Hermes bracing for £10m hit from ‘groundbreaking’ worker deal

Courier firm Hermes is expecting to take a £10 million hit from its “groundbreaking” deal to give new rights to self-employed drivers.

Martijn de Lange, chief executive of Hermes UK, told the Press Association the milestone agreement sealed earlier this month to offer its couriers paid holiday and guaranteed earnings will be a “huge investment”.

But he vowed not to hike prices for clients, with the move funded through the firm’s growth.

He said: “It’s a huge investment compared to the profits we are making. There’s no denying it.”

“But it’s important that clients aren’t impacted,” he said.

The group said the eventual financial impact will depend on the scale of the take-up among its 15,000 couriers in the UK.

It is estimating the cost at around £10 million, but said the hit could range from £5 million to £12 million.

Hermes is expecting around 20% to 30% of its drivers to take up the offer of “self-employed plus” status swiftly, but said as many as half – some 7,500 – could sign up to the deal.

The firm is holding talks on an individual basis with its self-employed drivers with a view to putting the new status into place at the end of the summer.

The deal was hailed by the GMB union as “groundbreaking” for gig economy workers when it was unveiled at the beginning of February, offering self-employed workers a degree of security while still retaining their flexibility.

It was also welcomed by political figures, with MP Frank Field, who chairs the Work and Pensions select committee, saying it should become the “cornerstone of a new contract for workers across the gig economy”.

It came after Hermes lost a case against the GMB last year, when a group of 65 couriers were found to be “workers” entitled to basic rights, instead of self-employed contractors.

Mr De Lange said Hermes decided against appealing the decision.

“It was my and the board’s decision to take a negative and turn it into a positive,” he said.

“We all want the same thing – which is happy couriers, so it was our idea to sit down with the GMB.”

Under the new “self-employed plus” agreement negotiated by GMB and the company, drivers can elect to be paid an hourly rate of at least £8.55. They will also accrue pro-rata holiday pay of up to 28 days a year.

Workers can choose to remain as they are or opt in, with no deadline and the option to switch once a year.

Mr De Lange also dismissed questions over the tax implications for workers and the company under the new arrangement, which he said was drawn up with the help of the best QCs in the country.

He said: “There’s not a worker status and definitely not an employed status and it’s clearly self-employment for tax purposes.”

He added it would be counterproductive for the Government to look to punish companies or workers for striking this type of deal.

“It’s exactly the type of security that the Government wants to give to these people,” he said.

Hermes said it has already had a raft of enquiries from legal and consultancy sectors about the deal.

Mr De Lange said: “I’d like to think it will become a template for others.”