The right gig

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Paul McCormack and Ian Hewitt ask if the reclassification of last-mile subcontractors to ’employees’ will spell doom for carriers worldwide?

Concerns about the so-called ‘gig economy’ – especially in the UK and Germany – have spilled over into the delivery sector, casting a shadow over subcontractors delivering the last mile.

While there will be a shift to the provision of greater rights and benefits for workers, self-employed contractors will remain, so it’s not a ‘doom and gloom’ situation worldwide. The UK is a key e-commerce market and has experienced significant last-mile development, making it a good litmus test for what may happen elsewhere. So, what are the issues there?

The UK last-mile industry is very diverse, far more so than in other countries, and there are already a range of ’employment’ contracts being used based on the expectations of the retail client and the e-commerce customer.

At one end of the employment spectrum you have employees and at the opposite end are the self-employed, or people who are essentially businesses in their own right and responsible for their own affairs, including the obvious risks associated with running one’s own business.

There is another definition borne from employment legislation – worker status: a worker is entitled to minimum wage and other benefits such as holidays and sickness pay. This was the main thrust of the Uber and CitySprint cases whereby individuals claimed they were workers and under a greater level of supervision, direction and control than would ordinarily be associated with self-employed people.

There are two distinct definitions of employment status: one that is linked to Her Majesty’s Revenue & Customs (the HMRC) and specifically, the tax view; the other being the view of an employment tribunal. There are a number of high profile cases that have caught media attention and some are still being contested, such as that concerning the UK’s Pimlico Plumbers, which is being heard in the Supreme Court.

The recent Taylor review, which investigated the impact of modern working practices on the world of work in the UK, highlighted a variety of different (but mainly last-mile) businesses: Hermes, Amazon, Deliveroo and Uber, and attempted to badge them in the same way.

Hermes is the UK’s largest independent lifestyle courier network, Amazon uses subcontractors, Deliveroo uses bikes for predominantly food deliveries, and Uber is primarily a ‘taxi’ firm, or a technology business, if you prefer. The nature of the contractual agreements and the ultimate agreements with the end customer are very different.

Deliveroo is interesting, as the cyclists who provide services often work for several different businesses at the same time, clearly not a behavior aligned to managing employees – something a tribunal in November 2017 agreed with.

In contrast, a recent case involving parcel company UK Express was settled out of court. The allegations in this case were that drivers were ’employees’ as they could not substitute freely to others, they were prohibited from driving for other businesses, and they had to provide services for a set number of days in the month.

As many ‘service partners’ do not have any guarantee of service from the retailer or carrier they are probably acting responsibly by not offering their staff long-term agreements. Some contractors may be genuinely misclassified, but there are many who are truly self-employed as they are clearly operating as businesses in their own rights.

There are a number of high profile cases. Some are being financially supported by trade unions and other lobby groups.

In reality, many subcontractors are genuinely self-employed and enjoy the flexibility their status affords them. They pay their own taxes, provide their own tools to do the job, provide services to multiple clients and have an unfettered right to substitute: all elements that are very different to that of an employee.

The question that remains is, “OK, but where will this end for the last-mile industry?” The simple answer is it depends on how individual governments (or, in Europe, the EU) will decide to treat this issue.

If they go down the route the UK seems to be following, this could cause severe cost as well as operational issues (due to the relative inflexibility of labor contracts) for carriers which, in turn, will affect other carriers, customers and consignees.

If, however, a more pragmatic approach is taken to limit extreme cases and ensure that last-mile contractors aren’t deemed to be employees, the effect is likely to be minimal.

Bio:

Paul McCormack has more than 20 years’ experience in both senior HR and operational roles. He has been closely associated with CEP consultancy Last Mile Experts for over 12 months. He has an MA in Employment Studies and Human Resource Management (HRM) and has developed a keen interest in the effective management of subcontractors and their contractual status. He was part of the team that designed and launched Amazon Logistics in the UK. He has since consulted with a wide range of businesses that deal with self-employed contractors within the logistics sector.

March 26, 2017

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