Uber Reverses Its Employment Policy

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Uber Reverses Its Employment Policy
<a href="https://pixabay.com/users/JacksonDavid/">JacksonDavid</a> / Pixabay

Uber reverses its employment policy and re-classifies 70,000 UK drivers as workers.

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Q4 2020 hedge fund letters, conferences and more

Uber Changes Its Employement Policy

"Uber's decision to reclassify its 70,000 drivers as workers will reverberate through the entire gig economy. It has become clear that the Supreme court’s decision last month steered Uber into a dead end in its fight to keep those behind the wheel on self-employed contracts. It is likely that other operators will now be forced to reassess the employment status of the drivers they have relied on to develop lucrative businesses.

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The company has reversed on its previous position of claiming that the ruling only applied to a limited number of drivers who had brought the case. Throwing in the towel is likely to come at a significant cost to the company. Drivers will not only be enrolled in a pension plan with contributions paid by the company but they will also be paid the national living wage as a minimum and receive holiday pay.

Uber had warned investors when it listed in 2019 that a reclassification of drivers would adversely affect the business. Uber’s share price fell slightly by just under 1% in after-hours trading in New York, as investors digested the implications of the decision.

Working Time

It seems Uber could still try and limit the financial damage to the bottom line by fighting its corner on what constitutes 'working time'. The Supreme court ruling judged it should be when drivers log into the app, but the company appears to have indicated it won’t include time waiting to find a customer.

The decision has been taken at a time when the company is still in recovery mode from the worst effects of the pandemic. Although demand for Uber Eats deliveries continues to rise, it’s still not offset the sharp decline in driver bookings. However it’s not Uber’s short term profitability, but its vision for the future that appears to have kept significant interest in owning the stock through the crisis. Over the past year Uber’s share price has more than trebled as it advances its plans to use its technology to corner the markets in everything from food and freight deliveries to green transport and even access to healthcare via its ride service for patients.

Its employment policy u-turn may prove to be a set back on its ambitious road map, but it might accelerate Uber’s plans to bring in autonomous cars to minimise the increasing cost of human labour."

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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