Uber drivers will be auto-enrolled into a pension scheme after the Supreme Court ruled drivers should be classed as ‘workers’.
The ride-hailing app said it will give its 70,000 UK drivers a guaranteed minimum wage, holiday pay and pensions, starting from today (March 17).
It comes after Uber lost a Supreme Court case last month over whether drivers should be classed as workers or as independent third-party contractors.
Uber has now said all eligible drivers will automatically be enrolled into a pension plan with contributions from Uber alongside driver contributions.
In its statement, Uber said it will also work to ensure that every driver who does not opt out receives the appropriate contributions as of today, up until when the pension scheme is live.
All employers must provide a workplace pension scheme and automatically enrol workers and make contributions to their pension, subject to criteria.
Pension commentators have previously said this judgment paves the way for more gig workers to be auto-enrolled into a pension, giving them the opportunity to save for retirement.
Under the new set up, drivers would earn at least the UK's National Living Wage, paid to the over-25s, of £8.72 an hour, although it will increase to £8.91 per hour for everyone aged 23 and over from April.
But the company said this is a floor and not a ceiling, with drivers able to earn more.
The holiday pay will be paid fortnightly and based on 12.07 per cent of the worker's earnings.
Jamie Heywood, Uber's regional general manager for Northern and Eastern Europe, said: “This is an important day for drivers in the UK. Uber drivers will receive an earnings guarantee, holiday pay and a pension, and will retain the flexibility they currently value.
“Uber is just one part of a larger private-hire industry, so we hope that all other operators will join us in improving the quality of work for these important workers who are an essential part of our everyday lives.”
Wider implications
A worker is a classification that is unique under UK employment law. Workers are not employees but are entitled to the minimum wage, holiday pay and a pension.
Indeed the law around automatic enrolment uses a third term - "eligible jobholder" - and there was some speculation around the time of the court ruling that Uber might use this to avoid providing its drivers with pensions.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said Uber's reclassification of its drivers would "reverberate through the entire gig economy".
Streeter said: “It has become clear that the Supreme Court’s decision last month steered Uber into a dead end in its fight to keep those behind the wheel on self-employed contracts.
“It is likely that other operators will now be forced to reassess the employment status of the drivers they have relied on to develop lucrative businesses.
She added: “The company has reversed on its previous position of claiming that the ruling only applied to a limited number of drivers who had brought the case. Throwing in the towel is likely to come at a significant cost to the company.
“Drivers will not only be enrolled in a pension plan with contributions paid by the company but they will also be paid the national living wage as a minimum and receive holiday pay.”
Meanwhile the GMB, the union for Uber drivers, said the company had done the right thing after losing four court battles.
Mick Rix, GMB national officer, said: “Uber had to be dragged kicking and screaming to do the right thing, but finally they’ve agreed to follow the ruling of the courts and treat their drivers as workers.
“It’s a shame it took GMB winning four court battles to make them see sense, but we got there in the end and ultimately that’s a big win for our members.
“GMB has consistently said we are willing to speak face to face to Uber about its treatment of drivers - our door remains open.
“Other gig economy companies should take note - this is the end of the road for bogus self employment.”
amy.austin@ft.com
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