A growing minority of the workforce in advanced economies is now economically dependent on digital platforms like Uber, TaskRabbit and Amazon’s Mechanical Turk for income.

Many platform firms have actively sought to redesignate work from an employment relation to one of independent contracting – self-employment.  Using strategies of  ‘regulatory entrepreneurship’ , platform firms can then avoid employment legislation across different national contexts, by ensuring their workers do not meet crucial legal tests for employment status.

In particular, exempting workers from employment contracts enables platform firms to avoid key social and employment protection (SEP) systems – these are the legal rights for workers, and related obligations for employers, that confer minimum wages, health and safety protections and benefits like parental leave and state pensions.

Yet, in a striking but curious development, some platform firms are now beginning to offer their own SEPs to nominally self-employed workers. For example, Uber now offers Allianz insurance provision for drivers in the UK, providing some coverage for parental leave, sick pay and compensation for industrial injuries and jury service (it claims “We are proud to be industry leaders with Allianz Partners in establishing stable flexibility for the gig economy”). In the US, during the pandemic, both Lyft and Uber also provided limited paid sick leave for those affected by the coronavirus.

These varied initiatives are examples of a growing trend in the platform economy: the provision of privatised SEPs. But in a sector where platform firms have a long history of looking to avoid regulation and obligations, what is motivating this behaviour?

Self-Employed Plus

In a new article for Research Policy, writing with Jacqueline O’Reilly and employment lawyer Marc Meryon, we develop an explanation of this trend by examining evidence from one important recent UK example of a privatised SEP from the UK parcel courier sector.

In February 2019, Hermes – the UK branch of German multinational parcel courier firm – and the GMB made headlines when they announced the formal recognition of the GMB trade union amongst self-employed couriers, and a new contract for these workers (called Self-Employed Plus, or SE+).

Like many other platform workers, Hermes’ ‘lifestyle couriers’ have traditionally been self-employed, and consequently exempt from receiving SEPs. After recruiting several members inside Hermes, the GMB trade union embarked upon litigation at an employment tribunal in 2017 aimed at securing limb (b) worker status (an intermediary category permitting paid holidays, sick pay and a minimum hourly wage) for a small number of couriers.

The Employment Tribunal found in favour of the litigants in June of 2018, and the GMB noted its intention to raise claims on behalf of more couriers. Hermes, for its part, planned to appeal the ruling. Legal proceedings were dropped in early 2019 when, in what both parties termed a ‘landmark agreement for the gig economy’, SE+, was announced.

The contract included paid holidays, minimum hourly rates, and a suite of other privatised SEPs, alongside the union recognition deal featuring collective bargaining framework – highly unusual in the platform economy.

SE+ status has since been made mandatory for new starters and a conversion process of all courier contracts is underway. The agreement includes union recognition with the GMB, securing its right to formally represent those couriers on an SE+ contract, along with a Partnership Principles Agreement’, outlining the principles of a co-operative approach between company and union.

Three reasons why platform firms are now offering privatised SEPs

Drawing on interviews and analysis of key documents from the Hermes-GMB case, we identify three major reasons why firms may decide to offer the nominally self-employed platform workers a suite of privatised SEPs.

First, SE+ may help to defuse potential regulatory and legal threats and attempts to secure greater protection for platform workers by offering ‘symbolic compliance’ with employment legislation. The strategy here would seem to be that if platform firms can show that they already match minimum wages, why would governments need to regulate to force them to do so?

Second, improving the terms of work through SEP provision can cost platform firms relatively little, but can significantly improve working conditions and ensure the long-term retention of workers. This may still cost platform firms less than formally ‘employing’ workers, and gives platforms greater flexibility.

Third — and perhaps most important — such agreements offer platform firms innovative ways to expand managerial control over the organisation. Hermes’ senior management, by mobilising a partnership agreement with the union to ensure robust upward reporting mechanisms by grassroots members, was able to exert greater control over lower tiers of management and reduce turnover and rationalise courier cover by establishing a system of banked and bookable annual leave.

What future for SEPs?

Could we see wider use of privatised SEPs, and if so, what would this mean for employment in the platform economy and labour markets more widely?

First, privatised SEPs do imply the deepening of segmentation in labour markets, as a growing pool of platform workers is shut out from public SEP systems and instead made vulnerable to a patchwork of non-portable benefits. Evidence already suggests that platform work is increasingly dominated by migrants, demonstrating the potential for entrenching inequalities.

Second, insofar as firms and workers avoid substantial tax contributions through independent contracting arrangements, they pose a growing threat to national social security systems and can mount unfair competition with those making such contributions.

Finally, though many in the trade union movement are understandably sceptical of such arrangements between platforms and unions, they are perhaps best understood as an unstable compromise between firms and employers. This is evident in last month’s announcement that Hermes SE+ drivers are to receive both auto-enrolment into a pension fund and paid parental leave – greatly enhancing the value of the deal.

In sum, private social and employment protection provision is in a current state of flux and could move toward either levelling-up (towards the conditions of employment status) or levelling-down (with a reduction of SEP provision). The likelihood of either outcome depends upon three main factors. First, the balance of forces within firms between management and workers. Second, labour market conditions. In tighter labour markets, such as those we see at the moment, this will be likely to improve workers’ bargaining conditions, if this tightness persists. Finally, the likelihood of improvements depends on whether the current legal confusion around independent contractors’ status is allowed to persist, or if courts and regulators move decisively in one direction or another to uphold or challenge the model.