Uber has made the landmark decision to guarantee all 70,000 of its drivers minimum wage, holiday pay and pensions in a move that is set to send shockwaves through the sector.
Uber, the pioneer of the gig-economy model on which numerous rival businesses like Deliveroo and Amazon Flex are based, has announced it will legally consider all its UK drivers as workers from today.
It comes after the Supreme Court ruled in favour of a group of drivers at an employment tribunal last month, stating that they should be classed as workers from when they log on to the app to when they log off.
Uber argued that it was simply a third-party booking agent and that drivers were self-employed, but growing pressure and legal challenges across various markets encouraged a stark U-turn on its policy.
Drivers will now be classed as workers, meaning they will not receive the same benefits as full employees but will receive a minimum wage of £8.72 per hour, fortnightly holiday pay based on 12 per cent of their earnings and access to a pensions scheme.
Since the start of the pandemic, Uber Eats has become the major income driver for the company thanks to the boom in takeaway and grocery delivery initiatives as the nation endured multiple lockdowns.
While its not yet clear if its Uber Eats riders will enjoy the same benefits, analysts believe this decision will have a domino effect across the entire gig economy.
“Uber’s decision to reclassify its 70,000 drivers as workers will reverberate through the entire gig economy,” Hargreaves Lansdown’s senior investment and markets analyst Susannah Streeter said.
“It has become clear that the Supreme court’s decision last month steered Uber into a dead end in its fight to keep those behind the wheel on self-employed contracts.
“It is likely that other operators will now be forced to reassess the employment status of the drivers they have relied on to develop lucrative businesses.”
Services like Uber Eats and Deliveroo have become the go-to companies for the UK’s leading grocers who struggled to expand their delivery services quick enough to match demand during the pandemic.
Deliveroo, now backed by Amazon, is preparing to launch the biggest IPO in London in nearly a decade but this decision could substantially impact its operating model as gig-economy workers across the sector will feel empowered to speak out.
“The company has reversed on its previous position of claiming that the ruling only applied to a limited number of drivers who had brought the case,” Streeter continued.
“Throwing in the towel is likely to come at a significant cost to the company. Drivers will not only be enrolled in a pension plan with contributions paid by the company but they will also be paid the national living wage as a minimum and receive holiday pay.
GMB Union’s national officer Mick Rix added: “Other gig economy companies should take note – this is the end of the road for bogus self-employment.
“Uber had to be dragged kicking and screaming to do the right thing, but finally they’ve agreed to follow the ruling of the courts and treat their drivers as workers.
“It’s a shame it took GMB winning four court battles to make them see sense, but we got there in the end and ultimately that’s a big win for our members.”