Deliveroo apologizes over new UK pay system in latest tech clash

By Kate Holton

LONDON (Reuters) – Food delivery firm Deliveroo apologized on Monday and said British riders could opt out of its new payment system after it became the latest high-flying tech start-up to face criticism for the employment terms given to its staff.

The London-based company, valued at more than $1 billion after a recent funding round, said a proposed plan to pay riders per delivery and not per hour had been a trial that its staff could opt out of if they preferred.

The new system of payment per delivery had prompted staff protests, criticism from the government and condemnation from the opposition Labour party which accused Deliveroo of offering a return to a piecemeal “Victorian system” by cutting costs and increasing insecurity for staff.

“We communicated this to our drivers really badly. I believe I should apologize for that,” Dan Warne, managing director of UK and Ireland, told Reuters.

“If they don’t like the lack of security that they feel they would have with the per delivery system … then they can revert to the old system and we’re very comfortable doing that.”

The dispute echoes similar standoffs in the United States and elsewhere between staff and fast-growing tech platforms such as Uber [UBER.UL] which provide an instant service to customers through workers who are self employed.

With their distinctive black and teal jackets, Deliveroo riders have become a familiar sight on London streets since the firm started trading in 2013, delivering food from restaurants which do not have their own delivery service.

The firm, which competes with the likes of Just East and UberEats, says it has around 6,000 riders in Britain, with 3,000 in London, using either mopeds or, more commonly, bikes.

Active in 12 countries across Europe, Asia and the Middle East, Deliveroo tested a system in five areas in London last week where riders received 3.75 pounds per delivery rather than the current 7 pounds per hour plus one pound per delivery.

Deliveroo said they believed the new system would enable riders to earn more while working fewer hours and said that during the trial the average hourly fees for riders had doubled at the busiest times.

But Deliveroo’s new pay scheme has made headlines in Britain where there is mounting public anger over low pay and job insecurity.

Workers aged 25 or over are entitled to receive the national living wage of 7.20 pounds, but those who are self employed do not. Two drivers for taxi app Uber have taken the firm to an employment tribunal in Britain, arguing they should get holiday and sick pay.

“Individuals cannot opt out of the rights they are owed, nor can an employer decide not to afford individuals those rights,” said a spokesman for the department of Business, Energy and Industrial Strategy when asked about Deliveroo.

The dispute in Britain follows two years of court and regulatory battles in Silicon Valley, the spiritual home of tech startups, over how dozens of on-demand delivery companies pay drivers as contractors rather than as full-time employees.

“I think that we are in an evolving industry, an evolving economy and there’s a changing nature in the way people work,” Warne said.

(Editing by Jane Merriman and David Evans)