On Sunday, 14 August there were articles saying that the government had told Deliveroo it must pay its couriers the minimum wage unless a court or HMRC rules that they are self-employed. Was the government just stating the obvious? Of course a company should pay its workers the minimum wage. The questions are: (1) what are they paid? and (2) are they workers and so covered by minimum wage regulations?

First, minimum wage rules apply whether or not an employer has been singled out by a government department – if workers are not paid the required wage, they may bring a claim before an employment tribunal; alternatively, HMRC may enforce the minimum wage, either because of a complaint by a worker, a third party or on its own initiative.

Are Deliveroo’s couriers workers for these purposes? Some of you may know that we are currently awaiting judgment on a case on similar issues involving Uber and two taxi drivers. The principal factors affecting employment status were summarised in an article here last month – the words of the contract are relevant, but a tribunal would decide the issue by reference to the actual situation, not just the contract. Each case will depend on its own facts. Deliveroo’s couriers, for example, may be found to be more integrated than Uber’s drivers – they are certainly more recognisable on the road. On the other hand, they may be more free to accept or reject jobs.

Apparently Deliveroo’s couriers are paid £7/hour plus £1 plus delivery. William Shu, Deliveroo’s co-founder, says that riders make between £9.20 and £9.30 and hour, which is above the minimum wage. Mr Shu has offered a new payment arrangement, through which they would earn £3.75 per delivery. There are further details, such as guaranteed minimum payments during peak times. Mr Shu said he expects the couriers to earn more under the new arrangement, though it is not being forced on the couriers.

It is worth pausing here, because if the couriers are paid purely by productivity (e.g. by delivery), it may be possible to apply a different minimum wage calculation: the lawful minimum “fair piece rate” is calculated by reference to the national minimum wage and to 120% of the actual average rate at which workers working for that employer work.

So let’s assess the government’s statement. First, it does not actually affect the legal situation – the same statement could be made about any employer; it is for HMRC or an employment tribunal to rule on the matter. The couriers may or may not be workers for the purposes of national minimum wage rules. Assuming they are workers, whether the payment arrangement is lawful would depend on the facts of each particular case – for example, average delivery rates and other costs such as petrol would be relevant. The issue is also complicated by the fact that delivery rates will vary through the day, so applying national minimum wage law might not be simple.

Are there wider lessons that we can learn from this? That’s going to depend on your perspective. We may see major restraints on Uber’s and Deliveroo’s business models. Whether that is good or bad will depend on your political views, but the answers are far from obvious – many of us benefit from this business model, for it reduces taxi fares and courier costs. Maybe the drivers and couriers benefit too – no one is forcing them to work for those businesses, and the flexible model should allow workers to combine different jobs.

What is certain is that if you have similar models to these companies, or if you use their services, these cases could be very important.

If you require further advice on these issues, you may wish to join our community; on elXtr we have guides on national minimum wage and on employment status. 

If you want to find out more, give us a call on 0345 351 0025 and we can talk you through your options.

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