Know How The Incentive System Of Food Delivery Companies Works & Is Exploitative
December 19th, 2018 / 8:35 PM
Image Credit: News 18 Tamil
Published with the permission from TN Labour
On 5th December, Swiggy had to partially withdraw food delivery services in Chennai, owing to a flash strike by its delivery workers. The self-organized protest was the result of a unilateral decrease in delivery charges by Swiggy a couple of days earlier.
The service charge was reduced from a base price of Rs 36 for 4 km to Rs 35 for 4 Kms. The general impression is that food delivery companies like Swiggy and Zomato are paying a very high service charge to the ‘delivery partners.’ That is what these workers are referred to by the companies.
So why did the Swiggy workers take the extreme decision to strike, lose wages and even incur the wrath of their company for just one rupee?
What is incentive based wage system?
Thousands of active workers, predominantly men, have joined the app based delivery companies. There are four major companies, Ola’s Food Panda, Uber Eats, Zomato and Swiggy, involved in this trade.
From young students in need of supplementary cash to middle-aged workers with families, workers have signed up as they feel that the flexible system suits their needs. The primary lure of these jobs is the higher than average earning that it promises. However, the wages are based on a complex structure of incentives.
There are three levels of basic incentives based on the amount earned (through the orders delivered). These include a Weekday incentive, Weekend incentive and Monthly incentive. Apart from this, there are incentives for late night shifts, (beyond 11 pm), rainy day shifts etc.
To become eligible for incentives, the following criteria ought to be met-
- Hours of work
- Earnings from delivery i.e amount earned from each delivery
- Number of rejects
So, for instance, if a worker has to become eligible for incentive during a weekday, he/she would have to work on 7 out of 10 peak times. Peak times are between 11 am and 3 pm and 7 pm and 11 pm on all days. Having done this, if the worker has delivered orders amounting to Rs. 3500, he/she will be given an incentive of Rs.450. If he/she wants to earn a maximum weekly incentive of Rs.1000, he/she should have delivered orders amounting to Rs.4400.
Since the percentage of incentives grows higher with more earnings, there is always a much greater desire to earn more every day in every week of the month. Merely relying on the earnings from the delivery is not nearly enough to survive and workers are heavily reliant on the incentives.
The only way to reach the higher brackets of the incentive system is to put in more hours to deliver many more orders. This is the reason why workers end up working from 7 am in the morning to 3 am the next morning (20 hours) so that they can make the most from the incentives.
The incentive systems have not only denied workers of hard-won rights but also lure workers to participate willingly in the exploitative condition. We analyse the impact of the incentive dominated the wage system in the following sections.
The case of three workers
To explain this, we have taken the case of three workers who choose to work different hours in this trade. Let’s assume that a worker working for a year at Swiggy full time, makes a delivery every 40 mins on average and makes Rs 45/- for every delivery. We have also shown how much would the worker work longer or choose to lose if their earnings are cut to Rs 40 per delivery, as has been done by Swiggy now.
Worker A wants to earn the maximum possible incentive which is Rs.14 000 (i.e Rs.7000 monthly incentive + Rs.4000 weekly incentive for 4 weeks + Rs 3000-weekend incentive for four weekends).
Workers B who is satisfied with earning a maximum weekly and weekend incentive which is Rs. 1000/- and Rs 750/- a week respectively.
Worker C who works 8 hours a day
* Calculations are for a worker who has completed one year of service based on the assumption that on average a worker takes 40 minutes to complete each delivery and receive a new order. This average includes peak and non-peak hours and the wait time between orders
From the table, it can be seen that a worker(C) who works normal 8 hours will earn Rs 14820 in 8 hours and will see his/her earnings dip to Rs 13320 if the rates are reduced.
A worker (B) who wants to earn the maximum weekly incentive (of Rs 2250/- a week for four weeks) will have to work 11.3 hours a day. If the rates are reduced, he/she will have to increase their work hours by another 1.4 hours.
The worker (A) has to work 16.6 hours every day for 24 days a month for earning the maximum monthly incentive of Rs 14000/- If the rates are reduced, then their work hours extend to 18.7 out of 24 hours!.
8 Hour workday will not earn them a living wage
After long and vicious struggles by the workers that even caused them to lose their lives, the working class won the right to an 8 hour work day. Even longer fights won them the right to a minimum living wage. Yet our economic system has devised cunning ways to rob the worker of a living wage for an 8 hour work day.
With growing inflation and the increasing cost of living, the minimum wage required to run a family of four and give them a basic standard of life needs to be in tens of thousands of rupees. Workers and trade unions have been demanding a minimum of Rs 18000/- a month. Even the pay commission appointed by the central government has indirectly acknowledged this by pegging the minimum wage of government staff at Rs 18000/-. Here we analyse if this basic condition for survival is met by Swiggy wage package.
If an entry-level worker(C) works for 8 hours without break covering a peak period of four hours and a non-peak of four hours, he/she would be able to complete 12 deliveries at best. Assuming that they work for six days a week, including both days of the weekend, they would deliver 48 orders on weekdays and 24 orders on weekends.
If they make Rs 45/- every order, (under the previous scheme of Rs 36 for four kms) they would be able to make about 14760/- including incentives. It will take them nearly 10 hours without break to make up Rs 18000/- a month.
However, if their per order rate is reduced by even a few rupees, this scenario changes drastically. For example, if the average wage per delivery falls to Rs 40/- the total wages earned in a month including incentives will fall to Rs 13320/- for 8-hour work and it will take the almost 11 hours of work every day to make a minimum wage of Rs 18000- a month.
How the Incentives makes workers to ‘choose’ to work long hours
The entire delivery system, which is the primary function of the app based companies, is dependent on an army of delivery persons, working through the day and into the night. However, the lucrative feature of these companies is the ‘flexibility’ they provide to workers.
This is where the incentives play a major role in making every worker ‘voluntarily’ choose to toil well beyond midnight. Below we explain how a worker has to put in not 8 hours, not 12 hours, but even 16 hours, every day in a month in order to earn more incentives. The late-night incentives and the rainy day incentives are also skewed to favour those doing excess work, without any consideration for the hazards involved.
The above chart shows how the incentive system pressures workers to work longer hours.
As you can see from the chart, the more you work the more you earn. But it is also to be noted that the gap between the wage earned (orange line) and incentive (blue line) also increases. Thus if a worker has to make the most incentive, they have to work nearly 17 hours every day and through the weekend.
Incentive is nothing but wage withheld
Given that the amount of wages increases because of incentives with longer hours, we calculated an hourly wage for all these three workers and found that the worker with a lesser number of hours is paid almost 25Rs lesser than the worker who was working more hours
Essentially, the company is withholding a part of the earnings of the workers for each delivery and is ‘rewarding’ the same to those who work longer hours as incentives. The workers can get this money only if they complete the target. If a worker works for 10 hours and yet is not able to achieve the target, even without the company asking him to do anything, s/he feels compelled to complete the target so that they can get their incentive. This way, the company not only maintains compliance but also makes the worker ‘choose’ to labour long hours, at the cost of health, family and personal life.
Why workers are agitated now?
Many workers, especially the middle-aged delivery persons have come to depend on the incentives to add to their incomes. The workers who spoke to us said the daily earnings they receive at around Rs 800/- to Rs 900/- from just the delivering orders is not the major draw as they have to work for 12 hours, from 11 am to 11 pm to make that wage. They know that this is the prevailing wage rates for semi-skilled technicians on contract. Their real attraction is the incentives that boost the monthly earnings even though it is skewed to favour those earning more than Rs.4000 per week.
When the base rate per delivery was reduced, the workers did not feel it was crippling. However, in two days they saw their daily earnings dip by Rs 150 – Rs 200. Over the week, this would have meant a reduction of over 1000/-, making it even harder to reach the incentive targets. This was the major reason for the agitation.
While they recognize the health costs of this work, for now, they seem to accept the trade-off for earning upwards of Rs 30000/- a month.
The false sense of flexibility this has given them makes them feel in control of their time. Very often workers say they can avail leave anytime or simply switch off the app (off duty). This is what the companies say too. That they are enabling workers to exercise more control over their time.
However, as evident, if the worker has to make a decent earning, he is dependent on the incentive system which severely punishes such actions. Thus it is seldom that they exercise their right to rest.
What history teaches us?
Not long ago, Ola cab drivers were very satisfied with the large incentives they were receiving from the company for the extra rides they took up. Some even began to invest in cars, allured by the returns they could reap.
However, their hopes were dashed, as the company began to roll back the incentives, made it harder to reach the targets, (some even allege tampering with the apps) and reduced the base fares for the trips. Today the cab drivers are demanding the state to fix a reasonable base fare rather than allow cab aggregators to decide on pricing. This year alone saw them protest and get detained many times.
Successful One-day strike by Ola and Uber drivers
Swiggy, Zomato and even the potential entrant Reliance, will follow the same trajectory as it is the nature of this business. While the state might be even more ignorant and reticent to their demands, it is necessary to organize quickly across the sector and challenge the audacity of these companies to fix wage rates well below minimum wage and force workers to work long hours (through a flawed system of incentives).
While the workers organized themselves very quickly and widely, their response since the agitation has been one of panicked reaction. There is still no attempt to reach out to other delivery workers, even though they all work from the same region and often shift from one operator to another.
The workers allege that the company has threatened to terminate some of the workers, they have also cautioned against suspensions. It is important that they learn from the past to organize themselves better. They should connect with the agitating cab drivers who have successfully organized themselves.
We will continue to discuss and analyze other dimensions of this sector in the coming weeks
Published with the permission from TN Labour