Uber will reclassify all 70,000 of its UK drivers as workers, entitling them to the minimum wage, holiday pay and other benefits after a ruling from the Supreme Court last month.
The ride-hailing app’s drivers will receive at least the national living wage of £8.72 ($12.11) per hour starting on Wednesday.
This will be the minimum drivers can earn, in what Uber described as an “earnings floor, not an earnings ceiling".
Uber did not specify how much the reclassification will cost but said it does not expect to change its earnings forecast for the quarter or the year.
The changes are limited to the UK, Uber’s biggest European market, but raise questions about whether management is willing to consider adapting its business model in other countries.
The San Francisco-based company faces legal challenges in its home state of California, as well as pressure from European policymakers to improve conditions for gig economy workers.
“This is an important day for drivers in the UK,” said Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe.
“Uber drivers will receive an earnings guarantee, holiday pay and a pension, and will retain the flexibility they currently value.”
The ruling also has ramifications for the wider gig economy and other firms that use third-party services to employ freelancers.
Mr Heywood said he hopes “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".
In a ruling last month, the UK Supreme Court unanimously rejected Uber's arguments that the drivers were not workers, giving the company little option but to offer expanded benefits.
Uber said after the court ruling that the decision only applied to the handful of people that filed the initial suit. Since then, it had been tight-lipped over its plans for the UK business while it carried out a consultation with its drivers.
Under the changes announced on Tuesday, the minimum wage will apply after accepting trip requests on the app.
Drivers will be awarded holidays based on 12.07 per cent of their earnings, paid out every two weeks.
The workers will also be automatically enrolled in a pension plan that will include contributions of 3 per cent of a driver’s earnings from Uber.
This is on top of insurance — which covers sickness, injury and parental leave — that has been available since 2018.
The added costs to the company will mostly come from holiday payments and pension contributions rather than the minimum wage.
On average, Uber drivers already earn £17 ($23.60) per hour in London and £14 in the rest of the country, the company said.
In addition, Uber said it will set up a process for drivers to seek compensation for backdated holiday pay and lost earnings without the need to go through the employment tribunal where the case started.
UK law is unique in that it distinguishes between employees, who are entitled to statutory employment rights such as severance pay, and workers, who are eligible for the living wage and holiday pay, but not the full range of benefits.
Uber has been lobbying for a separate labour classification with limited benefits in the US.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
