The Development of Pay System in Food Delivery Platforms – Speaking of the Foodpanda Strike

【By Anna Tsui (Research Assistant, Centre for Social Innovation Studies, HKIAPS, The Chinese University of Hong Kong) and Tat-chor Au Yeung (Assistant Professor, Department of Sociology and Social Policy, Lingnan University); Translation: Azmat Karavan】

Original Chinese version(中文原文)

In just five days, several Telegram, Facebook and WhatsApp social media groups emerged on November 9, promptly triggering a strike that paralyzed Foodpanda, an online delivery platform, and shut down several Pandamart pick-up stations on November 13.

In addition to demands for significant improvements in customer service and unilateral suspension and termination of accounts, food delivery workers were mainly dissatisfied with the company's persistent low price per order, demanding that the order price for motorcyclists be raised to $50 and for cyclists and walkers to $35. In the negotiations on November 16, the company was only willing to freeze the current order price until June next year and raise the bonus for peak hours, which is far from satisfying the demands of the food delivery workers.

As researchers concerned with platform food delivery labour, several questions need to be addressed:

  1. From a macro perspective, what stage of development has the market in the online food delivery platform industry reached?
  2. How long have the food delivery workers’ dissatisfaction against Foodpanda (known in the industry as “Panda”) been accumulating?
  3. Why is this industrial action happening at this time? What are its characteristics?

The short answer is that the food delivery platforms, led by Panda and Deliveroo, have largely evolved into a duopoly and a monopsony. The former means that the market share of the two companies has significantly surpassed that of their competitors and thus they enjoy price-setting power; the latter means that the sheer size of the two platforms has made it impossible for restaurants and delivery workers to choose other buyers of their take-out food or labour power, thus allowing prices to be significantly depressed by the only buyers (i.e., Panda and Deliveroo).

Faced with the massive increase in supply of labour in the epidemic, the two companies began to “race to the bottom”, exploiting the lack of market bargaining power and collective representation of their delivery workers to reduce their wages and maximize profits. The two companies have been taking advantage of the lack of market bargaining power and collective representation of their food delivery staff by reducing their wages to maximize profits. Over the years, the two companies have used short-term benefits to lure food delivery workers to follow new systems with reduced labour protection and wages. The strike came about not only because Panda began to cut food delivery pay below cost, but also because of successful network mobilization and cooperation between South Asians and their local counterparts.

Pay system: From employment relationship to racing to the bottom

First of all, let’s briefly review how the platform food delivery industry transformed from deploying traditional employment contracts to self-employment contracts, and then developed into a situation of “racing to the bottom” with ever-decreasing order prices.

The first stage can be called the honeymoon period between the company and its employees. When FoodPanda, a German multinational company, entered the Hong Kong market in 2014, it recruited its food delivery fleet under full-time employment contracts, providing employees with basic protection such as monthly salary, sick leave, public holidays, MPF and accident insurance, as well as motorcycles, fuel and meal vouchers. The company also invited employees to meet with them in person to understand their needs.

The second phase is the self-employment transition period. Since the British company Deliveroo joined the Hong Kong market at the end of 2015, it recruited only a small number of staff on full-time employment contracts to serve busy areas, and introduced the independent contractor system – which is now understood as “self-employment” – for the rest of the fleet. These food delivery workers are not covered by basic employment regulations and are paid on a basic hourly rate + price per order basis (e.g. $55 per hour + $80 per order), a practice that significantly reduces company costs. Panda then offered a higher order price to attract employees to switch to self-employment in 2016 and gradually sold motorcycles to food delivery workers. While both companies continued to lower their basic hourly rates and order prices, they encouraged delivery staff to take on more orders and "earn more with more work", as the number of delivery staff was not overwhelming and the average unit volume was sufficient. Workers gradually got used to the new normal.

In the third stage, the beginning of duopoly and racing to the bottom, FoodPanda and Deliveroo started to phase out the basic hourly wage system between 2018 and 2019 after establishing a core group of food delivery staff reliant on the platform for their livelihoods, and introduced new subsidies such as peak hour bonus and peak hour minimum income guarantee to allow food delivery staff to earn more. The new subsidies allowed the book income of the food delivery staff to maintain the original level in the short term, despite showing a long-term decline. We have heard that companies had individually lobbied their employees to switch to the system, and at times issued warning letters or terminated certain workers’ accounts if they did not comply. At the same time, both companies had not set up a broad and representative collective consultation mechanism to allow food delivery staff to participate in discussions before any new policies were implemented.

Companies made few concessions to past strikes

From 2020 onwards, social distancing restrictions and unemployment in the wake of the epidemic led to a surge in demand and labour supply for food delivery workers, which led to a marked increase in the companies’ market size and a decline in staff bargaining power. Around this time, the two companies adopted larger-scale pay reforms, while discontent among food delivery workers rose.

Readers may recall that there were two relatively large-scale strikes by delivery workers in 2020. The first was in May when a group of mainly South Asian workers went on strike to oppose Deliveroo’s abolition of the minimum price of order and minimum income guarantee during peak hours, and the introduction of a so-called 1.3 times “boost fee” system, which in effect penalized those with less than 80% order acceptance rate with a 30% discount on their pay. In July of the same year, Panda introduced the so-called “20/30 warrior” policy (i.e., if workers’ order acceptance rate is less than 85%, motorcyclists’ wage will be deducted to $30 per orders and $20 for others), and immediately afterwards, food delivery workers went on strike in September, demanding that the service fee be restored to its original level and that the pay formula be made public.

In the face of the outcry, the two companies offered concessions that fell far short of the demands of the food delivery workers, citing their inability to overturn the company headquarters’ policy or influence the laws of supply and demand in the market. Deliveroo offered to add an irregular bonus “Thunder” to some orders from time to time, while FoodPanda promised to announce every week’s service charges for each region one week beforehand. Back in November this year, FoodPanda also failed to respond to the core demand on order price, offering only small incentives (increased rush hour bonus) and a policy of delay (freezing existing unit prices until the middle of next year) as concessions.

Characteristics and effects of this strike

Generally speaking, platform delivery workers exhibit the characteristics of high replaceability and low barrier of entry into the labour market, and thus their bargaining power in the market is low. At the same time, they do not need to work in the same area, same time period or under the same manager, so the nature of the work is highly atomised, which makes it difficult to raise workers’ sense of collective representation with the traditional workplace organization model, or to use traditional means like strike picket lines to ensure the number of strike participants. Therefore, it is not difficult to understand that there are often comments in the food delivery discussion forum questioning the effectiveness of strikes in the industry.

Needless to say, the Foodpanda strike demonstrated the power of internet mobilisation and ethnic mobilisation in this emerging sector. South Asians and local food delivery couriers used social networking media to collaborate across communities, discuss strike demands, call for action and report on updates in real time, making it possible for the strike to be echoed by a large number of food delivery responses and receive significant media attention with just five days of preparation. Judging from the stage of development of the pay system, the food delivery platforms still have a strong market advantage accumulated over the years, and often do not give in to workers’ demand completely. After this strike, any long-term improvement in the labour conditions of the platform food delivery workers will depend on whether their market bargaining power, collective representation and solidarity could be enhanced in a sustainable and effective manner.