Following the GMB Union’s recent employment tribunal victory over Uber, working conditions at the American firm and their drivers’ wages are coming under increasing amounts of scrutiny.
The case saw Uber accused of forcing their fleet of drivers to accept self-employed status. Our case study is fictional but based on a typical scenario in which a 30 year old drives that rented a couple luxury cars, with no previous private hire experience and operates in the London area. It was argued that the company dictates the terms of their drivers’ contracts and effectively employs some at below minimum wage whilst avoiding contributions that an employer should be responsible for.
Uber has fought back arguing that the vast majority of drivers prefer their self-employed status. The company’s defence also included the claim that their drivers earn on average £16/hour.
This is after Uber deducts its fee of up to 25% from passenger fares – but it does exclude other overheads. The cost of which can be significant.
James Farrar, one of the drivers who successfully lodged the complaint against Uber claimed in August 2015 that his average hourly earnings were £13.77. He also stated that net of expenses he cleared £5.03 an hour.
Steve Garelick, of the GMB union, supports his claim,
The £16/hour figure is hog wash. If everyone was on that we’d all be clambering after Uber’s business.
His accusations have been backed up online by the Uber Driver London blog which documents the real life of an Uber driver working in London. According to the blogger’s experience of using the app a driver would be lucky to earn £16 per hour even before Uber’s commission of up to £4 is paid away,
I make somewhere between £10 to £15 pounds per hour. That’s it. Definitely not more than that.
Another private hire driver, who wishes to remain anonymous told us that,
I’ve stopped working from Uber and gone back to my old base office.
The driver explained that in his mind the £16 figure was grossly inflated. His reasoning was that Uber do not cover the time and cost involved with reaching a passenger. Also in central London he explained that it is very difficult to collect passengers both safely and without infringing road traffic rules. The distraction of arranging a meeting spot with a customer in an unfamiliar area would occasionally result in collisions with other road users and often led to fines for entering bus lanes, waiting at bus stops and on red routes.
Typical fines for such offences range from between £70 and upwards to £130. Just one fine could reduce a driver’s weekly wage by the equivalent of over a £1 an hour. However the ex Uber driver we spoke to said it was not uncommon for new inexperienced users of the app to incur multiple fines in the space of a week.
Can passengers take an Uber ride with a clear conscience?
With the help of some informed estimates we have attempted to answer the question – Can passengers travelling in a Uber vehicle do so with confidence that their driver is earning above the minimum wage?
We’ve predicted an imaginary Uber driver’s actual income once costs such as: vehicle hire, maintenance, petrol, valeting and insurance etc are taken into account.
Read more: Uber rival driven out of business
- In the first calculation we have taken Uber at their word and used their £16/ hour pre-expenses earnings figure.
- In our second calculation we have used the figure of £13.77 per hour stated stated by James Farrar in his employment tribuna
- In the third calculation we have estimated our drivers’ hourly wage based on the average sum put forward by the Uber Driver London blog.
In their induction manual Uber based their earning projections for drivers on a 55-65 hour week. So we have used 60 hours as the weekly total.
We are aware that many drivers may work in excess of this hourly total. However for the purposes of the exercise we have used their estimate.
Uber Driver Income Breakdown
|Vehicle costs/hour –||£3.92||Based on £235 weekly rental costs that include vehicle maintenance and private hire insurance that drivers are legally required to have|
|Vehicle Cleaning cost/hour||£0.25||Based on £15 per week for 2 washes – dirty cars lead to negative customer reviews|
|Fuel cost/hour||£0.80||Fuel consumption 52.5 mpg, cost of a litre £1.16, estimate of 8 miles driven per hour|
|Road tax||£0.00||Toyota Prius exempt|
|Congestion charge||£0.00||Toyota Prius exempt|
|Regulatory Licencing Costs||£0.06||£167 estimate total includes TfL licence, vehicle licence, medicals, topographical tests etc.|
|Total Costs of overheads/working hour||£5.03|
|Net income/hour before tax Based on Uber’s £16 per hour figure||£10.01*|
|Net income/hour before tax Based on James Farrar £13.77 per hour tribunal figure||£7.91*|
|Net income/hour before tax Based on Uber Driver London Blog £12.50 per hour figure||£6.72*|
*Figure includes 6% of earnings set aside to cover holiday and sickness
On the basis of Uber’s £16 per hour figure the driver in our case study after overheads are taken into account would still be earning above the minimum wage of £6.70.
They would also still be over the London living wage which has recently increased to £9.75 per hour. This is the sum the Living Wage Foundation determine that workers in London need to earn in order to support themselves and their families. Both the amounts stated by James Farrar and the Uber Driver London blog would place our driver over the minimum wage but well under the London Living Wage.
However drivers are currently covering lost earnings due to holiday and sickness themselves. Taxi and private hire accountants Eazitax inform us that they would recommend drivers set aside at least 6% of earnings to cover the days when they will not be generating income. In the Uber Driver London scenario this contingency fund for non revenue generating days takes the driver’s earnings within 2 pence of the minimum wage. If the £12.50 starting figure is accurate and overheads such as fuel rise then the driver in our scenario would be looking at an equivalent hourly wage that drops below the legal minimum.
As it stands whether a passenger can ride in an Uber with a clear conscience depends on whether they take the firm’s estimated average earnings at their word.
Ryan Georgiades, Managing Director at Plan says:
In our scenario the annual vehicle rent the driver faces totals over £12,000 alone. Some drivers may reduce costs by owning their vehicles but they’d still need to cover maintenance expenses and insurance – which for a new driver could between £3,000 – £5,000. So their take home pay is definitely substantially below the £16 headline figure being touted.
The black cab trade and private hire unions are hoping that the public will turn away from Uber due to the accusation that they exploit their drivers.
However, the revenue of other American firms such as Google, Amazon and Starbucks have managed to survive in the UK – even though they’ve been revealed to be short changing the British public by avoiding to pay, what most would consider, a fair amount of corporation tax.
This suggests that if a product or service is cheap and convenient enough, the majority of consumers are willing to turn a blind eye and chose to ignore the associated negative connotations.
Could it be that in the consumer’s mind it is a victim-less crime, even though the potential victim is sat right in front of them, bleary eyed after a long, tough shift?