Glovo, the home delivery platform controlled by the German giant delivery hero, has announced a decision that will mark a major shift in its business model in Spain: from now on, the RIDER will hired including full-time employees and no longer as self-employed workers. A choice that comes as a result of legal disputes and pressure from the Spanish authorities, and which could have a impact significant on accounts of the company.
The news of the hiring of the riders has shaken the MY BAG: Monday, December 2nd, the title of Delivery Hero is collapsed by 11%, and today it loses another 3%, due to higher cost forecasts.
Glovo Hires Riders in Spain: Here's Why
Spain adopted in 2021 a law which obliges them delivery platforms ad to hire their workers, a measure that fits into the international debate on the treatment of riders, many of whom, until recently, were classified as freelancers. This regulatory change had already created uncertainty for Glovo, which over the years had had to deal with fines e fines, including one of 79 million euros in 2022 for failing to hire its riders and for failing to pay social security contributions.
Despite an initial attempt to reform its business model in 2021, Glovo failed to reach an agreement with the Spanish labor authorities to regularize the status of its bike delivery drivers. To avoid further legal issues and the possibility of incurring new sanctions, the platform has therefore decided to switch to a framework based on employee contracts for its riders in Spain. A move similar to the one adopted by Just Eat, the only major delivery platform that has chosen to contract its riders.
The impact on Glovo's balance sheet
This choice will have a significant impact on costs by Glovo, with an additional expenditure forecast of about 100 million euro, which will impact adjusted EBITDA for 2025. The decision also involves a revision of the reserves for the 2024 budget, which will rise from a range of 330-550 million euros to between 440 and 770 million euros, covering social security contributions, penalties, VAT claims and other payment items until the end of the year. Despite the increase in expenses, Glovo still expects to generate a positive EBITDA in Spain in 2025, and the company has not revised its estimates for the entire group.
Glovo has announced that it will launch a dialogue with the social parties to drive change in the work model, trying to balance business needs with those of workers.
