Upwork’s acquisition of Bubty and Ascen is ushering in a new era of blending traditional employment with freelance flexibility. We explore what this move means for platforms built on 1099 contractors – and why fractional insurance remains pivotal in balancing compliance with freedom in a hybrid W-2/1099 model.

Upwork’s Big Move: From Freelancers to W-2 Solutions

Upwork, long known for its freelancer marketplace, recently made waves by acquiring two companies – Bubty and Ascen – to bolster its enterprise offerings. Bubty is a workforce management platform, and Ascen is a global compliance and employer-of-record (EOR) provider. By integrating these, Upwork can now help clients hire not just independent 1099 contractors but also W-2 employees via an EOR model. In other words, Upwork’s new stand-alone entity will support a spectrum of contract types – from agent-of-record arrangements to full employer-of-record services. This push into W-2 contractor management is significant because it lets Upwork compete in areas beyond its freelance roots, moving into the $650+ billion corporate staffing market.

Upwork’s leadership is positioning this move as a way to offer enterprise clients both flexibility and compliance in one package. Historically, companies engaging freelancers had to choose between the agility of 1099 talent and the assurances of traditional employment. As Upwork CEO Hayden Brown noted, many providers force customers to “choose between flexibility and compliance”, but with Upwork’s new capabilities, they are “refusing to compromise”. In practical terms, this means an Upwork client could tap into global talent on-demand and still meet the strict compliance, payroll, and benefits requirements large organizations demand. Upwork is betting that by offering a one-stop solution for independent contractors and W-2 workers, it can attract enterprises that want the best of both worlds – the speed of gig talent and the security of compliant staffing.

Implications for 1099-First Platforms

For other platforms and employers that rely primarily on 1099 contractors, Upwork’s W-2 pivot is a wake-up call. It underscores a broader trend: the contingent workforce is maturing, and expectations around compliance are rising. However, this doesn’t spell the end of the 1099 model – far from it. Independent contractors remain a cornerstone of the flexible talent economy. In fact, 80% of large corporations plan to hire more gig workers in the coming years, and enterprises are increasingly using contingent workers to fill skill gaps without taking on permanent headcount. The agility and specialized skills that freelancers bring are still in high demand, and most gig workers value the freedom and flexibility of independent work.

What is changing is the margin for error in how 1099 arrangements are managed. With regulators and labor agencies closely scrutinizing contractor use, businesses can’t afford compliance missteps. High-profile lawsuits and multi-million dollar misclassification settlements have made headlines in the past decade. One major risk area is workplace injuries or other liabilities: if a contractor without proper coverage gets hurt on the job, it’s all too easy for them to file a claim alleging they were effectively an employee. Such scenarios can expose platforms to legal and financial jeopardy. Upwork’s answer to this risk is to bring those workers under an EOR umbrella (making them W-2 employees of a third party). But for platforms committed to the 1099 model, there is another path: strengthen your compliance infrastructure so that using contractors doesn’t mean compromising on protection.

The Hybrid Workforce Model: 1099 + W-2

The future for many organizations will not be a binary choice between all-1099 or all-W-2 – it will be a hybrid workforce. In this model, some roles or projects are filled by traditional employees (or contractors converted to W-2 through an EOR service) while others remain purely independent contractors. Embracing a hybrid approach lets companies tap into flexible talent when needed, while using W-2 engagement for cases that demand more control or longer-term integration. The challenge for platform operators is managing this mix without adding friction for talent or risking compliance issues.

This is where innovative solutions like fractional insurance come into play. Fractional insurance means on-demand coverage that a contractor carries only for the duration of an assignment or gig – essentially giving 1099 workers a similar safety net to what W-2 employees receive, but only when and where it’s needed. 1099Policy’s fractional insurance products are designed for this hybrid reality. They allow each contractor to automatically obtain workers’ compensation, general liability, or professional liability coverage for the exact time they’re working, via an API that integrates into the work platform. The coverage is issued in the contractor’s name and paid on a pay-as-you-go basis per assignment, so it’s truly flexible. Just as Upwork is embedding EOR services to cover compliance for W-2 hires, platforms can embed insurance services to cover compliance for their 1099 hires. One enterprise client put it plainly: “1099Policy solved a real problem for us by embedding their on-demand, fractional insurance solution directly into the labor platforms we use to source freelancers.” This kind of embedded insurance ensures that every independent contractor on your platform is protected and that your business is shielded from many of the risks that typically come with 1099 engagements.

Equipping contractors with their own coverage not only provides safety for the worker, but also serves as a compliance buffer for the company. With the right insurance in place, a contractor who faces a workplace injury has their own policy to draw on, reducing the incentive to claim employee status. In effect, fractional insurance helps preserve the freelancer’s freedom while adding a layer of protection previously only available through employment. It’s a way of offering flexibility and security at the same time – very much aligned with the “no compromise” approach that Upwork championed with its latest move.

Staying Flexible and Compliant: Practical Guidance

In this evolving landscape, how can platforms and employers stay ahead of the curve? Here are a few strategies for navigating the new compliance-focused, hybrid workforce era:

1. Assess Your Workforce Mix: Start by evaluating which roles truly require a W-2 arrangement and which thrive as 1099 engagements. Factors like duration of work, level of control/direction, and the talent’s own preference can guide whether to use an EOR for certain workers. Adopting a “right tool for the job” mindset will help you optimize for both compliance and agility. Often, core, long-term roles or those in heavily regulated jurisdictions might be channeled through a W-2/EOR solution, whereas short-term, project-based, or highly specialized gigs can remain 1099 with the proper support.
   
   

2. Embed Compliance into Your Platform: Treat compliance not as an afterthought but as a feature of your work platform or talent program. This means baking in processes like automated contractor vetting, agreement on classification criteria, and especially embedded insurance offerings. For example, integrating an API-driven insurance solution ensures every contractor can easily obtain required coverage as part of onboarding. This not only protects all parties involved but also sends a message to enterprise clients and regulators that your platform takes compliance seriously. Flexibility doesn’t have to come at the cost of safety or legality.
   
   

3. Educate and Empower Your Contractors: A progressive approach to compliance involves bringing independent workers into the conversation. Make it simple for freelancers to understand their responsibilities (e.g. paying their taxes, obtaining insurance) and provide them with tools to meet those requirements. Many contractors appreciate the freedom of gig work and are happy to take on these tasks if given an easy, integrated way to do so. By enabling contractors to opt in to protections – like portable benefits or insurance coverage – you create a win-win environment: talent retains control over how and when they work, and you maintain a compliant operation. When contractors and platforms partner in this way, it fosters a culture of shared responsibility and trust.
   
   

4. Stay Ahead of Regulatory Changes: The legal landscape for the gig economy is actively evolving. Keep an eye on legislation (federal and state) around worker classification, freelance rights, and benefits. Consider joining industry groups or coalitions that seek balanced solutions. Being proactive ensures you can adjust your model (or products like insurance offerings) before you’re forced to. It also positions you as a thought leader with your clients – you’re not just reacting to changes, you’re anticipating them and providing guidance. In a field as dynamic as contingent work, knowledge and agility are key compliance advantages.

Embracing Flexibility with Confidence

Upwork’s latest moves highlight a truth that forward-thinking platforms have long understood: companies shouldn’t have to choose between flexibility and compliance. With the right strategies and tools, it’s entirely possible to have both. The growing availability of solutions like employer-of-record services and fractional insurance means that any organization – not just the largest players – can offer talent and clients a truly comprehensive contingent workforce solution.

For platform operators and enterprise employers, the takeaway is optimistic. The future of work is hybrid, and that’s a good thing. You can continue to leverage the creativity and agility of the 1099 workforce while providing the safeguards that used to only come with traditional employment. By enabling freedom and ensuring safety through innovative, embedded insurance and compliance tech, you build a more resilient, attractive platform for all.

In this new era, a contractor can enjoy the preferred lifestyle that 84% of gig workers say they have, and do so with greater peace of mind. Meanwhile, businesses can engage flexible talent at scale, confident that they’re protected against surprises. Progressive, dynamic, and clear in approach – that’s how 1099Policy views the path forward. As the contingent workforce evolves, those who embrace solutions that blend flexibility with responsibility will lead the way. By staying agile and compliant, you’re not just adapting to the future of work – you’re helping create it.

1099Policy is committed to enabling this future by helping platforms embed the insurance and compliance solutions that make a hybrid 1099/W-2 strategy sustainable.

Photo by Patrick Tomasso on Unsplash