Uber Technologies Inc. will reclassify all 70,000 of its U.K. drivers as workers, entitling them to the minimum wage, vacation pay and other benefits after a landmark ruling from the Supreme Court last month.
The ride-hailing app’s drivers will receive at least the national living wage of 8.72 pounds ($12.11) per hour starting Wednesday. This will be the minimum drivers can earn, in what Uber described as an “earnings floor, not an earnings ceiling.”
The U.K. will be the first country in the world where Uber will have this business model. The firm didn’t specify how much the reclassification will cost, but said it doesn’t expect to change its earnings forecast for the quarter or the year. Uber shares declined less than 1% in after-hours trading on Tuesday.
The changes are limited to the U.K., Uber’s biggest European market, but raise questions about whether management is willing to consider adapting its business in other countries. The San Francisco-based company faces legal challenges in its home state of California as well as pressure from European policy makers to improve conditions for gig-economy workers.
“This is an important day for drivers in the U.K,” said Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe. “Uber drivers will receive an earnings guarantee, holiday pay and a pension, and will retain the flexibility they currently value.”
The ruling also has ramifications for the wider gig economy and other firms that use third-party services to employ freelancers. Heywood said he hopes “all other operators will join us in improving the quality of work for these important workers who are an essential part of our everyday lives.”
BREAKING: Uber will reclassify all 70,000 of its U.K. drivers as workers, entitling them to the minimum wage, vacation pay and other benefits after a ruling from the Supreme Court last month.@NateLanxon breaks down the landmark change pic.twitter.com/VIHxGLgJx5
— Bloomberg Quicktake (@Quicktake) March 16, 2021
The changes could wreak havoc on some tech business models. “The ripples from this decision will travel far and the decision goes to the heart of the gig economy structure,” said Mary Walker, employment lawyer at Gordons, who wasn’t involved in the case.
“The lean, low-cost model is eroded by the need to pay minimum wage and to allow holiday,” she said, adding that “some businesses will simply be unable to continue trading with the increased cost base.”
Source : Bloomberg
