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By Ben Stupples
Deliveroo, the British rival of Uber Technology Inc.'s food delivery service, will allow its couriers to make legal claims over their employment status, following a probe by a U.K. parliamentary select committee.
The London-based company plans to make changes to its employment contracts that now prohibit couriers from challenging their self-employed status through an employment tribunal or a civil court, according to a Feb. 24 committee announcement.
Under the company’s current employment model, Deliveroo couriers are responsible for paying employment taxes to Her Majesty’s Revenue and Customs. However, the company will be liable for the tax payments if a court rules that Deliveroo’s couriers are actually their full-time employees.
In turn, any court or tribunal ruling in favor of treating Deliveroo’s couriers as full-time employees instead of self-employed may set a precedent for the gig economy and companies with similar employment models, such as Uber and parcel courier company Hermes U.K.
According to the select committee, which oversees the British government’s work and pensions department, Deliveroo will remove a paragraph from its current employment contract that says neither the courier nor anyone acting on their behalf can challenge that they are “an employee or a worker.”
Self-employed individuals pay less toward the U.K.'s state benefits, known as National Insurance, than those in full employment. Under U.K. employment law, an individual can also be classed as a worker, which leaves them entitled to limited benefits, like holiday pay and the minimum wage.
According to the Institute for Fiscal Studies, self-employed individuals pay 1,240 pounds ($1,550) less than those in full employment with companies through National Insurance contributions each year.
In the gig economy, a term derived from the music industry, individuals commonly operate as independent small businesses and perform work that can be broken down into separate tasks.
Today, some multinational technology companies, including Deliveroo and Uber, use these self-employed individuals on their digital platforms to connect the workers with potential customers.
The taxation of people in the U.K. who work for themselves—such as self-employed individuals, or those who both own and manage a small business—is a priority for Her Majesty’s Treasury amid fears the government’s existing tax system could result in fewer future tax receipts for HMRC.
In releasing the 2016 Autumn Statement in November, U.K. Chancellor Philip Hammond said the government will “consider how we can ensure that the taxation of different ways of working is fair between different individuals, and sustains the tax-base as the economy undergoes rapid change.” The chancellor is due to deliver his first budget statement to the House of Commons next month.
Dan Warne, Deliveroo’s manging director, faced questions earlier this week about the company’s employment model from the select committee on work and pensions. Led by Labour member of Parliament Frank Field, the committee launched an inquiry into the U.K.'s gig economy last year.
Warne appeared before the committee alongside Lesley Smith, Amazon’s director of public policy for U.K. and Ireland; Andrew Byrne, Uber’s head of public policy for U.K. and Ireland; and Carole Woodhead, the chief executive officer of West Yorkshire-based parcel courier company Hermes.
Employees make up 85 percent of the U.K.'s workforce, but there has been “substantial growth” in the ratio of self-employed individuals, which has been accompanied by “even faster” growth in the number of individuals owning and managing their own business, according to the Institute for Fiscal Studies.
Supporters of the gig economy say it allows individuals to have a more flexible form of work, while it can also provide additional income to boost earnings. Opponents, however, say the gig economy promotes a precarious and stressful form of work that is less flexible than it appears.
Launched in the U.K. four years ago, Deliveroo allows users of its smartphone app to order takeaway food from high-street restaurants. Now, with operations over Europe and Asia, the company uses cyclists and motorcyclists as couriers to deliver food to customers, who are paid by each delivery.
In the U.K., transportation company Uber launched a rival service to Deliveroo, UberEats, last year.
A spokesman for Deliveroo didn’t respond to a Feb. 24 request for comment.
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