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Ride-hailing Drivers in China: Not Employees, But Independent Contractors

Sun, 02 Jan 2022
Categories: Insights


Key Highlights

  • Drivers in ride-hailing platforms like Uber are not employees, but independent contractors, pursuant to a Chinese government policy issued in August 2021.
  • To strike a balance between platform operators and workers, the policy also emphasizes that the platforms should treat workers like employees in certain aspects.
  • Under the policy, among the obligations that employers shall assume, the platform has been exempted from making social insurance contributions, but other obligations, like the duty to ensure minimum wages and rights to rest, shall still be discharged by the platform.

On 18 Aug. 2021, China’s government announced a policy, officially confirming that drivers in ride-hailing platforms like Uber are not employees, but independent contractors.

However, the policy also emphasizes that the platforms should treat workers like employees in certain aspects.

The policy is titled the “Guiding Opinions on Protecting the Rights and Interests of Employees under New Forms of Employment” (the “Guiding Opinions”, 关于维护新就业形态劳动者劳动保障权益的指导意见), which was approved on 16 July 2021 by China's State Council.

The Guiding Opinions seeks to strike a balance between platform operators and workers.

I. Background of the Guiding Opinions

In China, previously the ride-hailing platforms like Uber were not recognized as employers. The number of workers on such platforms is extremely large, and they are subject to rigorous management by the platform.

It has led to public discontent.

In China, such problems mainly arise in two areas.

One is transportation sharing platforms, under which drivers and passengers are connected in ride-sharing services and the like. Among them, the largest platform in China is Didi, which was listed on New York Stock Exchange early in July 2021. Besides, there are several platforms that offer similar services, both ride-hailing, and freight services.

The other is the food delivery platform, which enables food delivery workers to connect the restaurant and the customers. The biggest platform of this kind in China is Meituan, which was listed on Hong Kong Stock Exchange in 2018. Meituan and Eleme, Alibaba's food delivery platform, cornered the food delivery market.

According to the news, the number of drivers on hide-railing platforms alone has reached 3.51 million, while the number of delivery workers on food delivery platforms has reached 7.7 million. It means that in China, there are more than 11 million workers on these two kinds of platforms.

Additionally, as statistics provided by the State Information Center of China shows, the number of workers working on various sharing economy platforms in China has already reached 84 million.

However, for a long time, such platforms did not sign labor contracts with these workers, nor did they recognize workers as their employees.

The platforms cooperate with the workers in two ways:

As one of two ways, the workers have a service relationship with the platform as independent contractors, so that the platforms are not employers of the workers.

The other way works through an arrangement called ‘labor dispatch’. The workers enter into employment contracts with small and medium-sized labor dispatch companies as their employees, and the labor dispatch companies then enter into outsourcing service contracts with the platforms. Not directly being the employers, the platforms don’t need to worry whether these labor dispatch companies ensure workers’ legitimate rights.

For the platforms, this allows them not to assume the employer's legal obligations. For example:

First, they do not bear some of the employers’ costs, such as making social insurance contributions for workers, which will increase the cost of using workers by at least 30%.

Secondly, their management of the workers is not restricted by the labor law, so the platforms implement extremely strict management on the workers. For example, platforms use algorithms to exploit workers' working hours and commission rates. 

This has led to widespread public criticism of the sharing economy platform in the field of labor protection.

However, policymakers also seem to be concerned that making platforms assume all obligations of employers may severely crackdown on their business operation and lead to a reduction of jobs, which may result in significant unemployment.

Therefore, the Guiding Opinions aims to seek a balance between platforms and workers. On the one hand, it does not identify the platform as an employer; on the other hand, it also requires the platform to bear some of the obligations of employers.

II. What does the Guiding Opinions say

1. Workers are not employees of the platform

If the platform and workers "do not fully meet the conditions for establishing the employment relationship, but the platform conducts labor management over workers", “the platform shall enter into agreements with workers in writing to reasonably clarify their respective rights and obligations".

Therefore, the documents signed between the platforms and workers are simply written agreements rather than "employment contracts".

“Where an individual replies on the platform to conduct business activities, and engages in freelance activities, etc., the rights and obligations of both parties shall be adjusted in accordance with the civil law."

Under Chinese laws, “civil law” does not include “labor law”, which means that the relationship between the workers and the platform is not protected by the labor law.

The policy recognizes that workers are not employees of the platform, so the platform is not obliged to make social insurance contributions, which results in significant cost savings for the platform.

2. Workers will make social insurance contributions for themselves, and the platform does not need to bear the cost

The government will organize workers to participate in the basic endowment insurance and basic medical insurance for urban and rural residents, and the platform will guide workers to participate in these insurance programs.

The expression “the insurance for residents” rather than “insurance for employees” means that, under China’s social insurance regime, the workers shall make their own social insurance contributions.

3. The platform shall ensure workers entitled to minimum wage

Although the workers are not employees of the platform, the platform shall still “pay remunerations not lower than the local minimum wage to the workers who provide normal work timely and in full amount, and shall not make unreasonable deductions or delay in payment without reason."

4. The platform shall ensure reasonable working hours 

The government will urge the industry to “determine workers’ workload and labor intensity in a scientific way”, and urge platforms to “reasonably determine rest methods as required and pay reasonable remunerations for the workers working on statutory holidays higher than those working for normal working hours.”

In other words, the platform shall respect workers' right to rest and pay them overtime wages in the same way as the employers treat their employees.

5. The platform shall not use algorithms and rules to exploit the workers

When formulating algorithms and rules, the platform shall solicit opinions and suggestions from trade unions or workers’ representatives, and publicize and inform workers of the results. The trade union or workers’ representatives also have the right to request the platform to consult with them at any time. Workers have the right to appeal to the platform.

III. Our comments

The Guiding Opinions is essentially to require both the platforms and workers to make a compromise.

The workers waive the right to request the platform to make social insurance contributions so as to avoid the reduction of jobs if the platform bore such costs.

Among the obligations that employers shall assume, the platform has been exempted from making social insurance contributions, but other obligations shall still be discharged by the platform.

We don't know yet whether such compromise is reasonable. But at least, it's a big step forward from the previous situation where workers' rights were not guaranteed at all.


Photo by Dan Gold on Unsplash

Contributors: Guodong Du 杜国栋

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