19th August 2016

Staff give delivery business food for thought

Deliveroo offers an online/app service to customers who wish to order restaurant food and eat it in the comfort of their own home. The cost to the customer is the price of the food plus a £2.50 delivery charge (this is sometimes waived by restaurants which have an agreement with Deliveroo). London-based riders were paid £7 per hour plus £1 per delivery. With Deliveroo facing stiff competition from other meal delivery businesses, it may have considered paying an hourly rate to riders to be less profitable than paying a set rate per delivery.

Deliveroo offers an online/app service to customers who wish to order restaurant food and eat it in the comfort of their own home. The cost to the customer is the price of the food plus a £2.50 delivery charge (this is sometimes waived by restaurants which have an agreement with Deliveroo). London-based riders were paid £7 per hour plus £1 per delivery. With Deliveroo facing stiff competition from other meal delivery businesses, it may have considered paying an hourly rate to riders to be less profitable than paying a set rate per delivery.

A trial was initiated which changed Deliveroo riders’ rate of pay to £3.75 per delivery, a move which led to protests from riders. The Department for Business, Energy and Industrial Strategy (BEIS) stepped in, stating that the riders must receive the National Living Wage of £7.20 per hour unless the riders are deemed self-employed by a judge or HMRC. Deliveroo has conceded it will give its riders the option of remaining on the old ‘hourly rate’ terms or moving onto the new ‘per delivery’ arrangement. It has also confirmed its riders will be paid at least the National Living Wage.

What the law says

  1. Since April 2016 employers have had to ensure they pay the National Living Wage to ‘workers’ aged 25 and over.

  2. The term ‘worker’ encompasses a broader range of working relationships than the term 'employee' and so more situations will be covered than if the Government had restricted the National Living Wage to employees. However, those who are engaged on a truly self-employed basis will not be considered a worker.

  3. To assess whether an individual is a worker or self-employed, a court or tribunal will look beyond the terms of any contract and consider what happens in practice. Indicators of worker status include:

    • An obligation to perform the work personally (although a limited right to appoint a substitute has not prohibited a finding that an individual is a worker);

    • The individual is not carrying out a business undertaking in their own right and marketing that service to others; and

    • There is mutuality of obligation (i.e. the employer is obliged to provide work and pay for it and the worker is obliged to undertake the work).

  4. The threshold for being deemed a worker is much lower than that for being an employee, as worker status is intended to provide an intermediate level of protection (less than that of an employee but more than an independent contractor). For example, the fact that HMRC deems an individual self-employed for tax purposes is not determined by whether someone is afforded worker status for the purposes of other rights.

  5. Whilst workers do not have many of the protections that are afforded to employees (such as protection from unfair dismissal, rights to a redundancy payment, and rights to automatically transfer with ownership of a business), they do have other protections, including:

    • Protections related to unlawful discrimination on the basis of a protected characteristic;

    • Protection from unlawful deductions from wages;

    • National minimum wage;

    • Holiday pay;

    • Rest breaks;

    • Limit on working time (48 hours per week unless opted out);

    • Protections related to whistleblowing; and

    • Pensions auto-enrolment for eligible job-holders past their employer’s staging date.

BEIS’ intervention is perhaps indicative of the Government’s shift in focus and its move to “build an economy that works for all”.  However, it would seem that the law is struggling to keep pace with the so-called ‘gig economy’ and the need to balance flexibility with the protection of vulnerable workers. As for Deliveroo, the publicity which this episode has attracted could very well see a rise in orders from a greater number of hungry households across the country.


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