App-based food delivery firm Glovo's freelance riders in Spain will be hired as employees following pressure from the government to give them labour contracts, its German owners Delivery Hero said Monday.
"Glovo management decided to change from a freelance model to an employment based model for its delivery riders in Spain to avoid further legal uncertainties leading to an increase of contingencies," it said in a statement.
The change in "operation model" will be limited to Glovo's activities in Spain and will dent Delivery Hero's 2025 core profit by 100 million euros ($105 million), it added.
Spain in 2021 passed Europe's first law that explicitly regulates the status of delivery workers, requiring that they be recognised as employees instead of being considered self-employed freelancers.
This means app-based food delivery firms like Glovo have to pay their riders -- who get around mostly on bikes and motorcycles -- employee contributions for benefits like sick leave and protections against dismissal.
Since the approval of the so-called "Rider Law", Spain's labour ministry has slapped Glovo with fines totalling 205 million euros ($215 million).
"Laws are to be obeyed. We have said it before: no exceptions. No big business is above the law. Democracy wins," Labour Minister Yolanda Diaz wrote on social media after Delivery Hero's announcement.
Barcelona-based Glovo was purchased in 2022 by Berlin-headquartered Delivery Hero.
