Last week, Hermes International SCA, which delivers over 400mln parcels a year, said it will be the first in the UK logistics industry to invest in pensions for its workers, while couriers will also have the right to paid maternity, paternity and holiday leave.
So what, you might say, but this is just the latest round in a battle between companies and workers that has big implications for a new breed of so-called gig economy companies such as Deliveroo PLC (LSE:ROO) and Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB).
How will this impact food delivery services like Deliveroo and Just Eat?
The talks about Hermes improving their workers' rights began in 2019, so the process takes a while, although the company was “forced” to make the alterations rather than wanting to.
Dan Lane, Freetrade analyst, said: “For the likes of Deliveroo… I think they're really missing the point if they don't proactively go out and offer these things.
“Either you wait and have it forced upon you, or you do it proactively - I know as an investor which one I would like my companies to do.”
It doesn’t take a genius to discover that increased worker’s rights will eat away at the profits of Deliveroo and Just Eat, so if these companies choose to not implement these policy changes themselves, they will lose popularity and customers – potentially further shaving down their profit levels.
These delivery companies would have to increase prices to make the same margins by either adding to the price of food, implementing one-off costs, hiding delivery fees, adding tips or a combination of these techniques.
Meanwhile, this is a hot topic currently with Deliveroo scheduled to publish its 2021 full-year results on Thursday (read more) with gross profit margin growth of 7.5% to 7.75% expected.
If the company has to amend its workers' rights it would struggle to maintain a respectable profit like what is to be announced tomorrow.
If investors know the company’s change to worker rights was forced upon it, the price hikes may be the last straw for “people to just bypass Deliveroo and Just Eat all together and go straight to their local [takeaway shops] down the road,” Lane commented.
“The short term will be people watching to see how companies react because if I want to go and work for these companies, I want to know that when push comes to shove, they will support me.
“It's not a mistake that ESG (environmental, social and corporate governance) has been a massive push in the industry recently.
“If I don't think that they support me I just won't work for them and that creates problems of their own,” Lane commented.
What is being done about poor workers’ rights?
In many countries, policymakers are listening to worker and consumer pressure and striving towards introducing regulations to improve workers’ rights.
However, most companies like Deliveroo and Just Eat seem to be waiting to be forced to make these changes, rather than seeking to improve the ‘S’ aspect of ESG.
“There's a bit of a split [between] companies being dragged through the mud to eventually get their workers’ rights, and then companies proactively going out of their way to do it,” Lane said.
Despite some governments attempting to develop laws, several companies will search for loopholes, so perhaps this isn’t the fastest and best approach.
“It’s most likely going to be up to workers and their organisations and allies, for now, to challenge these models again,” Tatiana López, Fairwork (Oxford-based project) researcher, said.
“Even in Europe many protests and lawsuits are initiated by new grassroots worker collectives and there is still room for greater engagement from established unions,” López added.
Meanwhile, in February last year, the UK Supreme Court ruled that Uber Technologies Inc (NYSE:UBER) workers, which included Uber Eats drivers, will be treated as workers rather than being self-employed.
Uber also recently signed a voluntary memorandum of understanding with the International Transport Workers Federation (ITWF) to negotiate benefits.
These discussions will cover trade union representation, freedom of bargaining, working conditions and social protections.
Stephen Cotton, general secretary of ITWF, said: “[This] marks a significant moment for workers’ rights in the gig economy.
“This will be the first time that meaningful conversations with a platform company on key issues for workers take place on a global level.
“We believe this agreement can accelerate improvements in rights and conditions for drivers and couriers through a dual policy of social dialogue and structural reform.”
Deliveroo's share price has plummetted 65% in the last six months and Just Eat's 63% - implying that investors are aware and concerned about the direction of these food delivery companies operating via gig workers with little rights.
The gig economy, which surged in popularity during the pandemic when consumers were reluctant to leave their homes, continued to grow but workers and unions have been piling pressure on companies to review their policies to improve the benefits received by those on zero-hour contracts.
Pros and cons of the gig economy?
These jobs, which took off during the financial crisis in 2008-09 when unemployment was high, tend to offer flexibility, decent wages, a variety of tasks and no boss, which gives workers control over their time and lives.
Although there are several common disadvantages of gig work, which arguably may outweigh the benefits.
“Not having your pension, health insurance, paid sick leave or paid holiday covered by your employer [as well as] minimal job security with regard to redundancy packages or dismissal notice periods,” Shaik Salauddin, an India-based freelance driver, said when commenting on the drawbacks.
“The gig economy so far has seemed to be rightly or wrongly an industry where zero-hour contracts are taken advantage of,” Lane added.