Cycle food delivery services in the gig economy – precarious employment 2.0
The fully integrated business model developed by companies such as Foodora and Deliveroo has completely revolutionised the takeaway delivery industry. However, even though their profits are rising, these companies are failing to offer their couriers fair pay and working conditions. The couriers are in turn beginning to express their discontent which the companies do not like at all, and now labour disputes are starting to rage in the digital economy. On the other hand, these developments have also produced a number of positive effects.
When applying for a position as a courier at the takeaway delivery service Foodora, it is necessary to watch a training video first and then answer a series of questions. How should I behave towards the customers, how should I transport the food correctly, how should I put my rucksack down correctly etc. The video would certainly have received lots of hits if it was uploaded to YouTube.
In Berlin alone, more than 500 couriers deliver food all over the city on behalf of Foodora. There are 2,300 in total across the whole of Germany who collect orders from the participating restaurants and ferry them to the customers. Their pink boxes and jackets are a ubiquitous sight, as is the green livery and kangaroo logo sported by the 1,000 couriers across Germany who work for Foodora’s main competitor Deliveroo. The couriers can also deliver by car or motor scooter, however, the overwhelming majority of them use bicycles. This is not only the most practical mode of transport but also the most cost-efficient.
Successful business model, lousy working conditions
Foodora and Deliveroo are not conventional delivery service platforms which list individual providers and then pass on the orders to partner companies which pay up to 30 per cent of their profit to them (Foodora). Instead, they collaborate directly with the restaurants which then do not need to have their own delivery service. Foodora and Deliveroo handle everything except the actual cooking including online presence, orders, delivery and billing.
A simple ordering system for customers, profitable business for the companies, good jobs for the cycle couriers? Yes, yes and no. The amount of criticism that is being levelled against these takeaway courier services is increasing in direct proportion to the rise in the number of providers of this new form of takeaway delivery service. Working as a courier, especially on a bicycle, is certainly not an easy job. It is important to ensure that the food still looks presentable and is still hot when it reaches the customer even though it has to be transported over a number of kilometres in a rucksack over uneven surfaces such as cobblestones. This wouldn’t be so bad if the pay were at least fair.
Too many couriers for too few deliveries
Unfortunately, the exact opposite is the case, resulting in lousy conditions for the couriers. Companies look for couriers that they can employ cheaply and who are more likely to accept less favourable working conditions, such as the self-employed, interns, students or part-time workers. They are not fussy which as long as the costs are low and they can avoid paying social security contributions or offering other kinds of support. The couriers have to pay for their work equipment themselves, including smartphones and bikes, and any repairs that need to be done. They also have to pay for clothing that is appropriate for all weather conditions. The couriers have to pay a security deposit for their jackets and time that is taken off in order to make bicycle repairs is also unpaid.
This is usual practice in the gig economy which describes the trend of companies hiring independent contractors and freelancers on short-term contracts instead of full-time employees. These employment practices are usually carried out via online platforms. Delivery services fit perfectly into this scheme with Uber being the most obvious example. Why has so much criticism been levelled at Foodora and Deliveroo especially?
Couriers who are working in ‘marginal part-time employment’ earn between 450 to 850 euros per month. This may be acceptable as an additional source of income if you are a student, for example. However, the cards are stacked against you if you rely on this as your main source of income. Both companies employ considerably more couriers than they are able to assign delivery jobs. The number of future orders can only be predicted in approximate terms and providers cannot risk not having enough couriers on the streets. The number of available shifts become scarcer, yet the pay rate is still set at between 9 to 11 euros per hour. Even though this rate is above the minimum wage, it is still too low to make ends meet due to the lack of available shifts. Once insurance contributions, bicycle repairs and other costs have been paid, the final amount is actually below the amount set out in employment regulations. Behind the facade of a dynamic start-up culture that encourages teamwork and mutual success, there lies a highly pressurised competitive atmosphere among the couriers.
The surplus of couriers in general has an even bigger impact on freelance cycle couriers. They are paid 5.50 euros per delivery. If you are only able to do three or four deliveries per day, you will only come away from this whole shift with 20 euros or less. The problem lies in the fact that both companies use an algorithm which monitors travel behaviour, calculates distances and assigns jobs based on these results. The courier who usually travels the quickest is given more deliveries to do. However, the next collection point may be at the other end of his or her delivery zone. The couriers only find out where they are going exactly after the current order has been assigned. And on top of this, it is important to consider whether any of us would actually like to be constantly followed when we are doing our jobs. Movement patterns are tracked by GPS throughout the shift which is effectively surveillance disguised as organised labour.
By the end of 2017, the couriers decided they had had enough of the situation. They established works councils in several states across Germany and Europe and organised themselves into trade unions in order to assert their rights and to present their demands.
Companies thwart workers’ attempts to organise themselves
It is well known that the employers are generally sceptical about their employees’ attempts to organise themselves. It is also a well known fact that they are not keen about the idea of employees exercising any co-determination rights. However, the delivery services operating in the gig economy did more than just regard situation with scepticism, they in fact refused to extend any of the couriers’ fixed-term contracts. Anyone who appeared to support the idea of worker rights and who wanted to be part of a worker movement was effectively fired. The employers justified this move by claiming that the employees were not willing to work on Sundays or that the restaurants had lodged complaints. It is unusual that companies are not obliged to justify why they have decided not to extend the term of a contract. Other couriers report that they have received disciplinary warnings about jobs that it is claimed they have failed to accept. Missed deliveries would serve as proof of this, however, there does not appear to be any evidence of this.
Low wages, constant job insecurity, total data surveillance and an arbitrary approach to employment agreements: the gig economy is creating new types of precarious employment that we have not seen since the beginning of the 20th century. It has been very easy to draw parallels between the digital revolution and the industrial revolution. Workers were paid for each shirt they made back then, whereas the couriers are now paid per delivery.
An enjoyable job
The first trade unions were formed during the industrial revolution and now similar developments are taking place in new and emerging occupations. Companies in former times profited from precarious employment conditions as they also do today, however, as is the case both back then and today, they also do not seem to have anticipated this amount of resistance from their employees. They are presumably relying on the fact that they have insufficient resources and do not have a large enough appetite to organise themselves effectively. Many of the couriers are earning money alongside their studies, travel to various districts or have come from various parts of the world to Berlin. They accept low-threshold employment with the delivery services because there are no other opportunities available. However, Deliveroo and similar companies seem to be way off the mark in their thinking.
Clemens Melzer, Berlin Press Secretary of the anarcho-syndicalist primary level trade union, the Freie Arbeiter Union (FAU), which many couriers are a part of, described this type of work to the Tagesspiegel newspaper as, ‘an enjoyable job that the couriers can identify with.’ Theoretically speaking, you spend every day in the saddle and deliver good food to people. However, the reality is not quite so rosy which is something Clemens Melzer is very aware of. ‘Many would like to stay on if the conditions were better.’
Despite this gloomy situation, there are also positive examples of delivery platforms that operate fairly. A notable example is Velofood which operates in the Austrian city of Graz. The company launched in November 2016 and now delivers on average 220 orders to its customers. A special feature of this business is that it only delivers food in biodegradable packaging. ‘Right from the start, we have wanted to avoid a type of pseudo self-employment situation. We also wanted to ensure that cycle couriers make the majority of the money,’ explains Jonathan Stallegger, CEO of Velofood. ‘First and foremost, we collaborated with cycle courier services whose cyclists were already freelancers.’ He goes on to explain that there are not many permanent jobs available and that it is difficult to predict when the busy times will be. ‘The six employees who are on fixed contracts also carry out administrative tasks in the office.’
He also explains that freelancers also have ‘complete autonomy’ over their working hours and are also entitled to find their own assignments. ‘It would not be financially viable to put all couriers on fixed contracts,’ Jonathan goes on to explain. The company pays 5 euros per delivery which is not as high as the ‘big players’, however, the couriers make on average 12 euros per hour. Velofood does not spend very much money on advertising – or on management jobs. In fact, the boss is usually out and about on his bike around three times a week.
This all begs the question as to whether it would be possible to roll out this model on a larger scale? ‘Apart from the employment conditions, this wouldn’t be a problem,’ continues Jonathan who goes on to pinpoint the exact problem. ‘It works for us because each and every courier decides what he or she wants to deliver. It could be difficult to maintain the system if there were two or three times as many deliveries.’ This is down to organisation issues.
‘Companies such as Foodora make a lot of money. They are backed by strong investors. In my view, there are no financial returns to be gained from issuing fixed contracts.’ However, this is not perhaps the main objective. ‘Employing couriers on a freelance basis is only legitimate if they are okay with it. The competitive environment means that the small players will fail first of all,’ Jonathan Stallegger predicts. This may be the desired outcome as we have seen in the coach travel industry with the case of Flixbus that was initially running at a loss and over time was able to hold a monopoly thanks to large investments and the fact that many of its competitors went bankrupt. Jonathan Stallegger predicts that the investors will save these companies.
If this is love …
It does not look as if things are going to change much for couriers who work for the large providers. Except for the fact that they are fighting for their rights. Not much has been achieved so far, however, even though Deliveroo introduced a flat payment to cover repairs, this is about all they have done. In fact they have actually reduced the number of couriers on fixed contracts. The couriers are continuing to fight for their rights. They are linking up outside the official chat groups, the works council elections showed that in many places action is being taken against the company’s resistance to change and the couriers are starting to gain greater bargaining power. However, there is the possibility that the works councils may not have anyone to represent at some point when all the fixed term contracts expire.
The declarations of love presented on the video that new couriers have to watch during the application process can only be regarded as mere lip service. Even though they profess that, ‘Our couriers are the lifeblood of our company. And we love them,’ the reality is actually quite different.