Analysis

Coronavirus exposes vulnerabilities in “gig economy” model

With public health authorities warning that a widespread outbreak of the new coronavirus strain (COVID-19) in the UK is overwhelmingly likely, the retail logistics sector may be facing a severe test of its employment structures.

At the time of writing, Worldometers.com lists the worldwide number of COVID-19 victims at over 110,000 with 3,882 deaths reported. Countries including China, where the outbreak started, as well as Iran and Italy, are especially badly affected.

Logistics and delivery companies supporting the UK retail sector risk being caught in a pincer movement. On the one hand, they may be facing a significant surge in demand if customers begin avoiding stores in favour of home deliveries. For example, courier software company ParcelHero has predicted that home shopping could double from 20% to 40% of all retail sales. Some shops, including the country’s largest supermarket chain Tesco, have begun restricting sales of certain items.

David Jinks, ParcelHero’s head of consumer research, said that in the event of an outbreak, “it is likely that consumers will also want to avoid crowded shopping centres and the big weekly superstore shop for groceries. One obvious alternative is shopping online. Consumers who have so far resisted ecommerce are likely to change their minds and move online to buy food and household items to avoid busy stores.”

This has been borne out by online grocers, some of whom are seeing increased demand as consumers hoard supplies. The British Retail Consortium’s director of food and sustainability, Andrew Opie, said retailers had “seen an uptick in online deliveries and are taking all necessary steps to meet this rise in demand.” Google Trends data indicates that searches for “grocery delivery” in the UK have spiked to the levels usually seen around Christmas.

On the other hand, their own employees may themselves be infected with the virus. Delivery and logistics companies work with many employees who are contracted on a freelance basis and have no alternative source of income if they are unable to work.

Considering that the government is encouraging workers to “self-isolate” if they believe they are infected, this will create issues for workers that are not entitled to sick leave, incentivising them to continue to work even with the virus. This is especially true when the disease has an incubation period of up to 14 days and a recovery time of between a few days and weeks.

The Freight Transport Association commented that while the news was concerning, the logistics industry was “highly adaptable and extremely reliable”, and the company had not yet seen any impact on the supply chain. It advised members to be aware of and follow advice issued by Public Health England (PHE). The latter has said employees should contact an ambulance if they are at risk (currently only if they show symptoms and have been to high-risk areas) and self-isolate if they then test positive for the disease.

The government’s statutory sick pay is usually only available after an employee has been off for four days in a row. Prime minister Boris Johnson has already announced that this will be available from day one in COVID-19 cases.

However, this still leaves self-employed workers uncovered, with the opposition Labour party calling on the government to make it available to those not currently eligible for it. At £94.25 per week, the figure may be insufficient to fully replace the income of a supply chain worker who is forced to self-isolate anyway.

This leaves logistics and delivery companies to formulate their own approaches.

Hermes has partnered with the GMB Union to offer a £1 million fund to support self-employed couriers who may have to self-isolate.

DHL Parcel declined to comment on whether it would extend sick pay in the future but said contracts would not be affected due to quarantine or illness and that drivers would be supported to find cover for their routes.

UPS said it was asking every employee and subcontractor to take precautions “out of an abundance of caution”. It said it was also following social distancing and disinfecting protocols and encouraging those with symptoms to seek medical treatment. It said it would provide sick pay “in accordance with government regulations” for employees and subcontractors. UPS does not work with self-employed drivers.

Royal Mail told eDelivery that it does not work with self-employed couriers so is unaffected.

DPD said it had not had any suspected cases in its workforce but would ensure they would self-isolate as per the PHE advice. It added that self-employed drivers would need to use their substitute drivers in the event of sickness, which is the standard procedure. The company added that it was examining other ways to provide additional support for any DPD drivers that needed to self-isolate.

The news also saw some retailers announcing special measures. Household goods company Wilko had announced that it is reducing employees’ sickness allowance in order to bring it in line with industry standards. However, it told eDelivery in an emailed statement that this was not related to COVID-19 and that employees affected with the virus would receive sick pay “as an exceptional circumstance”.

For employers that do extend sick leave payments to self-employed workers who have to self-isolate, there may be further obstacles. As COVID-19 symptoms are similar to those for ordinary flu infections, employers may face difficulties ascertaining who actually has the virus. PHE has encouraged companies to “use their discretion” when deciding whether they should ask for medical evidence from workers.

If, as now seems likely, the infection rate rises rapidly in the next few weeks, we may well see additional measures across the board, including government help for firms supporting workers. As things stand, the current model of gig economy employment seems unready to deal with this scale of epidemic.

This article was updated 10/3 to clarify UPS does not use self-employed drivers.

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