THIS MATERIAL IS A MARKETING COMMUNICATION.
ESG Sector Review: How the Gig Economy is Changing the Labour Market
In this article, we review the gig economy, the evolution of labour regulations for the gig economy and how companies are implementing good labour welfare practices for their gig workers.
In a gig economy, workers take up part-time or freelance positions which are often activities outside of a standard, full-time employment contract. Work within a gig economy is often transacted in a digital market; advertised, paid, and rated through technological means. The International Labour Organisation (ILO) classifies the gig economy into two broad categories: online web-based platforms (e.g. tasks like data processing, transcription, and programming that can be remotely performed anywhere), and location-based platforms (e.g. tasks like ride-hailing and food delivery that are mediated through digital platforms to match real-time supply and demand of services)1.
Gig workers tend to be younger, less educated and from ethnic minority backgrounds2. Gig workers prefer gig work due to the flexibility and autonomy it offers. However, gig workers are not always classified as employees but instead classified as independent contractors or self-employed, depending on the industry and nature of the gig work. Therefore, gig work lacks the security, benefits and protections that come with employment.
In particular, labour welfare issues associated with the gig economy were particularly exacerbated by the rise in gig platforms (an increase to over 777 in 2020 from 142 in 20103) and the COVID-19 pandemic which catalysed the demand for food delivery services. For example, the debate around the employment status of gig workers poses potentially legal and regulatory risks: there have been more than 10 court decisions and 15 administrative decisions to date on this topic4. Due to the hazardous nature of the work, the safety of delivery riders for food delivery companies is another topic that has gained attention; research found that nearly 47% of food delivery riders had been injured at work or knew someone who had been injured at work, due to a combination of factors including “unrealistic time and performance pressures, combined with high-risk work environments, and lack of training and appropriate protective equipment”5.
Regulations on the Gig Economy
In the US, at the state level, California signed Assembly Bill 5 (AB5) into law, which extends the employee classification status to gig works. Several companies, including Uber, Lyft and DoorDash financed a ballot initiative of more than US$200 million, known as Proposition 22, to exempt app-based ride-hailing and food delivery riders from AB56. Proposition 22 received 59% favourable votes in November 2020 but was subsequently judged unconstitutional by a Californian judge in August 20217.
In the EU, the EU Commission published a proposed Directive on improving working conditions in platform work in December 2021. The proposed Directive aims to correctly determine the employment status of people working through gig platforms and to enhance the transparency of the use of algorithms on gig platforms for distributing services and remuneration8.
The proposed Directive is going through the legislative process and may still be amended. If it is adopted, EU countries will have two years to transpose it into national laws, which means that it would enter into force in 2024 at the earliest. The EU Commission estimates that “up to five and a half million people working through digital labour platforms could be at risk of employment status misclassification”9.
In China, top government authorities made landmark announcements about the food delivery industry, including the Guiding Opinion on Implementing Internet Food Platforms Responsibilities and Protecting Food Delivery Riders Rights (关于落实网络餐饮平台责任切实维护外卖送餐员权益的指导意见), and the Guiding Opinion on Protecting New Employment Workers' Protection and Rights (关于维护新就业形态劳动者劳动保障权益的指导意见) in August 2021. The Guiding Opinions acknowledged for the first time the existence of workers outside the social insurance construct.
The Guiding Opinions focused on two issues: worker protection and social insurance. With regards to worker protection, food delivery companies are required to disclose their worker protection practices, e.g. explain the work performance evaluation system for riders, unionisation of riders, and assume responsibility for work-related accidents and labour disputes. With regards to social insurance, food delivery riders are to be classified into dedicated riders and crowded sourced riders and the respective classifications would determine their employment status and eligibility for social insurance.
Eligibility to social insurance
Workers who are managed by delivery partner companies contracted by digital labour platforms can be further classified as:
Delivery partner companies and labour agencies are required to enrol food delivery riders into China’s social insurance scheme and offer benefits including holidays and occupational safety measures
Workers who are willingly working for digital labour platforms on a freelance basis. Crowdsourced riders do not have formal employment contracts.
The Guiding Opinions did not specifically mention whether social insurance is required for crowdsourced riders.
How internet platforms are implementing good labour welfare practices
Regardless of whether it is mandated by law or whether a gig platform has a contractual employment relationship with gig workers, companies should implement good labour welfare practices not only as a responsible business but also to maintain driver retention to support the growth of the company.
Meituan recently released the 2021 Social Responsibility Report of Meituan Delivery Personnel Rights Protection10, which laid out steps Meituan has taken to help its delivery riders. For example, 15 cities in China are piloting a new incentive mechanism where delivery riders who receive bad reviews (e.g. due to not delivering food or packages on time) will be punished with a lower score on the platform instead of a penalty. By evaluating the service quality of delivery riders based on scores accumulated on the platform throughout a whole month, this new mechanism aims to reduce any incidental impact on delivery riders’ income. In Shaoxing, one of the 15 pilot cities, nearly 80% of riders are satisfied with the new incentive mechanism rules and think that the distribution experience has been improved.
Grab also offers benefits to its gig workforce through various initiatives:
- Financial support during COVID-19: Grab launched a “Partner Relief Fund” to help its partners, including the gig workforce, who got severely impacted by the pandemic. Through matching donations at 1:1 for every dollar raised by its regular employees, the fund raised US$600k for its drivers.
- Financial empowerment: Grab formed Grab Financial Group which provides "financial services and solutions to address the needs of drivers and merchant-partners and consumers, including digital payments, lending, insurance, and wealth management". Grab's driver-partners, including food delivery agents, are covered by Grab’s Group Personal Accident insurance policy that is provided free of cost.
- Training and upskilling: Grab offers training under the “GrabAcademic” initiative to its drivers to improve overall literacy capabilities.
The employment model of the gig economy is fundamentally different to that of traditional employment. With the rise in internet platforms, the demand for associated services from gig workers, particularly food delivery, has and will continue to increase. As gig workers become a new form of employment globally, labour welfare issues of gig workers are brought to attention by regulators and investors alike.
Whilst we see an evolution of labour regulations in different jurisdictions, some moving to reclassify gig workers as employees and some developing a hybrid model, companies operating globally will have to navigate the specificities of each country’s labour laws. We also see and expect companies to proactively implement good labour welfare practices for gig workers not only as a responsible business but also to maintain worker retention to support the growth of the company.
Staying Ahead with Mirae Asset’s Latest Insights
1. International Labour Organization, February 2022
2. Bernstein Research, August 2021
3. International Labour Organization, February 2022
4. European Commission, December 2021
5. Commonwealth of Australia, June 2021
6. Bernstein Research, August 2021
7. JP Morgan Research, February 2022
8. European Commission, December 2021
9. JP Morgan Research, February 2022
10. Meituan, March 2022
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.