All the contractors Bloomberg News spoke with said the contracting agencies, which are responsible for health insurance, offered either inadequate plans or none. One former TVC, who worked for Adecco, said he paid roughly $600 out of pocket a month for coverage to treat diabetes. “Adecco’s only around for [human resources] and crappy benefits,” this person said.

Google referred inquiries about benefits for contractor employees to the companies that directly employ them, but said its company culture requires that everyone is treated with care and respect. Adecco spokeswoman Mary Beth Waddill said the contractor does not disclose the terms of its contracts with clients, but that “we take great pride in being an industry leader who continually works to create meaningful career opportunities for all of our employees.”Some TVCs are paid well. Contract software designers and other specialists were offered as much as $150 an hour before taxes, above rival giants, according to two people familiar with the plans.

Vendors doing less technical work made less; one 2017 hiring contract in Europe, viewed by Bloomberg News, listed an annual salary of 28,000 Euros ($32,767) Google’s sub-contracted janitors, who today number around 400, have been unionized since the year 2000. According to the Service Employees International Union, which represents them, they earn around $26.39 in total hourly compensation, including the cost of benefits as well as their income. In Google’s home county of Santa Clara, a family of four with an income of as much as $94,450 a year is considered by the federal Department of Housing and Urban Development to be “low income”; total annual compensation for a full-time Google janitor—including benefits as well as wages— is a bit over half that amount.

Google distances itself from responsibility if contractors encounter problems. In both hiring contracts Bloomberg News viewed, the hiring agency is responsible for handling pay, benefits and any grievances contracted employees may have. However, Google asserts authority on key legal matters. Contractors must agree to assist Google in securing the company’s intellectual property, and if Google is unable to get the worker’s signature, the search giant becomes the worker’s de facto attorney. Contractors waive their rights to participate in class action lawsuits against Google.

One person recently worked at Indian outsourcer HCL Technologies Ltd. fielding customer calls for Google’s ads business. In multiple emails and complaints to HCL, the person described repeated verbal harassment from colleagues – including anti-Muslim and anti-Arab taunts. When no action was taken, the person sent emails to a Google manager and Chief Executive Officer Sundar Pichai. The vendor received no response. HCL investigated the claims and found no cause for action, according to documents reviewed by Bloomberg News. The person asked to remain anonymous for fear of reprisal from his current job. Google did not provide comment on that episode, but a spokeswoman said that TVCs have access to Google’s complaint channel, and that it reviews those it receives and investigates when appropriate. HCL did not respond to requests for comment.

“We have allowed businesses to really sever their responsibility for more and more for the people who create value,” said David Weil, dean of The Heller School at Brandeis University and a former Labor Department official under President Barack Obama. “We’ve allowed them to have their cake and eat it too.”

Over the years, Google’s influx of contractors has changed with investment priorities. Google Fiber, its broadband unit, was once a major contractor hub, but has scaled back operations. However, other parts of the company that lean on contract work are ramping up. Google’s device sales and cloud-computing units both use call-center support staff to handle customer issues.

Artificial intelligence projects may do so as well. Duplex, Google’s eerily human-sounding calling service, which debuts this summer, will turn to phone operators when the AI can’t carry on the conversation. Some of those operators will be contracted out, executives said recently.

Under Chief Financial Officer Ruth Porat, Alphabet has tightened its once freewheeling spending. Yet the company hasn’t stopped its appetite for expensive engineers, who can easily fetch $1 million a year or more. That decision necessitates more contractors. Every company division must petition for a budget and staff headcount. Talented engineers are pricey and take bites out of the budget. To compensate, managers will then fill out staff with TVCs, according to José Benitez Cong, a former Google hiring manager who runs the human resources firm Plause. “Companies are scaling faster than ever,” he said. “A company like Google may want to rely on contractors to maintain such growth.” Porat told investors on Monday that much of the new hiring will be in the cloud division and that headcount will increase this quarter, when the company takes on new graduates.

Contractors can offer a potential regulatory break, too. Seattle recently weighed a tax based on the staff headcount companies have, a way to reap more from local giant Amazon. Officials in Google’s hometown have voiced support. A spokeswoman for Google declined to comment.

Google’s lengthy hiring process is also factor, Benitez Cong said. Google employees can take several months to recruit, whereas the company can tap TVCs within weeks or even days. They can also be dismissed just as quickly. One contract worker, who spent two years at Google, said TVCs devoted much of their day to “tagging” their work — a way to document what the worker had done for managers so it could be passed seamlessly to others, or replaced with automation. “I felt the clock ticking,” the person said. “That’s a stressful experience.”

Another recalled being sent from San Francisco to New York City, along with direct employees, for a marketing project. Before the assignment wrapped, the contractor got an unexpected email from his hiring agency asking him to turn in his laptop the next day. His stint at Google was up. “People would just disappear,” the ex-contractor said. That day he returned to his hotel, which Google covered, without an exit interview. He remembered the email : “Thanks for the good work.”

Last year, a trio of Adecco employees who worked for Google’s food delivery service filed two lawsuits at the Los Angeles County court against both companies. The contractors claim Adecco withheld wages and did not provide meals and rest periods required under California law. Through their lawyer, Paul Tashnizi, the employees declined to be interviewed. Some of the claims have been forced into arbitration, and the others are on hold in the meantime.

Adecco is a favorite contractor for the tech giant. The Swiss temp agency, which posted 23.6 billion Euros ($26.73 billion) in revenue in 2017, secures staff for Google’s maps, cloud and apps units, as well as for Waymo, Alphabet’s autonomous car unit. For multiple former Adecco hires, however, the company was virtually absent. Several people recalled seeing its staff when they joined Google and again when they left. According to two former Google managers, Adecco takes roughly 20 percent of the pay of Google’s contracted employees. Adecco did not answer questions about those claims, but spokeswoman Waddill said that “we continuously listen to our employees’ needs and work to provide them an outstanding experience,” including when it comes to the company’s “unique benefits packages.”

In recent years, Google has brought some contract positions in-house. Following criticism, in 2014 it announced that some security guards would become direct staff. Most contractors do not work longer than two year stints, according to multiple contract workers who spoke to Bloomberg News, but some serve multiple terms on the hopes of becoming direct employees. Google did not provide data on how many achieve that.

And for many white-collar TVCs, the second-class status at the first-rate tech behemoth pays off. TVCs are asked to list their status as contractors on LinkedIn accounts – but they can still mention Google. Chris Szymczak, a former TVC who worked on marketing for Google from Poland, said multiple full-time coworkers served as a reference for future work. “They were just immensely supportive even past our work relationship,” he said. “The gig was a real springboard for me.”

That ladder is not available for everyone. One former TVC recalls an uncomfortable lesson. A new executive came to the division, sat down with each staffer and asked about his or her “five-year plan,” a standard managerial tactic. The next day, the manager returned sheepishly, explaining that he didn’t realize his report was a contractor rather than full-time staff. He asked that they forget their conversation entirely.

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