Uber will reclassify 70,000 of its UK drivers as workers, who are entitled to the minimum wage, vacation pay and other benefits following a landmark court ruling last month.
Drivers in private transport use will receive a national living wage of at least 7 8.72 (.11 12.11) per hour starting Wednesday. Uber described it as a “profit platform, not a profit ceiling” which would be the minimum drivers earn.
Uber will be the first country in the world to have this business model in the UK. The company did not specify how much the reclassification would cost, but said it did not expect to change its earnings forecast for the quarter or year. Shares of Uber fell less than 1 percent after trading on Tuesday.
These changes are limited to Uber’s largest European market, the UK, but raise questions about whether management is willing to consider changing 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 policymakers to improve working conditions in the Gig economy.
“This is an important day for UK drivers,” said Jamie Howe, Uber’s regional general manager for Eastern and Northern Europe. “Uber drivers will receive income guarantees, vacation pay and pensions, and will retain the flexibility they currently value.”
The ruling generally hires individuals for the gig economy and other companies that use third-party services. “All other operators will join us in improving the quality of work of these important workers who are an essential part of our daily lives,” Howd said.
These changes could wreak havoc on some technology business models. “The waves of this decision will travel far and wide and this decision will come to the heart of the bravery of the provisional economy,” said Gordon Labor lawyer Mary Walker, who was not involved in the case. “The low-cost, lean model is eroded by the need to allow the holiday to pay the minimum wage,” he said, adding that “some companies simply can’t keep up with the increased cost base.”
In a stern ruling last month, the UK High Court unanimously rejected Uber’s arguments that drivers were not workers, giving the company little choice, but more concessions. Uber said after the court ruling that the decision only applies to those who have filed an initial judgment. Since then, he has been quiet about his future plans for the UK business as he has held a consultation with his supporters.
“Uber had to be kicked out and screamed to do the right thing, but they finally agreed to follow the court ruling and treat their drivers like workers,” said Mick Ricks, a GMB national executive, one of the unions that supported the case.
“Other companies in the kick economy need to take note: this is the end of the road to bogus self-employment,” Ricks said.
Based on the changes announced on Tuesday, the minimum wage will be used after the application accepts travel requests. Drivers will be given vacations based on 12.07 per cent of their income and will be paid every two weeks.
Workers will be automatically included in the pension plan, which includes a 3 percent contribution to Uber driver’s income. This is in addition to insurance, which includes sickness, injury and parental leave, which is available from 2018 onwards.
“I am very surprised to see this. This is a step in the right direction, but it is something they should have done in 2016, ”said Yaseen Aslam, one of the drivers who first filed the lawsuit five years ago.
Uber claims that drivers get the minimum wage after accepting rides in use, and he still worries that they will not be paid when they sit in cars and wait for work. “They have to leave. When you sign in when you leave, you have to earn the minimum wage,” Aslam said. “They did not fix the situation as they say.”
The additional costs to the company will come primarily from holiday pay and pension contributions rather than the minimum wage. On average, Uber drivers already earn $ 17 an hour in London and $ 14 in other parts of the country, the company said. Its UK driving business accounted for 6.4 per cent of its global total movement bookings in the fourth quarter.
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