Legal recognition of delivery riders is not a “one-shot” solution

Special legislation for semi-formalisation is the way forward towards a more balanced bargaining relations.

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Published in Astro Awani, theSundaily, and Asia News Today, image by Astro Awani.

The economic impact of the Covid-19 pandemic in the form of lockdowns and movement restrictions had forced many businesses to lay off workers in order to lower their payroll as a result of the loss of income or revenue. 

This is, of course, a classic case of involuntary unemployment. Meaning to say, the unemployment only resulted because of the pandemic as externality and not from the dynamics internal to the business and production processes, i.e., market in the form of the relationship between wages and output/productivity.  

Others who were not laid off within the same firm, for example, took pay cuts (which isn’t equivalent to lower real wages) or accepted fewer working hours since these were meant to be temporary arrangements. 

When the economy fully resumed, what we see are wages rising not only due to the new minimum (nominal) wage legislation (RM1,500) but due to demand from the employers also (in certain sectors like hospitality, food & beverage, plantations, etc.). 

In short, there was no wage rigidity (real and nominal which would be on the part of the workers) in the first place. 

Consequently, this has led to a sharp increase in the gig economy as most of the unemployed individuals shift into working conditions and contracts characterised by flexibility and “informality” and, thus, the term, “independent contractors”. 

The gig economy can be best defined as flexible or casual-type jobs (similar to zero hours contracts that became popular in the UK in the aftermath of the macro-economic austerity measures post-Great Financial Crisis of 2008/09) that businesses offer to “independent contractors” for services that typically deploy online platforms and mobile app to connect with customers.

So, whilst it’s possible for a gig worker to “look” no different in terms of form (nature of work, i.e., activities) from a conventional employee, in substance (nature of employment, i.e., terms and conditions), there’s a significance difference. 

In Malaysia, delivery riders can well be considered as the prominent feature or embodiment of the gig economy, not least because of their near-ubiquitous presence on our road landscape. They come under what’s known as p-hailing services which is defined by the Ministry of Transport (MOT) as “food, drinks, and parcel delivery using motorcycles”.

According to the Department of Statistics Malaysia (DOSM), there were approximately 772,900 Malaysians who had lost their jobs by the Q4 2020 (see “Key Statistics of Labour Force in Malaysia, December 2020”). By the same token, DOSM statistics showed a strong growth in the employment of gig economy in the same year – with up to four million engaged (see “Gig Workers Reveal How Much They Can Make”, by Haziq Alfian, iMoney).

Indeed, the disruptive nature of job insecurity caused by the pandemic has subtly transformed the traditional workforce which has been typically concentrated in terms of location/on-site as well as employment terms and conditions that are geared towards the collective (hence “collective bargaining”, for example) into a fragmented, disaggregated and atomistic labour market. 

This tips the balance in favour of the employer or contract provider. 

The passing of the Employment Act (2022)/EA 2022 which in effect provides legal recognition to gig workers, including especially delivery riders who are considered the most vulnerable in terms of social protection given the nature of work and employment conditions, is a vital step in ensuring the security of their welfare.

But it’s still insufficient to address the long-standing problems of job security, benefits entitlements and social protection. 

As pointed out by researcher and gig economy specialist Edwin Goh of The Centre, despite the introduction of schemes such as the Socso work accident insurance, a voluntary retirement savings programme under the EPF via i-Saraan and a housing credit guarantee, none of these addresses the nature of the gig work platform which revolves around delivery fares, payment schedules, rating systems, etc. (“Responses to delivery riders missing the bigger picture”, Malay Mail, August 29, 2022). 

Reviewing the impact of gig workers’ “employees” status in Europe

First, let us review the situation in other countries with Europe as an example.

To rebalance the nature of the contract provider-contractor relationship, several European countries have taken the stringent step to legally recognise gig workers as “employees”. 

This, of course, has ramifications.

Following the legal recognition in Germany, the gig economy seems to have slowed down. Berlin-based food delivery company Delivery Hero cited that the rising cost of riders had forced them to stop operations in six German cities (see “Delivery Hero exits Germany for second time, citing high costs”, Financial Times, December 22, 2021). 

In Spain, food delivery platform Deliveroo left the country altogether and this scenario could potentially stumble the growth prospect of gig economy not only in Spain but across Europe especially when the policy issue of gig employment status was being looked into by the European Commission (see “The Gig Economy’s Days in Europe Are Numbered, WIRED, December 10, 2021).

In December last year, the European Commission published its proposed Directive (as one of the primary sources of EU laws) which seeks to ensure that gig workers employed under digital labour platforms (algorithmic management) are entitled to the same benefits as conventional workers – by shifting the policy orientation towards the concept of “employer”. 

In February 2021, the UK Supreme Court ruled that Uber drivers must be treated as employees and that they are entitled to the social benefits. 

According to Dr George Maier of the London School of Economics (LSE), for many years, Uber in the UK had relied on offering a low-cost alternative to traditional taxis in order to support its rapid growth across new markets, but labour liabilities will inevitably lead to increased prices that will erode demand for Uber rides and reduce turnover as a result of status recognition of Uber drivers (see “Will Uber exist by the end of the decade”, LSE Blogs).

Reassessing the welfare of delivery workers in Malaysia

For the past few years, the government has introduced several policy initiatives for gig workers – with particular focus on the delivery riders – such as the Self-Employment Social Security Scheme (SKSPS), i-Saraan, e-Rezeki, e-Usahawan, etc. 

Notwithstanding, the job security of delivery riders is still not properly addressed. 

According to DOSM, in 2020, only 5% of the self-employed in Malaysia had enough (sustained) savings to last for at least three months. 

This could partly account for Section 101C(1)(f) of the EA 2022 whereby any payment received at “regular intervals” and which constitutes the majority of the worker’s income would automatically make the person an employee.

The next step is to ask what more could be done to complement and supplement the provisions of the EA 2022 that impinges on the welfare of gig workers with particular focus on the delivery riders. 

This given that a) they constitute a significant and conspicuous presence and the familiar embodiment of the gig economy, b) the low-skilled nature of their job, and c) the majority continue to prefer flexibility not least due to better earnings prospects.

Therefore, it’s critical for the government to formulate a specific legislation aimed at delivery riders – which balances between flexible earning arrangements and permanent benefits and, by extension, the interests of both the “worker” and “employer” – all within the broader remit of the EA 2022. 

In effect, the flexible working arrangements (FWA) provided for under the EA 2022 (Sections 60P & 60Q) would be adapted specially for delivery riders under this new legislation. 

An opt-out clause (from the EA 2022) under this special legislation should be allowed for delivery riders who don’t wish to be recognised like a conventional worker whilst still enjoying the benefits afforded. 

Basically, a delivery rider should be able to enjoy the benefits of a conventional worker – up to certain limits – whilst retaining their pre-existing “independence”. 

In other words, not full formalisation but semi-formalisation of the delivery riders’ employment terms and conditions – where only the benefits entitlement is formalised but not the nature of the working and earnings arrangements. 

So, for example, delivery riders who want the flexibility in terms of working hours and days (so as to concentrate on only certain working days which exceed the statutory working hours whilst leaving the rest of the week for family time and leisure) should be allowed to do so and simultaneously be entitled to some kind of benefits like medical coverage (at least for in-patient treatment) and a mandatory employer contribution to EPF savings of not more than e.g., 5%. 

Furthermore, the proposed legislation should also make it mandatory for representatives of delivery riders to sit on the board of the top management to enable them to have a say/voice. 

In addition, there should be a provision for the establishment of a delivery riders’ union representing the delivery riders – moving beyond associations under the Societies Act (1966) but which would be completely distinct from the Trade Unions Act (1959) for obvious reasons. This will give legal recognition also to the collective bargaining status of the delivery riders. 

Going forward, under the same proposed legislation, there should be a high-level gig workers’ council comprising of the Deputy Minister for Human Resources who’s also specially tasked to look after the welfare of the delivery riders, representatives of the delivery riders’ union, gig economy providers/employers or p-hailing and e-hailing services companies, employment lawyers and practitioners, etc. 

This council should be meet once every two years to review the existing legislations and ensure that the balance of competing interests between the “employer” and delivery riders are continuously maintained.

These measures should foster a climate of trust and cooperation in the industry and prevent discontentment that would result in strikes or other disruptive actions that would damage business and consumer confidence.

In summary, having provided for the general framework and initial step in securing the welfare of gig workers under the EA 2022, with especial reference to the delivery riders, we should then move towards ensuring the particular rights of the latter via a specialised legislation that allows for a re-pivoting (back) towards the interests of the employers with opt-outs allowing for flexible contracts but which are better protected and from a stronger and more balanced bargaining relations. 

Jason Loh and Hazriq Iqmal Abdul Aziz are part of the research team of EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research. 

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