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Highlights
- The EU has proposed reclassification of some workers as employees, especially the ones who work for online platforms.
- The European Commission proposal aims to boost the social rights of the gig economy workers.
- Of the 28 million workers, these new rules would potentially impact around 7 million to 4.1 million workers in 15 companies.
Food delivery and ride-hailing apps operating in the European Union are in a state of confusion. The European Commission is expected to bring in a rule that would force companies to bring gig workers under their payroll and consider them as employees rather than self-employed.
The reclassification of workers will majorly affect online platform companies, such as Deliveroo (LON: ROO) and Uber. Expected on 9 December, the European Commission proposal aims to boost the social rights of the gig economy workers and distinguish when the couriers should be treated as independent contractors and when as employees.
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The Draft Rule
The new rule has a set of five criteria to determine if the platforms would be considered as employers. If the remuneration level of the workers, their working hours, and their appearance are determined by the platforms, and also if they use electronic means to keep a check on the daily performance of their workers and restrict them from working for other platforms or third parties, then the platforms might be considered as employers. However, meeting all the five conditions isn’t necessary to establish an employer-employee relationship, and only the fulfilment of two of the above-mentioned conditions would be enough to establish this relationship, as per the draft rule.
Information regarding the usage of algorithms which help in monitoring and evaluating the performance of employees also needs to be provided by the ride-hailing, food delivery apps, and other such companies, along with information regarding the setting of fees and task allocation. In case of a breach, a compensation might be demanded by the employees.
RELATED READ: Understanding The Concept of Gig Economy
Of the 28 million workers, these new rules would potentially impact around 1.7 million to 4.1 million workers in 15 companies. The burden to support the claim that the rules don’t apply to them with appropriate evidence falls on the online platforms. The platforms can also approach the court or go through an administrative process to object to the reclassification.
The tax contributions in the EU countries from reclassified employees could increase up to the range of 1.6 billion and 4 billion euros. The EU member states and lawmakers need to give their consent to the draft rules before they come into force and a 2025-timeframe is estimated for the same by the commission. The EU countries would set the sanctions for non-compliance to the new rules.
Impact on Deliveroo
UK-based leading online food delivery company Deliveroo saw a fall in its share prices as the EU planned to crack down upon the gig economy. After the proposal of the European Commission to revise the labour rules, Deliveroo’s shares went down by 9.6% on 6 December amid the increasing fears of a fall in the company’s profitability. On Tuesday, the shares were up by 1.9%, after the fall on Monday.
This comes just days after Deliveroo’s stock value went down by 7.6% after a sale £47 million worth of shares by its founder Will Shu to pay off a tax bill. The £2 million Class A stock was also sold off recently by Deliveroo’s chief financial officer Adam Miller to get rid of some tax liabilities.
RELATED READ: Deliveroo (LON:ROO) & Kanabo (LON:KNB): Should you buy these 2 stocks?
Despite its business flourishing due to high demand for online food delivery during the lockdown, Deliveroo has faced many ups and downs this year, along with a flop London IPO in March 2021, with its value going down by 25% in just one day.
The market cap of Deliveroo PLC (LON:ROO) stood at £4,137.20 million as of 7 December 2021, while its shares closed at GBX 238.10. On Wednesday, it opened at a high of GBX 239.90.
