Uber takes $600m hit from giving UK drivers minimum wage and holiday pay

Watch: Uber hit with $600m UK drivers' bill after being forced to classify them as workers

Uber has taken a $600m (£431m) hit from its decision to pay drivers in the UK a guaranteed minimum wage and holiday pay.

The transport app revealed last night that it was logging the sum to settle historical claims related to the decision to classify drivers as workers, rather than independent contractors.

Uber announced in March that 70,000 drivers in the UK would start receiving holiday pay and pension payments, as well as a guaranteed minimum wage, after the company lost a lengthy legal battle over drivers’ employment rights.

The $600m accrual relates to historical claims from drivers claiming back payments, and does not cover the cost of the move going forward, which analysts have said could cost up to $350m this year.

It came as Uber showed signs it was bouncing back from a slump in bookings caused by the pandemic. The company said bookings - the amount users spent on its ride hailing and food delivery services - rose 24pc year on year to $19.5bn.

This was a record for a single quarter but was down to a 166pc rise in food delivery spending, which was almost twice the size of spending on its taxi business, which fell 38pc. Uber lost $108m in the quarter, a substantial improvement on previous financial results.

Uber is suffering from a shortage of drivers as economies reopen, particularly in the US. Uber said it had 3.5m drivers and couriers on its service, down 22pc year on year.

The company has cut costs and sold experimental businesses in the last year in a bid to bring it to profitability. The financial hit from the UK decision comes as drivers and regulators around the world challenge the company’s gig economy model.

On Wednesday, Joe Biden’s administration blocked an incoming regulation written during Donald Trump’s presidency that would have made it harder for gig workers such as Uber drivers to be classified as employees.

Watch: Uber up after hours after posting earnings