Uber offers retirement plans. Will it appease drivers fighting for basic benefits?
Uber announced on Wednesday that it has partnered with Betterment to offer its drivers discounts on individual retirement savings accounts.
Uber announced on Wednesday that it has partnered Betterment, the retirement planner and advisory startup, to offer its drivers discounts on retirement savings accounts.
For now, the partnership is a pilot program for Uber drivers in in Seattle, Boston, Chicago, and New Jersey. Starting today, those drivers will be able to access Betterment’s retirement-savings tools through their Uber app.
Betterment accounts have no minimum balance but typically charge a small maintenance fee based on how much is in a particular savings account. For Uber drivers, Betterment will waive the account fee for one year, and after that charge a discounted fee of 0.25 percent of the amount of assets drivers have in their IRA or Roth IRA accounts.
Uber, which technically doesn’t employ drivers, will not contribute to the retirement accounts, as Wired reports.
The goal of Uber’s offering is to “improve the overall experience to help drivers get the most out of their time on the road and their future,” Rachel Holt, the ride-hailing company’s regional general manager for North America, told The Wall Street Journal.
The offer comes as Uber is fighting efforts among some drivers to secure "employee" status and the associated benefits from the company. In pushing back against their entreaties, Uber, which is estimated to be worth between $30 and upwards of $62.5 billion, argues that freelancing is the beauty of its model (and saves it at least 20 percent on labor costs). As contractors, drivers get to enjoy perks including flexible working hours, according to the company
But these perks come at the cost of zero benefits, highlighting the biggest drawback of what has come to be known the “gig economy.” Some estimates suggest that 1 in 3 Americans have no full-time employer, and instead are stringing together multiple gigs to make ends meet -- including those for ride-hailing companies like Uber and Lyft, or grocery delivery services like Instacart and Munchery.
“Without full-time, salaried work, there is no government-sponsored health care, no federally mandated parental leave or vacation time. Even if companies wanted to provide some provisions for workers who aren’t full-time employees, current labor laws say they can’t,” wrote The Christian Science Monitor’s Schuyler Velasco last year.
Some of these companies have taken small steps to make certain benefits more accessible to their non-employees. Lyft offered its drivers a low-cost retirement savings option last year. Like rival Uber, it also offers drivers gas discounts and easy car rentals through corporate partnerships.
Some have gone even further. Hello Alfred, a personal assistant service, and Munchery, a food deliverer, joined a number of big names in the gig economy universe and decided to make their contractors full-time workers with benefits last year. Part of the motivation for that, as The New York Times points out, is to reduce turnover and make workers more reliable. Freelance workers with no skin in the game may not be as motivated to work during a company’s peak business hours, for example.
When “lots of people want food delivered...on a 1099 [freelance tax form] model it’s tougher to compel [workers] to show up." Kris Fredrickson, Muchery's former vice president for operations told the Times in 2015.
As for Uber drivers, it’s not clear whether the retirement account perk will boost savings rates. According to some estimates, a typical Uber driver makes less than $13.25 an hour after expenses, as BuzzFeed has reported, potentially making it hard to save much money. But it might help to have the fee discount. Betterment generally doesn’t require an investment minimum, charging accounts between 0.35 percent for portfolios with less than $10,000 in assets and 0.15 percent for those with more than $100,000, according to The Wall Street Journal.
Uber's announcement with Betterment comes a week after its $100-million settlement with drivers in California and Massachusetts was rejected by a US district court judge in San Francisco. He ruled that the settlement of two class-action lawsuits in those states wasn’t fair, and ordered the parties to meet before a court appearance in September, reports the Journal. About 385,000 current and former Uber drivers were represented in the suit, arguing that the company should treat them as employees instead of contractors.