Uber’s intermediaries often cut abusive deals with drivers, adding a layer of uncertainty to an already precarious work arrangement
Oleksiy’s first job after immigrating to Poland from western Ukraine was in a bakery. But the work was taxing, and he fell ill from going back and forth between the oven area and the refrigerated section. So when he heard from a friend about an opportunity to drive for Uber in Warsaw, he jumped on it. A 35-year-old man with the bubbly energy of a teenager, Oleksiy likes cars and enjoys working with people. He now works 13 or 14 hour days, subsisting only on fruits and vegetables, a diet which he claims is the secret to his vitality.
Driving for Uber was a better job, with less strenuous work, better pay, and a flexible schedule. In order to sign up for an Uber account and start working, though, drivers in Poland like Oleksiy have to become formally self-employed — a very cumbersome process for the driver.
The self-employed status, which is different from just working as a freelancer, isn’t merely a matter of which tax form to use. You have to register with the government as a company and with the tax agency as a value added tax (VAT) payer. You need to pay for the national social insurance scheme, which, after some initial exemptions, costs the equivalent of more than one-third of the median pre-tax salary in Poland per month, as well as pay the income tax, which starts at 18%, and VAT tax. To all of this, you have to add accounting costs — there’s an invoice for every ride — and the hassle of it all. As a foreigner like Oleksiy, you also need a special residence permit.
Oleksiy, who asked OneZero not to use his full name because his work is undocumented, had no idea how he’d even begin. His only real option was going to a “fleet partner.” In countries like the United States and Germany, partners like these typically provide cars to Uber drivers in exchange for a commission.
In Poland, and in several other countries in Eastern Europe, these intermediary companies also take care of the paperwork and fulfill the legal requirements, which can be so onerous that many drivers who have their own cars still choose to work for the partner companies. Though these drivers and their passengers use the Uber app, they technically work as freelancers for an intermediary. They also take care of Uber’s requirement for drivers to have a transportation license, which the company implemented in 2018 to appease the authorities. Otherwise, the driver has to get the license on their own — the process takes weeks, and is quite costly.
For Uber and its ridesharing competitors, intermediaries offer a convenient solution to avoid trouble with the government over the way drivers are hired and their work is taxed. The company declined to share data about how many of its drivers in Poland work through these partners, but conversations with drivers and experts suggest that the majority of drivers are in the intermediary system.
Uber’s kaleidoscope of partner companies blossomed after the rideshare firm faced questions from the media and the cab industry about whether its drivers were properly declaring their earnings. If everything is square and legal, these intermediaries — some of which have hundreds of cars and drivers — offer their workers employment or freelance contracts, which should ensure that the state is getting its tax revenue and that the drivers have legal recourse against employer wrongdoing.
But hundreds of Uber’s partner firms operate in a legal gray area, or outside the law completely. They are often just a guy with a couple of cars, trying to make a quick buck. While some of the 20 drivers OneZero spoke with in Poland for this article are happy with their intermediary situation — like Oleksiy, who says his employer takes care of car upkeep and finds him a substitute car if his breaks down — these companies sometimes abscond with the drivers’ pay, add unexpected fees, and hire them illegally, without even the most basic protections offered by a contract.
The system adds a layer of uncertainty to the already precarious employment arrangement that is rideshare driving, and is beginning to draw scrutiny from Polish authorities. In April, Warsaw prosecutors launched an investigation into taxation and employment practices related to Uber and its main competitor, the Estonian company Bolt.
This is not a lucrative business for the driver.
Partner arrangements vary. Often the drivers pay a relatively low flat fee that covers the accounting costs every time they want to withdraw their pay, which is most often weekly. Sometimes part of their pay is withheld to cover car rentals, which can cost more than a third of the driver’s weekly income.
In other agreements, the driver’s income (after Uber’s cut) is split evenly with the partner, if the driver and partner are also splitting the cost of expenses such as gas. Sometimes the partner retains 70% of the driver’s income if it is covering those expenses alone. “The car has to be efficient and the partner okay — he can’t be cheating the driver in any way — for it to all add up,” said the head of one of the partner companies, who spoke to OneZero on the condition of anonymity. “This is not a lucrative business for the driver.”
Many arrangements are aimed at circumventing or cheating taxes, even though the role of the intermediaries is supposed to be to ensure taxes get paid. Some partner companies offer bizarre rental agreements in which the driver rents out their own car or bike to the company, which then rents it back to the driver. The setup lowers the tax rate if the company can successfully pass it off as a rental agreement rather than work subject to income tax.
“For Uber, it’s an excellent situation, because they can wash their hands of the problem, say that they work with partners, and what these partners do is not their issue to deal with.”
Other partners, Polish media reported, declare a small amount of driver income in official documents, and pay the rest under the table. If a worker’s pay is below half of Poland’s minimum salary, there is no tax requirement on their employer at all, which can incentivize partners to pay drivers an extremely low rate, according to Domink Owczarek, head of the Social Policy Program at the Institute of Public Affairs think tank in Warsaw. Yet another way Uber’s partners have cheated is by employing “volunteers,” the Polish daily Gazeta Wyborcza uncovered. Drivers were hired by a “foundation” whose ostensible aim was to teach people safe driving, and the drivers were paid an “allowance.”
“For Uber, it’s an excellent situation, because they can wash their hands of the problem, say that they work with partners, and what these partners do is not their issue to deal with,” Owczarek said.
With little oversight from Uber or regulators, intermediaries who cheat drivers face few consequences. Drivers told OneZero that partners had been late with their payments, or had withheld them completely. This situation is so common that in a Facebook group for Uber drivers, partners advertise to drivers: “Have you been swindled and are looking for a new partner? We have a special offer for you!”
Drivers also mentioned extra fees the partner would suddenly add onto their agreement, like for a training that never took place, or for using the Uber app, which is free.
The worst arrangements are most often offered to immigrants like Oleksiy, who are additionally vulnerable because they work illegally and face prejudice from Poles. Uber declined to provide the share of drivers who came to Poland to work from abroad, but in Warsaw, it’s hard to find a driver who is a local. Ukrainians started arriving in Poland en masse after the war in the eastern part of the country broke out in 2014, and they now make up the largest group of immigrants in the country. Meanwhile, Uber Eats couriers, who also work through intermediaries, are predominantly from India, Pakistan, or Bangladesh, having come to Poland on real or fictitious student visas. They often immigrate to get a degree from the European Union, while working for Uber Eats to support themselves, according to Zuzanna Kowalik, a master’s student at the University of Warsaw who is studying the community.
Nearly all of the immigrant drivers OneZero interviewed were working in Poland illegally — meaning they could face deportation if they were discovered. They all worked for partner companies, but had not signed any contracts whatsoever.
One of the “partners” Oleksiy worked for previously suddenly stopped paying him and would not respond to his phone calls. But he was helpless to get his money back. “What can I do?” Oleksiy said about his stolen pay, shrugging. He didn’t have a formal agreement. Just the partner’s name and phone number.
Government attempts to hold Uber and its intermediaries accountable for driver abuses and tax evasion have been arbitrary and irregular, with few systemic solutions. The Chief Labor Inspectorate, Poland’s main labor agency, told OneZero that it is regularly auditing partner companies, and that the several probes that the agency undertook in 2018 showed irregularities, including missing payments and inadequate documentation. In one such audit, the agency found that a partner was hiring based on faulty contracts, offered no safety training, and employed foreigners without work permits. The agency is also working with the border patrol, police, and transport authorities to monitor the intermediaries.
Even though this oversight is sporadic, as these various government and law enforcement agencies began taking more and more interest in the intermediaries’ labor practices, Uber itself has been pushed into action. An Uber spokesperson told OneZero that intermediaries allow drivers who can’t afford to own a car a way to participate in ride-hailing. But abuses have become such a headache for Uber that in April it introduced a “Code of Conduct” for fleet partners in Poland, a very broadly framed set of rules that tells the intermediaries to obey Polish law, respect the drivers’ rights, pay them fully and on time, and ban any kind of discrimination. The company said in a statement to OneZero that it wants the drivers and couriers to “feel our support at every step and have both the knowledge and tools to evaluate the cooperation with the fleet partner.” Uber will take non-compliance “extremely serious[ly].” Any violations, however, will have to be reported by the drivers.
The underlying problem in trying to regulate Uber’s intermediaries is that ridesharing itself has not been regulated in Poland, a young democracy with relatively weak laws, despite Uber being met with the same vehement opposition from the taxi industry that it has experienced in other countries.
After more than five years in the country, ride-hailing apps will be addressed by Polish law for the first time in January 2020. A new law will, in many ways, legitimize the status quo, fully legalizing the apps, with relatively lax requirements for the platforms and drivers, and a focus on documenting their work. Both experts and insiders say it seems to be aimed at ensuring the Polish state gets tax revenue from Uber’s operations in Poland, and likely won’t significantly affect the intermediaries or eliminate the pathologies.
In January, Polish media published a leaked letter to the country’s infrastructure minister from American ambassador Georgette Mosbacher, in response to what was, at the time, a more stringent proposal to regulate ridesharing. Mosbacher warned that hindering Uber would set back United States-Polish business relations, and “have a chilling effect” on investments in the country. Uber, notably, employs hundreds of people in an operations hub in Krakow, and the company told OneZero it plans to hire more.
Poland is booming economically and the demand for services that make life for the middle class more convenient is growing. Warsaw is teeming with Bird and Lime scooters, a reminder of Silicon Valley’s ubiquitous tentacles. Gig economy companies capitalize on these appetites, but their business models, and the thousands of miles that separate their headquarters from the situation on the ground, allow for intermediaries to exert control. “We see it in other sharing economy markets in Poland,” said Jan Zygmuntowski, board chairman of the Warsaw-based progressive economic think tank Instrat. On the home rental platform Airbnb, for example, those renting out apartments are increasingly large companies, rather than individual homeowners.
“One thesis is that global corporations adapt the way they operate to what they find in local markets, and if in Central and Eastern Europe they get weak social institutions, no unions, a weak law, a culture of undocumented work, then they agree to it,” said Owczarek. And thus, a business model already known to be built on underpaid and defenseless workers, ends up abusing them even further.
This article originally appeared in OneZero on October 17th, 2019.
