Labour in the age of tech

Published September 2, 2019

Technology has redefined the way we think about employment. From the age of unions, pensions and permanent jobs, we have now moved on to an era where everything is flexible and increasingly on demand.

Whether it’s the expanding popularity of working from home or the ever-growing number of job opportunities now available to make some quick cash, the new economy has been transformed in ways no one could have perceived.

And with all of this come the new complications, giving rise to the debate over the very definition of an employee and how it’s distinct from an independent contractor — something central to the business model of quite a few players in the new economy.

The argument goes that these tech platforms simply provide a portal for everyone to list their services exercising control and the freedom to choose when to work, hence making them independent service providers or contractors.

Given Pakistan’s largely underdeveloped tech start-up ecosystem, the overall debate might not be particularly relevant. But the issue is quite pressing when it comes to ride-hailing companies that have found a sizeable market in the country and are trying to battle it out for turf. The current model of these companies allows drivers to choose the number of rides they take and charges a certain commission for every ride. In addition, there are also some bonuses and guarantees based on performance and ratings.

Over the last few years, these international players have amassed a massive fleet with a significant base of ‘independent contractors’ who rely on these newfound opportunities for both full- and part-time employment. However, that initial enthusiasm for new income avenues dies down fairly quickly for drivers largely because of their negligent say in most matters, be it pricing or hours worked and with frequent changes in company policies.

Many new start-ups are misclassifying huge numbers of employees as independent contractors and thus bypassing several labour laws

As far as the independence of contractors is concerned, they undoubtedly have it in terms of choosing working hours. But when it comes to the rates, there’s none as the two companies unilaterally make any adjustments to pricing and commissions.

Asked whether they signed any contract at the time of registration, all drivers answered in the negative and said that relevant details — related to service charges and fares — were communicated verbally instead. Only the licence and CNIC are checked and the car briefly inspected, said multiple drivers.

I also tried to sign up as a Careem captain and took the online training, but the app started acting up afterwards. So I couldn’t get to the terms and conditions.

The drivers also commented on how, despite increasing fares for consumers, they aren’t getting a proportionate share. The company’s commission, which was initially conveyed to the drivers to be20 per cent (for Careem) has gone upwards of 35pc.

In the case of Uber, the drivers do not even know what commission they are going to pay on every ride as the company charges a variable service fee ‘to make its upfront pricing work’.

All of this adds to the uncertainty faced by the drivers who are already largely missed by regulation that doesn’t even envision the concept of ride-hailing and hasn’t been able to keep up with advancements in tech.Unsurprisingly, the ‘service providers’ of the two companies have time and again protested across the country to demand better rates but to no result.

To give some protection to the drivers (and passengers), both Uber and Careem do have in-ride insurance for the distance between pick-up and drop-off points.

This isn’t to say that all gig workers are equal: some are more equal than others. Developers or designers, for example, are a well-off segment with many techies now even choosing to go freelance instead of pursuing a full-time job as they can earn higher sums through foreign clients while also protecting themselves from the exchange rate risk.

Thanks to the unprecedented rise of ride-hailing, some lawmakers have finally realised its importance. “At the provincial level, there was no separate tax category for ride-hailing services until the 2019-20 budget. However, Sindh recently categorised ride-hailing platforms in the Sindh Finance Act 2019 as “cab aggregators” with a 5pc sales tax on services levied on their total revenue, including the share of the captain.

“On the other hand, Khyber-Pakhtunkhwa has also recognised ride-hailing as a separate category with a 2pc tax levied on the share of the platform, exempting the captain under the KP Finance Act 2019,” a statement from Careem explained.

California, which houses the tech hub Silicon Valley, has been the most proactive as its assembly passed a bill, AB5, this May that could potentially change the business model of many a start-ups.

It adopts an ‘ABC’ test to identify if the worker is an independent contractor. To classify an individual as such, the employer must prove that (a) the work must be free from the control and direction of the company in connection with the performance of the work, both under the contract for performance of the work and in fact, (b) the worker performs work that is outside the usual course of the company’s business and (c) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

The European Union didn’t stay behind either as it introduced new rights to all employees, including gig economy workers, with the aim of giving some predictability and protection to the most vulnerable of segments.

Keeping the ABC criteria in mind, it’s not hard to see that many of the new start-ups are misclassifying huge numbers of employees as independent contractors and thus bypassing many of the labour laws.

But in Pakistan where even a data policy is yet to go beyond a draft and legislators seem to be living in the Stone Age, it’ll again the most vulnerable segment of workers that will continue to bear the brunt of the lack of imagination of our law.

Published in Dawn, The Business and Finance Weekly, September 2nd, 2019

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