Uber to reclassify 70,000 U.K drivers, provide benefits

Uber Technologies Inc. will reclassify all 70,000 of its U.K. drivers as workers, entitling them to the minimum wage, vacation pay and other benefits after a landmark ruling from the Supreme Court last month.

The ride-hailing app’s drivers will receive at least the national living wage of 8.72 pounds ($12.11) per hour starting Wednesday. Uber described it as an “earnings floor, not an earnings ceiling.”

Uber didn’t specify how much the reclassification will cost but said it doesn’t expect to change its earnings forecast for the quarter or the year. Uber shares fell as much as 3% in after-hours trading.

The changes are limited to the U.K., Uber’s biggest European market, but raise questions about whether management is willing to consider adapting the business model in other countries.

The San Franciscobased company faces legal challenges in its home state of California as well as pressure from European policymakers to improve conditions for gig workers.

“This is an important day for drivers in the U.K.,” said Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe. “Uber drivers will receive an earnings guarantee, holiday pay and a pension, and will retain the flexibility they currently value.”

The ruling also has ramifications for the wider gig economy and other firms that use third-party services to employ freelancers. Heywood said he hopes “all other operators will join us in improving the quality of work for these important workers who are an essential part of our everyday lives.”

In a stinging ruling last month, the U.K. Supreme Court unanimously rejected Uber’s arguments that the drivers weren’t workers, giving the company little choice but to offer expanded benefits.

Uber said after the court ruling that the decision only applied to the handful of people who filed the initial suit. Since then, it’s kept tight-lipped over its future plans for the U.K. business, as it carried out a consultation with its drivers.

Under the changes announced Tuesday, the minimum wage will apply after accepting trip requests on the app. Drivers will be awarded vacation based on 12.07% of their earnings, paid out every two weeks.

The workers will also be automatically enrolled into a pension plan that will include contributions of 3% of a driver’s earnings from Uber. This is on top of insurance — which covers sickness, injury and parental leave — that has been available since 2018.

The added costs to the company will mostly come from holiday payments and pension contributions, rather than the minimum wage. On average, Uber drivers already earn 17 pounds per hour in London and 14 pounds in the rest of the country, the company said.

U.K. law distinguishes between employees, who are entitled to statutory employment rights such as severance pay, and workers, who are eligible for the living wage and holiday pay, but not the full range of benefits. Uber has been lobbying for a separate labor classification with limited benefits in the U.S.