When limited staff leads to organizational changes.
In Germany, there's a shortage of personal services. This is evident on platforms like Helpling, where cleaners and their customers feel the impact firsthand. Elsewhere, rates are being renegotiated, but in this case, the imbalance creates different circumstances.
Helpling is a digital marketplace based in Berlin. It mainly connects cleaners but also offers services for caregivers or pet walkers. It operates through an app where people sign up and offer their services, while others search for these services. Service providers indicate the hourly wage they want, and customers specify the pay they're willing to provide. Helpling brings both sides together.
In the first year of its operation, 2014, Helpling had about 2,400 cleaners registered. Now, this number has increased ten-fold. However, the cleaning industry has experienced significant changes over the years. Huffmann, Helpling's representative, notes, "Before Covid-19, we could always find people." After the pandemic, the labor market was empty, according to Huffmann.
The lack of skilled workers is felt everywhere in Germany: at customer service desks, hair salons, delivery rooms, and IT helplines. It leads to wage conflicts, union power, rail strikes, and discussions about the 35-hour week. On a marketplace like Helpling, this shortage is more evident.
"Fewer cleaning staff for similar cleaning jobs - that wasn't ideal for me as a marketplace operator," says Huffmann. The service providers could choose which jobs to accept and became unreliable. On the other hand, prices were increasing. Before Covid-19, cleaners on Helpling earned an average of 16 euros an hour; now, they make 22 euros.
This growth in prices attracted more suppliers, creating some balance between supply and demand. Huffmann says, "That's the beauty of the marketplace: it tends to stabilize itself." The high prices attracted more supply, kept demand in check, and prices then increased further. That in turn led to increased demand.
This is not a major problem yet. However, the shortage of skilled workers has created a significant demand surge. In parts of Germany, individuals are signing up on the platform and booked almost immediately. Huffmann admits, "We can't cover many requests." This affects a small percentage of the business but has far-reaching implications: where cleaning staff is scarce, you see higher prices. In Stuttgart, for instance, 30 euros per hour are expected, compared to 20 euros in Berlin.
Helpling considers itself a neutral intermediary, setting the rules and selling its platform to cleaning staff. It takes a share of the amount that private households and companies pay for cleaning. The commission percentage ranges from 25 to 39%. Huffmann won't comment on this, only saying, "There are high marketing costs, we offer technology and service, and we take on the entrepreneurial risk." Helpling's intermediaries may choose not to involve the platform once they find a contact. This saves on the high fees. Different from platforms like Uber or Lieferando, the relationships that Helpling helps to establish are longer-term.
This is a business risk for Helpling. "Of course, we have ways to find out if someone is doing it all without us," says Huffmann. If a cleaner restricts work to the first job, it would be noticeable. However, the company doesn't have complete control; there are no direct sanctions. Huffmann mentions that the threat of a 500 euro fine to platform-fleeing cleaners in Helpling's terms and conditions could be an option.
Cleaners on these platforms are often well-educated young people from abroad who are digitally experienced. They may be law students or engineers and receive degrees not recognized in Germany. Orth, a social scientist, says of these platforms that mediate household services, "These platforms are known for not taking the regulations as seriously." This helps people with little experience on the German labor market who may not have the necessary registration or a suitable license.
Huffmann shares that customers' happiness is key. They generate the income that helped Helpling turn a profit after years in the red. He adds, "We're no longer a young company - Helpling is celebrating its tenth anniversary this year: 'Of course, it's good to be profitable too."
Mr. Huffmann states that the most critical thing for him is that the service providers have a good experience. The cleaners are customers for Helpling, bringing in the income that the startup requires. He concludes, "We're not here to be rich, we're here to support people."
Helpling's primary rival is the black market, as mentioned by Huffmann. A study by the Institute for German Economy reveals that only about 10% of household helpers in Germany are officially registered. Helpling proposes an option for professional cleaning agencies and the unlawful employment of helper: The system offers easy access to employment with minimal paperwork. Users just need the ability to use a smartphone to locate a job or a cleaner. No need for contracts or invoices. Even German language proficiency isn't needed.
Researcher Orth points out that many people from other countries discover a quick route into the German job market through digital platforms. However, some realize that they lack insurance and must pay taxes and contributions. Helpling ensures that taxes and contributions are paid. Users are classified as self-employed and, thus, do not receive contractual paid time off or benefits if they're sick. If a job is abruptly canceled, self-employed helpers even have to pay cancellation fees to Helpling.
Helpling has created a gap between regular employment and the illicit economy: While the self-employed do not have contractual time off, they receive no pay when ill, and if they terminate a job promptly, they must reimburse fees to Helpling. This business model transfers risks and liability to the cleaners, with little long-term improvement for their position.
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In response to the staff shortage in the cleaning industry, Helpling has seen an increase in prices to attract more suppliers, with cleaners earning an average of 22 euros per hour now compared to 16 euros before Covid-19. This has led to a demand surge for cleaning services in certain parts of Germany, with prices reaching as high as 30 euros per hour in Stuttgart, contrasting with 20 euros in Berlin.
The staff shortage in the cleaning industry has also resulted in a challenge for Helpling as a neutral intermediary, as fewer staff means increased prices and a higher demand for cleaning services. This has created a situation where Helpling can't meet all the requests for cleaning services, leading to a problem that has far-reaching implications for the prices of cleaning services.
