Is Just Eat’s switch to a contractor model a sign of the times or of their own doing?

OPINION

Food delivery business Just Eat in the UK is switching to a contractor worker model, replacing its once hybrid model in an effort to cut costs, it has been reported. Workforce status experts are concerned Just Eat couriers could be exploited if not “truly self-employed ” once they switch to a contractor model.

A read through Just Eat’s latest financial statement and it doesn’t come as much surprise why the food courier business is looking for ways to cut costs.

The full-year 2022 financial results included a loss for the period of €5.7 billion, which was “mainly due to impairment losses of €4.6 billion on past equity-funded acquisitions.”

One way it’s trimming costs is by moving away from its current hybrid system of employees and self-employed workers. Just Eat’s Scoober business, which has about 1700 hourly paid workers will now only use self-employed drivers to deliver food in the UK.

Employed drivers have been given a six-week notice with pay, with a further 170 head office staff also being made redundant, it has been reported.

The switch to a contractor-only model goes against the grain for courier worker trends in Europe, which have gained more worker rights in the EU, such as sick and holiday pay and pension contributions.

Couriers that worked for Just Eat Scoober cities were being paid a fixed hourly rate, an uncapped bonus, plus other benefits. They would have had an employment contract and needed to commit at least 15 hours a week. They also had access to Just Eat electric bikes and mopeds.

Just Eat contractors are responsible to use their own set of wheels. This could mean that couriers that were once employed as hourly workers may not have the luxury to continue as a courier if they feel they will not be able to afford the purchase and running costs of a car, moped or bicycle, including insurance. Contractors are also responsible for their own mobile and data plans and related app costs.

There are two things that come in conflict with being an independent contractor for Just Eat. The first is contractor couriers cannot call the shots on how much they can charge per hour or delivery. They will also be beholden to some form of algorithmic management.

The EU Directive for platform workers was first proposed by the Commission in December 2021, introducing a legal presumption of employment for misclassified ‘self-employed’ platform workers. It also seeks to regulate algorithmic management in the workplace – a first at the EU level.

Couriers might want to work for more than one food delivery service, which will put more demands on couriers’ time management. However, it does give them more earning potential. That said, each day is unpredictable and driver reviews on Indeed have mixed reactions. Once expenses and late restaurant orders are taken into account (you only get paid £1 every 10 full minutes waiting over the allotted time). Just Eat couriers could end up getting minimum wage on any one day.

It has not been made clear as to whether Just Eat will continue paying contractors weekly or if they will farm out payroll management to umbrella companies.

Temp and contractor experts respond

Julia Kermode, founder of IWORK said Just Eat’s change in worker status is a “very risky move.”

“Having initially been a champion of worker rights, Just Eat is backtracking – which is hypocritical, to say the least. The firm is bucking the trend in the gig economy, where many similar platforms have been instructed by employment tribunals that these individuals are not self-employed,” said Kermode.

“If Just Eat can’t compete unless their couriers are all self-employed, the gig economy model needs a rethink,” said Kermode.

She continued, “Of course it’s cheaper and easier to engage everyone as self-employed, but that’s not to say it’s compliant or fair on these individuals. And if it isn’t genuine self-employment then it’s exploitation – simple as that.” 

“If a tribunal found that these couriers aren’t self-employed, Just Eat will face the massive cost of backdating holiday pay and other statutory worker rights.”

Seb Maley, CEO of Qdos – an employment status specialist – said that Just Eat could face reputational costs if they do not assess with rigour how they manage their working relationships with self-employed contractors. Too much algorithmic control could put them in the hot seat with HMRC.

“Only time will tell as to how this one plays out,” said Maley.

“The self-employed model – which Just Eat is reverting to – provides many benefits. However, businesses shouldn’t adopt this approach unless the individuals engaged are actually self-employed,” he said. 

“I would hope that Just Eat has carried out rigorous employment status assessments prior to making this decision. Over the years, we’ve seen countless tribunals involving gig workers who have successfully challenged their self-employed status – at a huge financial and reputational cost to the platform engaging them,” said Maley.

“Above all else, insisting that individuals work under a certain employment status – whether self-employed, worker or employed – isn’t the way to ensure compliance.”

Qdos is in the business of worker status compliance and IR35, alongside contractor insurance, so they could see this switch as an opportunity for new business if Just Eat or contractors call on their services for worker status compliance.

Too many acquisitions or just a sign of the times?

In recent years, Just Eat has been on an acquisition spree. While that was supposed to help them build scale in new countries and cities, it has lobbed them with debt at a time when interest rates are rising and inflation is showing no signs of abating.

For example, the non-cash goodwill impairments associated with its Grubhub acquisition and Just Eat merger were primarily driven by macroeconomic factors, such as increasing interest rates, according to Just Eat.

“In addition, the Loss for the period also included a book loss of €275 million on the sale of the iFood stake based on the historical allocation to iFood as part of the equity value issued on the Just Eat merger, which is reflected in the line-item ‘Other gains and losses’.

“Excluding the impact of impairments and the loss on the iFood stake, the Loss for the period amounted to €792 million compared with €990 million in 2021,” said the company’s 2022 Financial Statement.

Other couriers have been cutting jobs in the UK, including Deliveroo. The food delivery service reported it would cut close to about 350 roles, mostly in the UK, due to “unforeseen economic headwinds”, reported the BBC.

Deliveroo reported a £294m annual loss, which the company put down to consumers cutting back on takeaways due to the cost of living crisis.

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IR 35 and UK’s gig and contractor economy: expect an exodus to umbrella companies