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Is the European platform economy about to appear? Brussels lawmakers are discussing new work rules that would offer better protection for drivers and passengers. Uber has claimed that if it were forced to treat its drivers as employees, it would have to cut jobs, raise prices and reduce its workforce. The British company Deliveroo has already left Spain, where the government has decided to strengthen passenger rights.
For platform companies, the risk is clear. Fixed working hours are not compatible with their flexible business models. Platforms that have to guarantee working hours would have to hire a fixed number of drivers, organize deliveries and distribute the workforce.
The impact of such a rule change is difficult to estimate, but Citigroup estimates it could increase labor costs by 30 percent. That’s a lot when you consider the low platform margins.
Take Deliveroo. In 2022, the company had sales outside the UK and Ireland of £855m, out of a total of £2bn. Gross profit outside the UK was £237m, which equates to £618m for cost of goods sold. If one assumes that the majority of these costs are attributable to drivers and increases that figure by 30 percent, international gross profit would be roughly halved.
Not all of Deliveroo’s international business comes from the EU. Citigroup estimates it represents less than 30 percent of gross transaction value. Lower marketing expenses would offset the additional effort. These quick estimates then provide indications of the impact.
Don’t expect such a draconian result. While the European Parliament considers all 28 million gig workers in the EU to be employees, the European Commission estimates that only 5.5 million are incorrectly classified as self-employed.
Any rule change must be implemented into the local labor laws of EU member states – a process with some flexibility. Italy has already given gig workers some protection from strict algorithms, but without destroying the platform model. When the rigid distinctions between employees and contractors become blurred, this flexible approach offers an option.
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