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Rent the Runway Is Offering Benefits to Hourly Employees. Why Do Bigger Companies Lag Behind?

Its CEO just announced the change to her company, and hopes others will follow suit.

Photo: Astrid Stawiarz/Getty Images

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The fashion startup Rent the Runway has been a pioneer on several fronts. When it launched in 2009, it gave millions of women access to luxury clothes they wouldn’t normally have. As it grew, RTR’s success helped develop the overall renting economy, through which shoppers today can rent anything from watches to luxury handbags to pets.

Now the company is becoming a pioneer on the employment front. On Sunday, in a New York Times op-ed titled “Treating Workers Fairly at Rent the Runway,” CEO Jennifer Hyman announced that the company would now start extending some of the benefits it offers to salaried employees to its hourly ones. RTR workers in the company’s warehouse and stores and on its customer service team who don’t get a set salary and work on an hourly base will now get bereavement leave, parental leave, family sick leave, and sabbatical packages. (Rent the Runway already provides health insurance to all employees.)

Hyman tells Racked over email that such a public announcement came from her hopes for there to be a trickle-down effect.

“The reason for talking about this publicly, and the best-case scenario, is for other CEOs and leaders to follow suit,” she says. “Business leaders have the power to change people’s lives, their families and society overall — for generations. What might seem like a small change in benefits has a massive impact on employment, social mobility, and general fairness. I want to empower business leaders to be the change they want to see in the world and not wait for Washington to make those changes.”

RTR has 1,200 employees. In her Times piece, Hyman said that she merely followed suit with typical corporate America structures and had “two tiers of workers”: Salaried, full-time employees at RTR were given paid family and sick leave and flexibilities like working from home, whereas hourly employees working at the company were not. Hyman noted that her salaried employees “typically came from relatively privileged, educated backgrounds,” and that by creating this type of discrepancy, “I had inadvertently created classes of employees — and by doing so, had done my part to contribute to America’s inequality problem.”

“Employees who work at hourly rates are an afterthought,” she writes. “But over the years, I began to reflect on how the system that I and others had constructed may have been perpetuating deep-seated social problems. The people with the most means have the most flexibility in their lives, not only because they have the ability to throw money at their problems but also because their companies grant them this flexibility to keep them happy.”

RTR’s employee benefits structure is not unusual. According to the Society for Human Resource Management, there are no federal laws that require companies to offer the same benefits to all employees.

As Susan Scafidi, founder of Fordham’s Fashion Law Institute, tells Racked, most companies, like RTR, draw the line between full-time and part-time employees.

“It’s actually quite common for companies to have different levels of benefits,” she says. “In some cases, there are benefits that are baked into the law. Under Obamacare, for example, employees were considered full time, and therefore eligible for health care, if they worked 30 hours a week. Other benefits, though, like leave or sabbatical packages, are at the discretion of the employer.”

It’s understandable why big companies wouldn’t offer perks and benefits to all employees, says Scafidi: “Many companies think about the cost of these benefits, and how offering them could impact their bottom line.”

Hyman, however, says undergoing such a change could have a serious positive impact for a company. She cites “higher retention rates, lower training costs, and better overall productivity from more experienced employees.”

“I believe that these new policies will help us retain corporate employees too, or at least those who care about working at a company that takes values seriously,” she adds. “I received more positive feedback about these changes from my corporate team than about any other leadership decision I have ever made.”

Scafidi notes that RTR’s move draws a line in the sand between old-school corporate America and the new class of businesses that RTR is a part of. The state of employment today spans new territory, getting rid of typical structures like required time in the office and a set number of vacation days. The rise of the gig economy has also given way to employees who want different terms than the standard 9-to-5 employee expectations.

“Anyone who will stand up and say that it’s time to reconsider the distinction between salary and non-salary, in terms of benefits, is a real step in the right direction of lowering the barrier between social class of workers,” Scafidi says.

There is, of course, another factor at play, which is what Scafidi called “millennial aspirations.” In her op-ed, Hyman notes that “millennial and Generation Z employees choose to work at companies that more closely align with their values.”

“There’s a new desire to bake philanthropy and do-good philosophy into the workplace,” says Scafidi. “This is not a temporary shift; this is a trend that is continuing to evolve, and it is changing corporate America.”