Three months from approval and publication in the BOE of the known as Rider Law. A text in the form of a Royal Decree that comes to reform the Workers’ Statute pTo guarantee the labor rights of the people dedicated to the distribution in the field of digital platforms.
A countdown from its registration that ends today in its entry into force with the shadow of doubt about the future of digital platforms. Months of negotiation between social agents and the Government of Spain with a single purpose: to recognize the relationship between workers and platforms and provide it with greater legal security.
With a deep-rooted debate within and outside the sector, the Rider Act is now in effect. A text that is going to greatly modify a market that, until now, based the relationship of the distributors and their platforms on the figure of the self-employed. The regulatory change comes to shake the market, whose first reactions have not been long in coming.
In fact, before its entry into force, the Rider Law It has been an earthquake in an industry spread over a handful of companies for which the new text leaves little room for maneuver.
Each company has set its own strategy to adapt to the ‘Rider Law’
Deliveroo, announced that given the changes involved in the new regulations, together with the low profitability of a market with little margin, it is leaving Spain. Not without first, yes, starting a consultation process among your employees. The reality is that since the approval of the Rider Law, the company seemed to have plans to exit the national market.
On July 30, since Hypertextual we echoed how Deliveroo I had already started a collective dismissal process. An ERE for its 3,871 employees it marked the beginning of the end for Deliveroo.
However, this will not be the general dynamic that results from the entry into force of the Rider Law. The doubts, present inside and outside the industry, augur a rather bumpy transition. And not even the different companies agree on the way forward, although the text is quite clear.
The delivery does not find a common strategy to adopt the Rider Law
Glovo is one of the main actors in home delivery and one of the most critical of the Rider Law. The company is suspicious of regulatory changes, although it will adapt to the new regulations. The company, in the words of its director in Spain, Diego Nouet, will launch a new model to keep 80% of its distributors as self-employed.
According to the manager in statements for EFE, the bulk of the distributors will be able to continue as self-employed, since the Rider Law what introduces is a presumption of employment. This would allow them, in theory, to justify that there is no work dependency and that they can adapt to what the regulations define as self-employment.
Changes to Glovo include that Riders they can connect at any time or define what price they want to charge for shipping. They also outsource themselves to other deliverers. All focused on the non-existence, on paper, of labor dependency, and therefore, the regulations are not breached. However, it plans to directly hire 2,000 delivery people before 2022, and will expand that number in the future.
Now it remains to be seen if these changes, and those that have not been announced, fall within the parameters of the Rider Law. Something, by the way, of which the unions are not very convinced. In fact, CC OO announced last Monday that it has filed two complaints with the Labor Inspectorate against Glovo for allegedly violating the labor rights of its workers and “challenging the Rider Law openly without making an attempt to adapt to the regulations. ”
According to the union, Glovo “It will employ 2,000 people, but it will not do so with another 8,000, forcing the interpretation of the law and saying that it will give freedom to fix prices or time discretion. But it’s not enough”.
On the other side of the coin is the strategy adapted by Just Eat. Unlike Glovo, the other great competitor of the last mile of the delivery, opts for the complete employment of riders and is already negotiating with the unions first collective agreement in the sector in Spain. In fact, Patrik Bergareche, director of Just Eat Spain, I already pointed out in an interview in Hypertextual in December the will of the company to remove the precariousness label from the sector.
For its part, Uber Eats has opted for a mixed model, similar to the one that follows in some cities with its transportation service. Subcontract fleets of delivery people to third parties so that they are in charge of the operational part. With this, Uber Eats starts to contract the services of a third party. And this will be the one that must adapt to the regulations established by law, either with the Glovo model or with the Just Eat model.
Rider Law: the ultimate test for a business model built on a house of cards
What is clear is that the Rider Law supposes a blow for the accounts of companies like Glovo, which tend to handle very low margins. The alternatives, if the law is strictly adhered to, are quite limited.
Hiring your entire workforce opens the door to an increase in costs that, until now, the companies did not have. The decision that the company makes, either absorbing those costs in its income statement or raising prices to consumers, opens a period of short-term doubts. Doubts that can be put long-term viability in check of your business model.
In fact, the Open University of Catalonia published a study very interesting on the subject. Their conclusions exposed the consequences for these companies of changing their model towards direct contracting.
In one of the analyzed scenarios, they revealed how the direct hiring of riders by these companies would mean an increase in shipping costs by 30%. They also pointed out how the trend in this sector towards massive outsourcing of temporary work agencies is one of the drivers to reduce this extra cost and maintain flexibility.
Price increase for a loyal consumer with free offers and promotions
Given its market dynamics, it is unlikely that the consumer will want to burden the price he pays for the service with regulatory changes. Something that can seriously affect the demand of a very competitive market, even if it is distributed among a few companies.
Especially when it has been that market dynamics that has pushed this incipient industry low prices and job insecurity. All through loyalty strategies based on the coup of the checkbook of the risk capital that has financed them. And more importantly, an efficiency scale whose greatest added value resides, mainly, in its workforce. Or rather, in the so far few limitations on efficiency of that workforce.
The agility and adaptability of a business model that was born with the riders and their precarious working conditions. And that it has been surviving thanks to the flexibility that until now the condition of freelance was supposed for its income statements.
Precisely what you want to change, the Rider Law.