Embracing Change – The Way Forward for Gig Economy Companies

13 February 2019 | Anna Triponel

Hermes Parcelnet made headline news last week when it decided to offer a new contract to its self-employed couriers. This was a positive news story with implications for the gig economy: for the first time ever, self-employed workers would be provided holiday pay, guaranteed pay and full trade union representation. Hermes, the UK’s second largest carrier of parcels, does not rely on an online platform; it sees itself as a bricks and mortar company, more like the Royal Mail than Uber or Deliveroo. Nevertheless, last week’s announcement will have significant repercussions on companies operating in the gig economy. It shows a way forward, which involves sitting down and engaging with workers. By agreeing together on working arrangements that offer greater protection for self-employed workers, companies will equip themselves to face the future, with satisfied workers, loyal customers and added value to their business.

Tim Roache, Secretary General of the GMB Union and Martijn de Lange, CEO of Hermes Parcelnet UK, announcing the new courier contract

Companies that rely on self-employment, including gig economy companies, are here to stay. The rise of the smartphone, the drop in the price of broadband and the quest for consumer convenience have all contributed to the creation of businesses that connect consumers with workers via online platforms. These gig economy companies are changing the way we eat, buy and interact – and the change has only just started: those working in the gig economy could go from 1 million to 8 million, and close to 5 million are now self-employed. This is over 15% of the UK labour force.

In an ideal world, on-demand companies would be subject to labour laws that strike a balance between empowering businesses to innovate and grow, while at the same time providing workers adequate protections. In the real world however, the law is always one step behind technological advances. While the government has acknowledged the scale of the issue by commissioning an independent review of ‘Modern Working Practices’ (the Taylor Review) and has agreed to make some changes to the law, the changes are too limited and too slow in the eyes of many.

Workers have decided to take matters in their own hands and take companies to court. At Uber, a group of drivers argued that they were workers and should therefore benefit from national living wage and holiday pay. Both the employment tribunal and the Court of Appeal agreed. At Hermes, a group of couriers claimed that they were workers and were therefore entitled to national minimum wage and paid annual leave. Again, the employment tribunal agreed. At Pimlico Plumbers, a tradesman argued that he is a worker entitled to employment protections such as holiday pay. The Supreme Court, the final court of appeal in the UK, agreed.

Companies have responded in a variety of ways, by offering sickness and maternity cover, or providing self-employed workers with the option to convert to employee status. Hermes Parcelnet’s decision, announced last Monday, is to date the most far-reaching for self-employment: it offers three insights for companies reliant on self-employed workers.

First, embrace the change and ask yourself how your business is creating vulnerabilities to people. The winds are only blowing in one direction, as evidenced by the surge in litigation and recent decisions by the UK Supreme Court, Transport for London and the UK government. Self-employed workers are requesting better working conditions, and will no longer accept the trade-off with flexibility. Business models that worked in the past may still be legal but may no longer be fitting in today’s world. Companies are faced with a choice: how to respond? Hermes Parcelnet has been operating with self-employed couriers for over 20 years. Yet, the company chose not to appeal the employment tribunal decision that it lost in June 2018, and to consider instead the decision’s impact on its business model.

Second, engage with those affected by your business. It can be frightening to open the door to hear directly from those working for you. Yet, hearing from workers does not mean the end of your business – quite the contrary, it can strengthen it, through increased engagement and loyalty. Hermes first heralded this approach when it created its courier grievance mechanism in 2016, which I support as Ombudsperson. Through this process, the company found that hearing from and responding to courier complaints resulted in improvements to its business model, such as for example new standard operating procedures and stronger invoice and payment procedures. They chose this approach again when they decided to sit down and engage with the GMB Union, the originator of the court case, to ask what couriers were looking for. The resulting courier contract was negotiated alongside the GMB Union every step of the way. Not only did this lead to stronger content, it also enhanced its credibility. A one-sided arrangement decided upon by management – even had it contained exactly the same provisions – would not have been so powerful.

Third, agree on a course of action. Look beyond the traditional confines of employment labour to find creative ways to offer wellbeing to those who make your business run. Hermes Parcelnet’s discussions with the GMB Union enabled them to find a compromise that worked to meet the demands of workers, while sustaining the company’s business. Hermes will also benefit from this arrangement in a number of ways, by increasing the loyalty of couriers, enhancing the predictability of delivery costs and attracting ethically-minded retailers. This is a win-win scenario. As Hermes itself acknowledges, this new contract is not “the solution” or “the end of a process”, but a continued engagement on their part that enables the business to evolve over time, balancing the changing needs of both the business and its couriers.

When announcing the deal, the Secretary General of the GMB Union stated that Hermes is “showing that the gig economy doesn’t have to be an exploitative economy.” Companies reliant on self-employment do not have to be fighting for consumer acceptance, defending their reputation or appealing court cases. Instead, they can choose to embrace the demands of their workers and commit to finding a compromise that works for both the business and those supporting it. For companies whose primary customer audience are the same millennials who may end up working for them, now is the time to create working arrangements that will be sustainable and equipped to face the future.

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