My Hermes, how a company can change for the best

[Catkins]

Just remember that a lot of 'Business-to-Customer' deliveries are offered by companies in a market that can not realistically sustain the number of suppliers, and in an effort to survive or thrive then they will cut operating costs, or attempt to increase market share, buy undercutting the rivals; it all leads to a race to the bottom, and the weakest will fail, but on the way there will be casualties - staff training and wages are two.

 

If you don't believe me, then look at the changes in Road Haulage, consider the fact that a new entrant in the pallet network market has gone under before they could even start, and remember (Initial) CityLink died at christmas 2017.

[rockershovel]

 

Financial Times paints a grim picture of the sector https://www.ft.com/content/392e7cd2-90e6-11e4-914a-00144feabdc0

Edited January 20, 2019 by rockershovel

[hayfield]

One thing you need to consider, is what the company’s business model actually consists of. This can be instructive.

 

One thing I learnt from my neigbours’ efforts, was that some (though by no means all) companies are actively involved in promoting and supplying approved and/or liveried vehicles under finance agreements. Then there are restrictions on permitted loads, particularly taking “drops” from other companies or private customers (hence his comments about being unable to grow the business, because otherwise you are wholly dependent upon the goodwill of the depot controller)

 

According to my neighbour, the profitability of their operation depends upon recognising that there are certain categories of work that cannot be made profitable. Out-of-town drops fall into this category, as do large items which take up too much room and limit the paying capacity of the van. Drops to collection centres (the drop-points at various supermarkets etc) are better than single drops, although the rates are lower, and collections FROM collection centres at the same time are a worthwhile extra although the rates are lower still.

 

It all adds up to a system in which the actual parcels are no one’s first priority, and it is no one’s priority to ensure coverage everywhere, which isn’t a happy thought.

 

 

I think many businesses run on an average profit basis where there are large volumes at play, which is the basis of these delivery services, its the same for grocery delivery business and fast food delivery. Then look at supermarkets, they work on number of items going through the check outs (one person buying a packet of crisps looses them money, the next customer with a trolley full  equals profit etc

[rockershovel]

I think many businesses run on an average profit basis where there are large volumes at play, which is the basis of these delivery services, its the same for grocery delivery business and fast food delivery. Then look at supermarkets, they work on number of items going through the check outs (one person buying a packet of crisps looses them money, the next customer with a trolley full equals profit etc

I don’t doubt that, but it isn’t quite the issue. The courier company might “average out” the revenue, but what about the courier who has that parcel to Little Dribbling in his load? It’s the same in principle, but the volume isn’t.

 

It all reminds me of the “cold calling” sector which my nephew was involved in, at one time. The idea was that when a new “agent” started, they received a “contact list” of names and numbers. However that list would already have been picked over by their predecessors’, now their supervisor (who had their own book, on top of their other duties) and possibly, other better established agents. The new starter has to beat the odds to make a success, most don’t and leave once they conclude that they can’t make it pay.

 

Hence the constant advertising for these positions, often quoting “OTE” or On Target Earnings which probably aren’t achievable. There was a practice at one time of “clawback” - making advances against OTE which had to be repaid upon leaving, if Commission earnings didn’t match advances - but I believe that was challenged in the courts and ruled illegal.

 

It was described as the “80/20 rule” - that 20% of the people do 80% of the business, and vice versa - and the object was to be on the right side of the equation.

 

It’s nothing new. Orwell described travelling newspaper subscription salesmen (Road To Wigan Pier) operating under much the same system, with much the same results, in the 1930s

Edited January 20, 2019 by rockershovel

[Colin_McLeod]

Financial Times paints a grim picture of the sector https://www.ft.com/content/392e7cd2-90e6-11e4-914a-00144feabdc0

That article requires a subscription and it's not free.

[hayfield]

I don’t doubt that, but it isn’t quite the issue. The courier company might “average out” the revenue, but what about the courier who has that parcel to Little Dribbling in his load? It’s the same in principle, but the volume isn’t.

 

It all reminds me of the “cold calling” sector which my nephew was involved in, at one time. The idea was that when a new “agent” started, they received a “contact list” of names and numbers. However that list would already have been picked over by their predecessors’, now their supervisor (who had their own book, on top of their other duties) and possibly, other better established agents. The new starter has to beat the odds to make a success, most don’t and leave once they conclude that they can’t make it pay.

 

Hence the constant advertising for these positions, often quoting “OTE” or On Target Earnings which probably aren’t achievable. There was a practice at one time of “clawback” - making advances against OTE which had to be repaid upon leaving, if Commission earnings didn’t match advances - but I believe that was challenged in the courts and ruled illegal.

 

It was described as the “80/20 rule” - that 20% of the people do 80% of the business, and vice versa - and the object was to be on the right side of the equation.

 

It’s nothing new. Orwell described travelling newspaper subscription salesmen (Road To Wigan Pier) operating under much the same system, with much the same results, in the 1930s

 

 

Quite

 

Its the numbers game in all of these examples, and for the likes of Hermes and its operatives as the numbers grow it allows the more enterprising to enter the game and make money, then by offering a better service additional customers are attracted etc

 

The other interesting fact is that a while ago the Royal Mail was suffering a similar problem, it seems traditional letters are decreasing but the more profitable packets business has mushroomed with the growth of internet shopping and selling sites like eBay. The Royal Mail seemed to pick up on this about 8 years ago when they increased the prices of packets greatly. They tried again to do this about 2 years ago by revising the size of the small packets downwards, but this was soon revised as presumably they started to loose too much revenue

[rockershovel]

That article requires a subscription and it's not free.

Oh... I found it by an internet search for “City Link collapse”, I don’t subscribe to FT. I don’t like to post it, because I assume it is copyright.

[hayfield]

Has Hermes taken over one of the companies, Post2go or similar?

[rockershovel]

Listening to the radio today, Hermes appear to be moving towards a fixed-rate, paid-holiday model at the drivers’ discretion. 

 

They arent the first such company to make such announcements, although I’ve yet to hear of such a scheme being successfully introduced - previous accounts seem to have placed further cuts on the drivers, and eroded their ability to recover costs from earnings as tax-deductible. 

 

The FT article I posted a link to, dates quite openly that personnel turnover remains very high, partly because certain categories of delivery simply can’t be made to pay by the driver. It also states quite specifically, that the courier company makes no attempt to satisfy itself that its drivers are paying tax, or indeed submitting tax returns at all.

 

 

[hayfield]

2 hours ago, rockershovel said:

Listening to the radio today, Hermes appear to be moving towards a fixed-rate, paid-holiday model at the drivers’ discretion. 

 

They arent the first such company to make such announcements, although I’ve yet to hear of such a scheme being successfully introduced - previous accounts seem to have placed further cuts on the drivers, and eroded their ability to recover costs from earnings as tax-deductible. 

 

The FT article I posted a link to, dates quite openly that personnel turnover remains very high, partly because certain categories of delivery simply can’t be made to pay by the driver. It also states quite specifically, that the courier company makes no attempt to satisfy itself that its drivers are paying tax, or indeed submitting tax returns at all.

 

 

 

 

Firstly I think companies like this have been bought kicking and screaming to provide benefits to those individuals it subcontracts to where they influence how the individual operates.

 

I worked a franchise environment for over 29 years, many years ago the Revenue had tax law changed so the companies employing self employed individuals had to send annual payment details to the revenue  

 

Whatever type of franchise it is the individuals own responsibility to sort out their own tax affairs. Just the same as any other self employed person. 

 

As far as what is tax relivable, the rules are basically the same for all self employed with only a few exceptions specific to a persons type of work    

[rockershovel]

Yes, but.... no.... the problem is that Hermes (in this instance) wishes to protect its margins by withdrawing any sort of security or obligation, from its staff - who are employees, in all but name. If they wish to pay a flat rate, leaving the driver with open-ended obligations (even, in some cases, penalty rates for covering their rounds) then it is incumbent on the employer to demonstrate to HMRC satisfaction that the driver is genuinely self-employed. Previous attempts appear to have fallen at that fence.

 

There is no legal entitlement to an employee, to claim mileage, vehicle maintenance or anything else. That falls within their contract of employment. If the employer wishes to deem them to be included, the driver has no redress or appeal. 

 

It is also true, that companies using subcontractors are required to send in details of payments to those subcontractors. However there is no obligation to ensure that due tax returns are submitted by those subcontractors, far less agreed and paid. 

 

It all sounds very remniscent of the construction industry, back in the “bad old days” where tax evasion was endemic, certificates changed hands in a thriving “informal market” and a constant turn-over of companies and individuals based outside the U.K. underpinned the whole thing. 

 

 

[hayfield]

In no way am I defending Hermes but they are like virtually every other company in wanting to pay the minimum it can get away with on staff wages The Co-oP constantly gives the impression of being an ethical company, yet the non management staff are paid peanuts, there is no company pension and no sick pay other than what they can reclaim from the government. Look at the care industry where some carers are not paid whilst travelling between patients. The hospitality industry is notorious with low pay. I would say it is far harder to find companies who look after their staff

 

As I said for nearly 30 years I was self employed, HM revenue and customs were happy that I qualified as self employed, the commission I earned was classified as  turnover and was able to offset qualifying business expenses from my turnover to derive a taxable income. Whilst in a different industry the control the company had over the way I conducted my business was the same or even higher.

 

Why should there be an obligation on a contractor to check up on its sub contractors tax affairs, do you ask your taxi driver or hair dresser if they pay their taxes ? How do you arrive at the opinion that all Hermes sub contractors don't pay tax ?

 

You are quite right that tax evasion is wrong and should be stamped out.  The country would be far better off if the revenue chased and the government legislated better stopping Multi National PLC's, larger companies and those who earn vast sums appointing top tax advisers using loop holes to reduce/avoid taxes.  

Edited February 4, 2019 by hayfield

[rockershovel]

We seem to be getting rather at cross purposes, here. I worked on a self-employed or Ltd Co basis for a number of years (I switched over to PAYE in the early 2000s due to various changes in circumstances) and I never had any particular problems satisfying HMRC that I was a contractor. However the law has changed significantly in recent years, largely in response to the efforts of companies like Hermes to push the boundaries of its interpretation. 

 

It is specifically mentioned in the FT article I linked to, that Hermes (and others) are well aware that a significant proportion of their drivers are engaging in systematic non-payment of tax. However, as you say, they are not obliged to pursue this, and don’t. There are quite a lot of pieces around on this topic, the Low Pay Unit can be quite informative on the subject. I’ve also had direct experience of employment agencies contracting staff outside the U.K., and making no attempt to reconcile their U.K. tax liabilities - which are far from clear, in some respects. 

 

Being old enough to remember “the lump” in the building trade, and the 714/715 scheme which brought it into some sort of order, I have to feel that anywhere there are a high turnover of non-U.K. nationals and/or residents working on contract basis, often through agents not themselves based in U.K., the chances of systematic tax evasion being present are high. 

 

 

[hayfield]

I think that unless the Revenue requires contractors as part of their contractual obligations to only to accept sub-contractors who have an inland Revenue certificate (similar to that in the building trade) it is wrong to single out a few companies whilst ignoring others. This type of employment has certainly been going on since the late 60's if not even earlier and across many different industries. Personally I think where companies have a significant level of control over the subcontractors they should be employees,  would be beneficial to the Inland Revenue I don't know as large companies are very clever at minimising their tax burden

 

One of the biggest drivers of low pay is the rise of part time employment and the decline of full time contracts. Many workers are employed on 16 to 24 hour per week contracts and depend on doing overtime to balance the books, however the employers can withdraw overtime at any time. This is massively beneficial to the employer in controlling the wage roll and being able to control its man power depending on seasonal requirements. I know of a company (house hold name) that now prefers to employ 2 part timers rather than one full timer and that they only give out permanent contracts that cover 95% of expected minimum hours required, knowing that they can turn the tap on for overtime as there are many employees who jump at the opportunity to do overtime

 

This method will suite some workers but has greatly reduced the opportunity (mainly effecting the young) of full time gainful employment. As for the low pay unit, does not seem to be very effective as low pay is rife in this country and there is no effective plan to reduce one of the main drivers of low pay 

[rockershovel]

I’m inclined to agree about the Low Pay Unit being pretty much ineffectual in controlling the numerous abuses that  operate in the employment field - but they ARE quite s good source of information that doesn’t appear elsewhere. 

 

16 hours is, of course, a key figure for qualifying for a range of benefits and benefits-in-work... 

 

a propos courier work, I recently saw an advert (for DPD, I believe) which said airily that “if you can make 100 drops a day, in an urban environment, you should find the job quite straightforward”. That’s a drop every five minutes, eight hours nonstop. 

[hayfield]

For two or 3 years I was a PAYE delivering internet orders. Usually the round was covered by 1 van in 2 hour blocks. When we had days which warranted 2 vans, which meant we could cut the area in half we could deliver between 2 and 3 times more orders in the same day. The drop every five minuets providing the area is quite tight and the fact that some drops will be two or more items is achievable traffic permitting. The qualification is an urban (not rural and perhaps not City) Both Rural and city environments will throw up different issues

 

It will not be 8 hours non stop are drivers required to take and document rest breaks. Having to work 8 hours a day is a normal working whether you are driving or not and if you are employed for 8 hours you should work for 8 hours, in this case I guess you are paid per item, a bit like a builder taking on a job for a fixed price, most jobs are completed within the time estimated, a few will go over, where you work for yourself (self employed) and enjoy the benefits of being self employed, you have to take as they say the good with the bad. 

[rockershovel]

3 hours ago, hayfield said:

For two or 3 years I was a PAYE delivering internet orders. Usually the round was covered by 1 van in 2 hour blocks. When we had days which warranted 2 vans, which meant we could cut the area in half we could deliver between 2 and 3 times more orders in the same day. The drop every five minuets providing the area is quite tight and the fact that some drops will be two or more items is achievable traffic permitting. The qualification is an urban (not rural and perhaps not City) Both Rural and city environments will throw up different issues

 

It will not be 8 hours non stop are drivers required to take and document rest breaks. Having to work 8 hours a day is a normal working whether you are driving or not and if you are employed for 8 hours you should work for 8 hours, in this case I guess you are paid per item, a bit like a builder taking on a job for a fixed price, most jobs are completed within the time estimated, a few will go over, where you work for yourself (self employed) and enjoy the benefits of being self employed, you have to take as they say the good with the bad. 

 

Which is all pretty much, consistent with the comment made by my neighbour (previously posted). He reckoned it was do-able, but tight, provided that you avoided the areas which couldn’t possibly be made to pay. He was scathing about the system which effectively placed the individual’s earnings at the sole discretion of the dispatcher (a very common criticism of ZHC and piecework systems generally) and also felt that margins and risks were severely imbalanced

[hayfield]

But 

1 hour ago, rockershovel said:

 

Which is all pretty much, consistent with the comment made by my neighbour (previously posted). He reckoned it was do-able, but tight, provided that you avoided the areas which couldn’t possibly be made to pay. He was scathing about the system which effectively placed the individual’s earnings at the sole discretion of the dispatcher (a very common criticism of ZHC and piecework systems generally) and also felt that margins and risks were severely imbalanced

 

With this system where the driver has their own area to a certain degree allows the driver to build up and develop their business. My late brother in law had a franchise and as it happened the head office of one of the new banks became a user, loads of work across the country, most of which had to be farmed out to other agents, but he got a rake off on every one. Back to Hermes I think with those who have a decent area and service it well and have a good work ethic can make a reasonable living.

 

My farther (who was a trade unionist) taught me a work ethic ,in that no body owes me a living, if you are employed you work hard for your wages, seems to have rubbed off on my daughter who is a civil servant and has risen quicker up the ranks than others who joined at the same time or earlier. But by doing this your employer should be equally appreciative by rewarding those who do work hard.

 

I may be lucky in having a conscientious Hermes delivery person now, but they (Hermes) seem  to be improving the quality of their delivers. An on the odd occasion I have used them without any problems 

[rockershovel]

The consensus which seems to be emerging here is that it is possible to make a profit by running a franchise, with application and good fortune. I don’t doubt that, but Hermes aren’t a franchise chain. Their drivers aren’t franchisees, but tightly regulated subcontractors with high variable costs, prevented from growing their business because they don’t have regular areas, apart from anything else; nor do they have any information about costs (which are handled online) and nor can they accept parcels unless Pre-booked, or collected from one of the drop-off points (a separate operation). 

 

Ive just been reading about the Hermes workers deal, in conjunction with GMB Union. I did this by googling “Financial Times Hermes GMB” and found I could open one article, once; I recommend this! The gist seems to be that they have, if they opt for it, a guaranteed hourly rate calculated over a year, if the work provided doesn’t achieve that. No details on how those hours are defined and calculated. Also paid leave allowance accrued over a year. 

 

 

Edited February 6, 2019 by rockershovel

[hayfield]

I am sorry but the GMB union is hardly a neutral body where one of its sole purpose is to increase its membership. And before you start off on me being anti union. My dad was a member of the GMB (or its original format)  whilst working in a wire mill in Hertfordshire from the early 50's, and was works conveyor for the last 20 years of his working life. I do respect many of the things unions have done in the past and do now

 

Whilst the exact termination of the job may not be a Franchise (Similar to my 30 years as a self employed contracted worker( totally different industry))  It bears all the hallmarks of one. I have no idea about the new g'teed hourly rate scheme, but that seems to fly in the face of truly being self employed. And possibly driven by the court ruling from the Uber case. But accruing holiday allowance ? Defiantly against what I have come to understand what being self employed is all about. Still times change and employment characteristics alter over time 

[rockershovel]

4 hours ago, hayfield said:

I am sorry but the GMB union is hardly a neutral body where one of its sole purpose is to increase its membership. And before you start off on me being anti union. My dad was a member of the GMB (or its original format)  whilst working in a wire mill in Hertfordshire from the early 50's, and was works conveyor for the last 20 years of his working life. I do respect many of the things unions have done in the past and do now

 

Whilst the exact termination of the job may not be a Franchise (Similar to my 30 years as a self employed contracted worker( totally different industry))  It bears all the hallmarks of one. I have no idea about the new g'teed hourly rate scheme, but that seems to fly in the face of truly being self employed. And possibly driven by the court ruling from the Uber case. But accruing holiday allowance ? Defiantly against what I have come to understand what being self employed is all about. Still times change and employment characteristics alter over time 

 

Sorry about what? GMB are not neutral, they are a body which exists for the purpose of collecting subscriptions from its members, and using those subscriptions to represent the interests of those members to the best of their abilities, within the defined context of their employment. Their importance here, is that they are representing those members with Hermes, to a certain extent. 

 

Franchising is a simple concept. The franchisor offers a brand and reputation, and (usually) certain opportunities in respect of internal purchasing, such as insurance or raw materials. In return, the franchisee (1) pays an agreed sum of money as a fee (2) finances the establishment of the place of business and necessary tools, plant etc (3) operates in conjunction with the franchisor in conformity with the terms of the franchise. The franchisee’s reward is that they accrue any profits from whatever value or volume of business they can attract and execute. They may buy other franchises, enlarge any given franchise site to whatever the trade will bear, employ staff and generally exercise the freedoms of the business owner. 

 

The subcontract courier has none of these opportunities. I’ve duscussed this at length with my neighbour, who had a franchise printing business himself at one time, and he assures me that the courier contract they are currently dealing with, has none of those characteristics. They cannot seek business on their own account. They derive no benefit from any business they attract, because that goes through a separate department. They cannot vary rates, accept payment or generally exercise any judgment or discretion except in the selection of their routes subject to the loads they receive at the start of each day. Their volume of business, in short, is arbitrarily controlled at the sole and exclusive discretion of the dispatcher, with no guarantee or redress. 

 

That isnt franchising. 

 

[hayfield]

Not all franchises work like this, my late brother in law brought a franchise within the legal industry, not only in this case did the franchisee have to pay a fee for the business, he had to pay a % of his turnover to the franchise. As it happens after some very good years the franchise went down hill as the industry changed, in the end these franchises were worth nothing. Franchises cover a wide range of businesses and business practices you cannot draw a line. The one difference with a subcontractor is that they work for many companies, rarely dependant on one, and the work is usually either time related or individual job related. the subcontractor usually quotes for the business

 

I worked in a very different industry as a self employed person very tightly controlled in what I could do probably on similar lines to Hermes drivers as far as your illustration

1/ I sold something and received a fee based on the value of the sale, Hermes drivers get paid a set rate per package. 

2/ I was provided with office space, but had to use my car and paid all my own costs,  Hermes drivers have to provide their own van and pay their own costs

3/ Like me the Hermes drivers certainly confirm with the first part

They can also go up a level and control other rounds, My chap had a paid assistant with them the rest of the third of your requirements its very debatable as how much freedoms franchisees have, usually the franchiser is very protective of their franchise

 

I like the Hermes drivers had our own business account(s) mainly to keep the business finance away from personal, as for benefiting from business they are an end provider (red herring) Most franchises cannot vary rates, many service style franchises do not accept money, I would have thought that they have an area which they cover.   

 

Your final paragraph certainly is not subcontracting, as subcontractors do all the things you say cannot be done

[rockershovel]

I’m unclear quite what point you are trying to make, at this stage. 

 

I certainly wouldn't regard paying a %age rather than a fixed sum, a meaningful distinction. Either way, the franchisee pays the franchisor for the franchise in some shape or form. 

 

What seems to be happening overall, is that the old, binary model of employed/self-employed is being tested to destruction; HAS BEEN tested to destruction, in some categories and jurisdictions. Many businesses now find themselves unable to recruit or retain staff at the wages offered and skills training has been almost entirely destroyed. 

 

Some sort of consensus is emerging, but it is far from clear as yet

 

[hayfield]

If you define a Franchise as having to pay a fee and pay royalties, then the Hermes model does not fit, however in the true sense they are neither in the true sense a self employed contractor, as many do not receive income derived from other sources. Its a subsection between the two, but nearer to a franchise as they are controlled by the main Franchise/contractor usually with restrictions on doing other similar activities. Neither is this type of business model new, in the early seventies I was sold a life insurance policy from a self employed salesman representing Sun Life of Canada, from memory the likes of Abbey Life then Hambro life and many others operated the same franchise type operations. None of these carries any form of employed status or benefits, whilst maintaining strict control of the business activities of these people, who were like other franchises able to employ staff

 

So not a new concept and one the revenue seems happy to accept