If the group claim launched by law firm Leigh Day is successful, retail giant Amazon could be forced to pay £140 million in compensation to thousands of drivers who deliver parcels on their behalf. Amazon’s drivers, who currently deliver as ‘delivery service partners’, are classed as self-employed and, as a result, are not entitled to employee rights such as holiday pay and minimum wage.
This is not the first instance of an employment rights case in which a well-known, global company has come under scrutiny for their employment practices, and we’re certain it will not be the last. So, let’s take a closer look at why Amazon has come under fire, what their current system means for their drivers and how UK law could better define self-employment to avoid issues like this.
Amazon’s Delivery Service Partner Programme
Amazon’s current logistics programme is centred around their drivers being self-employed and running their own full-time delivery business, with a view to recruiting, training and managing a team of up 100 drivers. Those who enter the programme are expected to procure their own delivery vehicles or lease Amazon-branded vehicles. Any vehicles used by the drivers must meet Amazon’s requirements.
Amazon estimates that anyone entering the Delivery Service Partner programme should expect start-up costs of approximately £10,000, with a total of £25,000 in liquid assets required. The key start-up costs incurred by the individual include:
- Legal entity formation and licensing
- Accountant and lawyer fees
- Business supplies like laptops and timekeeping software
- Costs for recruiting drivers, drug tests, background checks and driver training
- Personal living expenses whilst the business is in its initial stages
- Vehicle costs
- No entitlement to holiday pay, sick pay or minimum wage
On the surface, these seem like reasonable and expected costs for anyone starting their own business. As limited company accountants, we deal with all of the above for our clients every day, and there is nothing out of the ordinary about these costs if you’re self-employed. The question currently being raised regarding Amazon’s Delivery Service Partner programme is whether their partners and the drivers that fall under their authority are self-employed at all, given the level of control Amazon has over their businesses.
The Issues with Amazon’s Delivery Service Partner Programme
As discussed, some 3,000 drivers who are a part of Amazon’s Delivery Service Partners are classed as self-employed under the current program and are not entitled to holiday pay or minimum wage. If you would like more information about what it means to be self-employed, you can speak to Gorilla – as experienced sole trader accountants, we have a wealth of information surrounding self-employment in the UK.
The issue arises when you look at the Amazon Delivery Service Partner programme’s structure and the level of control Amazon has over its ‘self-employed’ drivers. The case made by law firm Leigh Day argues that the work carried out by the drivers and how they fit into the business is dictated heavily by Amazon themselves. Therefore, these drivers should be entitled to employee rights. Issues used to illustrate the level of control Amazon has over their self-employed drivers include:
- Drivers must follow an Amazon-built and maintained app that gives them estimated travel time targets between delivery drops they are required to meet.
- Drivers cannot return undelivered parcels to the Amazon depot. Instead, they must be redelivered and drivers pay for any additional fuel at the end of the working day.
- Drivers work set shifts as dictated by Amazon and have to book time off with the company.
Drivers have also reported that they are left with little tangible income after paying for the vehicle rental and insurance.
Drivers Want Employment Rights from Amazon
Leigh Day believes that drivers short-changed by Amazon through the Delivery Service Partner programme could be entitled to an average of £10,500 in compensation for every year they have worked for the global retailer. If the case is successful, Amazon could be facing a bill of up to £140 million. Of course, it’s a small sum for a company that makes billions in revenue every year.
Still, the ultimate goal is to achieve workers’ rights for those affected and push the government to address the current shortfalls in employment law that allow issues like this to happen.
In February 2021, Leigh Day famously won a landmark employment rights case for Uber drivers who demanded basic workers’ rights such as minimum wage and paid holidays. In an economy where many companies – particularly delivery and courier companies – define their drivers as self-employed, the success of the case was expected to lead to better terms for millions of gig economy workers. Leigh Day is hoping to repeat their previous successes with the Amazon case.
Urging The Government to Better Define Employment Law
The confusing nature of current UK employment leaves plenty of room for companies like Amazon to manoeuvre their drivers into a position where they are unsure of their obligations and are seemingly not reaping the rewards of a worker, despite working to parameters defined by the parent company. Receiving a minimum wage, holiday pay, and working under a legitimate employment contract would be life-changing for many operating in the gig economy, which has risen from the ashes of poorly defined employment status laws.
Although employed and worker statuses are clearly defined in UK law, there is no statutory definition of self-employed status. This allows companies like Amazon to blur the lines between who is and isn’t self-employed, essentially creating the definition for themselves. Until there is a change in government legislation, definitions of who is self-employed under business models like Amazon’s Delivery Service Partner programme will only ever be resolved through lengthy court cases.
Many, including the trade association for self-employed workers – IPSE – are urging the government to create a statutory definition for self-employment to end the confusion. They believe action should be taken to secure rights for workers who should be entitled to them and protect the freedoms of genuine freelancers.
What It Means to Be Self-Employed
An interesting fallout from such cases is the dilution of what it means to be self-employed. As contractor accountants, we work with hundreds of genuinely self-employed people. They are in complete control of running profitable, successful businesses without a large corporation impeding how they operate. When large companies attempt to move into the self-employed space and use it to maximise their own gains, it can distort what it means to be self-employed.
At this time, it’s unclear whether this case will fall in favour of Amazon or Leigh Day and the drivers. Still, given their previous success when taking on Uber and the sheer number of similar ongoing cases, we could see a shift toward better defined self-employed status in UK law in the future.
If you’re self-employed or considering becoming self-employed and want to know more about what that means for you, contact us today. We are leading sole trader accountants who specialise in self-employed accounting, and we’ll be more than happy to help.