Research and advocacy of progressive and pragmatic policy ideas.
Recent issues on delivery riders can be traced to one conundrum: the unclear employment classification for gig workers. To resolve this, we will need to establish a regulatory sandbox.
By Edwin Goh30 August 2022
In early August, a number of delivery riders under the banner of Food Delivery Blackout gathered at Grab headquarters to submit a memorandum demanding better compensation and working conditions. At around the same time, Capital A (the parent company of AirAsia Super App and AirAsia Food) announced that it will offer formal jobs to an unspecified number of its delivery riders with a minimum of RM3,000 monthly salary and full-time benefits. A few days later, the Transport Minister remarked on mandatory licensing for delivery riders, drawing vehement criticism from delivery rider group Penghantar for potential over-regulation.
The plight of delivery riders has gained much more exposure in recent years, a reflection of their role and importance in urban Malaysian life today. In tandem, the plight of delivery riders is also becoming increasingly important to political parties, with various representative groups attracting cross-partisan interest from UMNO and PKR. Perhaps, as a result, the government via the Transport Ministry is giving representative groups space to share their concerns on delivery fares and social protection.
All this attention is to the good. Nevertheless, the policy analysis and responses that have been proposed so far have been, in our view, rather disappointing. As pointed out in a recent article, there is no clear consensus amongst delivery riders themselves whether they want to be considered as formal employees – one of the ‘solutions’ that have been proposed. The bigger picture currently not being addressed, in our view, is the nature of gig work itself and how our policies on employment classifications and benefits need to evolve accordingly.
Globally, gig workers are increasingly dissatisfied with their end of the bargain. And countries across the globe have taken differing policy approaches in attempting to provide some measure of labour protection and to ensure fairer labour terms.
In Malaysia, gig workers lack rights, benefits and protections as they are legally designated as independent contractors. To a degree, the government has recognised their vulnerabilities; gig workers are specifically mentioned in the 2021 Economic Outlook Report and some forms of assistance have been introduced including work accident insurance by PERKESO, a voluntary retirement savings programme under EPF, a housing credit guarantee scheme, various digital reskilling programmes, a microfinance initiative and many more. But none of these addresses the nature of platform gig work which revolves around delivery fares, payment schedules, rating systems, not to mention general issues on social protection.
It is increasingly evident that there is no way to ensure decent work for gig workers without clarifying their employment classification. If Malaysia intends to maintain the status quo of keeping them as independent contractors, a comprehensive universal safety net would be required to ensure adequate social protection for gig workers (and indeed, all workers). Without a universal safety net, labour laws and benefits that are designed with full-time formal employment in mind will exclude gig workers who do not meet the employment definition.
Why not reclassify gig workers as formal employees with full-time benefits? This approach would be viable only if all gig workers work full–time with one particular gig platform. However, this is hardly the reality. Not all gig workers are the same. Our 2019 study found that gig workers were almost evenly distributed between full-timers and part-timers, and both types of gig workers view gig work as an important income source. Perhaps more importantly, the majority of gig workers according to our study have a strong preference for job flexibility.
Reclassifying all gig workers as formal employees risks curtailing their job flexibility and may produce unintended consequences. As seen in Germany, Spain and most recently the Netherlands, some gig platforms have ceased country operations entirely after formal employment classification was imposed, rendering their business models unsustainable.
The all-or-nothing approach of classifying gig workers either as independent contractors or formal employees carries risks from two extreme ends: on the one hand, classifying as independent contractors means leaving gig workers vulnerable to algorithms and working conditions that are highly influenced by gig platforms’ practices. On the other hand, classifying gig workers as formal employees would increase the cost of doing business without necessarily improving their working conditions or preserving their jobs.
Policymakers need to develop a new employment classification. Our cross-country comparison of gig worker policies shows a few country experiences we can learn from and to this end, we suggest a new worker category known as a dependent contractor to capture the unique nature of gig work. This new classification would allow the government to prescribe labour provisions for gig workers based on the labour power dynamics inherent in gig platforms.
Note: More on this, and on worker benefits in our current age of job informalisation, can be read in our Fair Work Act proposal.
We’ve seen what happens when significant policy decisions – such as imposing blanket full-time employment classification – are meted out on gig ecosystems. Customisation and evolution from our current policy paradigms is required to balance job flexibility with worker protection.
Therefore, for a feasible duration, we fully support a policy environment of trialling and flexibility for regulators in developing a better employment classification for gig workers. As a way of navigating this uncharted policy territory, we propose the creation of a regulatory sandbox to negotiate and formalise the structure, scope and terms for a proposed National Employment Status Test, which would ultimately lead to an employment classification for gig workers that is fit for purpose.
What is a regulatory sandbox? A regulatory sandbox refers to a controlled environment under regulatory supervision which is typically used for testing new products, services, business models and delivery mechanisms in the financial sector.
We have seen similar initiatives undertaken in other countries to spur regulatory innovation for protecting gig workers. In Denmark, a gig platform Hilfr and Danish union 3F collaborated to test a new classification method that automatically recategorises qualified gig workers as employees with some employment benefits, and an opt-out option to remain self-employed. And in mid-2022, Uber and the Transport Workers Union signed a joint Statement of Principles to call for legislating an independent body for studying and reforming the rights and conditions of gig workers in the transportation and food delivery sectors. A local example would be the regulatory sandbox to provide a regulatory environment for financial technology established by Bank Negara Malaysia in 2016.
We believe that the Ministry of Human Resources (MOHR) is well positioned to set up a regulatory sandbox for re-classifying gig workers, where novel regulatory approaches like the National Employment Status Test can be developed and tested. The government can spearhead the regulatory sandbox with the participation of key stakeholders to conduct studies and policy experiments within a set time.
The shift away from formal full-time employment to flexible hour gig work marks a significant, perhaps enduring, change in contemporary work culture. Emerging labour trends, including flexible work, remote working and digital nomadism, are creating new challenges for labour laws that were formulated in the past prior to its existence.
We have arrived at a policy juncture where the government must decide between two policy approaches: a wait-and-see strategy with incremental policy shifts, or a structured trial-and-error approach to seeking new regulatory innovations. We believe that the latter is a more progressive, forward-looking policy approach in embracing the future of work to ensure decent work for all.
* This article first appeared in the Malay Mail on 29 August 2022.
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