The investment community has reacted to a first-of-its-kind analysis of Deliveroo invoices to riders, revealing more than a third of its couriers in the UK are paid less than the minimum wage. Murielle Gonzalez reports
Deliveroo rider

An investigation into the employment conditions at Deliveroo has found that 41% of riders in the UK who worked for Deliveroo in the financial year 2020/2021 received less than the minimum wage. 

The findings released today come on the back of a landmark Supreme Court ruling, which forced ride-hailing company Uber to guarantee its 70,000 riders a minimum wage, access to holiday pay and pensions – and sent shockwaves to the investment community that has been keen to take part in Deliveroo’s IPO on 7 April. Aberdeen Standard and Aviva Investors, which manage more than £800 billion combined, said they were put off by the working conditions of Deliveroo’s riders.

Speaking to NutritionInvestor, Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, commented: “The report may lead some investors to question the impact on the company’s profitability prospects if it is forced to acknowledge the employment status of its riders in the future.”

In its registration documents, Deliveroo said that it would be ‘adversely affected’ if riders were no longer classed as self-employed. “This could require us to incur significant additional expenses for paying riders or potentially result in us even exiting that market,” it said.

Deliveroo pay

Deliveroo reported riders are paid more than £10 an hour on average. However, the joint investigation published by the Bureau of Investigative Journalism (BIJ), The Daily Mirror and ITV news, produced in collaboration with Deliveroo riders across the UK, showed more than half of the couriers were paid less than that.

One in three riders made less than £8.72, the national minimum wage for those over 25. Some earned even less – a cyclist in Yorkshire worked 180 hours and was paid the equivalent of £2 per hour.

The investigation into Deliveroo’s riders pay looked at invoices recorded since 2018

“For the latest financial year, 2020/2021, we had data from 318 riders doing 11,611 sessions,” BIJ reporter Emiliano Melino told NutritionInvestor. He noted this is not a survey but a crowdsourced investigation with data based on Deliveroo invoices that riders uploaded onto a secure system.

For the investigation, a session starts when a rider logs into the Deliveroo app and ends when they log off, having done at least one delivery.

This first-of-its-kind analysis of thousands of invoices registered over the past three years showed riders’ pay below the minimum wage have been on an upward trend since the fiscal year 2018/2019 to date – at 11%, 31% and 41%, respectively.

Concern over employment conditions

Tom Powdrill, head of stewardship at Pensions & Investment Research Consultants (PIRC), said employment conditions are becoming a very significant issue for companies in the gig economy, such as those in the meal delivery sector.

He said: “The S in ESG (environmental, social, and corporate governance) is becoming a much bigger concern for investors. We now know that Aviva Investors wouldn’t participate in the Deliveroo IPO in part because of concerns over employment conditions. We represent some investors who may also decide not to take part in the IPO.”

Tom Powdrill

For Powdrill, Uber’s court case has set a precedent. “We are concerned about poor labour practices in their own right, but more generally, investors see that if companies are challenged over employment conditions, it can have a significant impact on valuations,” he said.

Companies with a gig economy business model such as Deliveroo have become significant employers. For the past decade, they have pushed for a high level of flexibility and risk on the employee. Powdrill argued we’re starting to see that the pendulum is swinging back in the other direction.

“There’s only one real direction of travel now, and that is to have greater protections afforded to workers in this sort of sectors,” said Powdrill. 

He continued: “We have to be upfront about this – companies have benefited from being able to keep labour costs down, and probably labour costs are going to increase to some degree. But people deserve to be paid for their labour, and that should be factored into business models.”

A Deliveroo spokesperson argued that its riders have the complete freedom to choose when and where to work and they choose which deliveries to accept and which to reject. 

“50,000 riders choose to work with Deliveroo, and thousands more people apply to work with us every week,” said the spokesperson. “Our way of working is designed around what riders tell us matters to them most – flexibility. Riders in the UK are paid for each delivery they choose to complete and earn £13 per hour on average at our busiest times.”

Competition in the meal delivery space

Streeter pointed out that competition in the meal delivery sector is high, and Deliveroo faces up against rivals Uber Eats, Just Eat Takeaway, and a host of others.

Susannah Streeter

She said: “Just Eat Takeaway has already announced its intention to ramp up operations in the UK. Until now, it’s been focused on just offering the delivery platform, but now it will be scaling up its delivery fleet of riders over the coming year. 

“Just Eat Takeaway has also pledged to stop using the gig economy model and offer UK workers hourly wages, sick pay and pension contributions.”

Streeter noted Deliveroo has so far seen off challenges in the courts but attempts to change the company’s contractor model are likely to continue.

She added: “The European Commission is set to draw up new legislation this year governing how the gig economy model works across the bloc, and it’s likely to draw on any new evidence available regarding current working practices of companies, including Deliveroo.”

Deliveroo has more than 100,000 riders in 12 countries. Many are fighting parallel battles for employment rights and recognition as workers – these battles have been successful or are fast gaining ground in countries across Europe.

For Streeter, Deliveroo has clearly had a Covid-19 boost as diners switched from eating out to ordering dishes from restaurants at home. However, she questioned whether the uptick will continue.

She said: “Although this insatiable demand for takeout food isn’t likely to fully reverse and its service has been popular,  there is inevitably going to be a drop in demand once restrictions ease.”

For Streeter, many diners will seize the opportunity to book tables at their favourite eateries once more, and enjoy food that has travelled 20 metres on a waiter’s tray, rather than two miles on the back of a bike.

Deliveroo IPO

The flotation of Deliveroo on the London Stock Exchange is scheduled for 7 April. The IPO is expected to value the business at around £8.8 billion. If the forecast comes to fruition, it could become the biggest London stock market debut since commodity company Glencore in 2011.

The price range for the shares has been set at £3.90 to £4.60, and the IPO consists of 384,615,384 shares.

Deliveroo founder Will Shu is expected to gain a £30 million payout, retain a 6.3% stake in the company worth about £550 million.

Existing shareholders, including Amazon and private equity firms Bridgepoint, Index and Greenoak, are set to exit with returns totalling at least £536 million.

In contrast, Deliveroo riders who have met a minimum target of deliveries are in line to share a £16 million cash bonus.

Deliveroo has engaged Goldman Sachs and J.P. Morgan Securities as joint global coordinators. Merrill Lynch International, Citigroup Global Markets, Jefferies, and Numis Securities are acting as joint bookrunners for the offer.

Date published: 25 March 2021

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