Hermes worker deal gives flexibility to a strategic resource

Last mile delivery provider Hermes has struck a deal with trade union GMB to offer drivers ‘self-employed plus’ status, which comes with guaranteed pay rates and 28 days paid leave.

The news comes after a group of 65 Hermes drivers challenged their status as ‘independent contractors’ in mid-2018, when an employment tribunal ruled they were entitled to a minimum wage, paid annual leave and the right to claim back what were judged to be unlawful deductions from pay. The new employment status is offered on an opt-in basis, meaning drivers can retain the flexibility of self-employment and the opportunity to earn higher rates, or choose to work under the new contracted terms.

‘Self-employed plus’ status comes with guaranteed pay of at least £8.50 an hour over the year, which is above the UK minimum wage, and a range of rights that are attributed to “workers” under UK employment law such as minimum rest breaks as well as paid annual leave. The new status is available to all 15,000 of Hermes UK couriers, although it does come with what appear to be restrictions.

Hermes has allowed its drivers to set their own routes in the past, a move which relies on the local knowledge of those undertaking the delivery. That option will remain available to all existing drivers who choose to take up the new contracts, but any new couriers who opt-in to the contract will be guided by Hermes route optimisation software. Choosing the most efficient route possible will help to increase the speed and number of deliveries each driver is able to undertake, although in an interview Sky News, Hermes UK Chief Executive Martijn de Lange stated “couriers can still deliver parcels whenever they want, it is still unbranded and they can still use substitutes and have parcels delivered by other people if they so wish to…What we have got is route optimisation software, which is a tool couriers can use to be more efficient if they want to, but if they want to change the route, they can still do that.”

Scale and efficiency are vital to last mile business models, especially for those with large volumes of B2C e-commerce deliveries to handle. The amount of flexibility Hermes is determined to provide to its couriers is a key part of its offer, and de Lange admits the new contracts are “going to cost us many millions of pounds but we’re happy to do that because ultimately we want to invest in the future of our company…Our business has been growing double-digits over the last 5 or 6 years, driven by online shopping, but our bottom line has not grown double-digits, that’s been more flat. So what has happened here is that we’ve been investing in our couriers but also into technology to ensure that we give great service to clients, and that is how this will be paid for.”

Whether Hermes would have taken this step without the action brought by a group of its own couriers is up for debate, but the move strikes at the heart of a business model that relies on self-employed owner-drivers. Hermes estimates that it could sustain only 6,000 fully employed couriers, markedly below the 15,000 it utilises under the more flexible deal it can offer to either self-employed or self-employed plus drivers. As online retail volumes continue to grow, the emphasis on drivers as a strategic resource will only gain importance.

Source: Transport Intelligence, February 7 2019

Author: Nick Bailey


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