Deliveroo's Human Resource Approach: Analyzing Psychological Contract and Reward Strategies

Question

Task: How does Deliveroo apply the psychological contract and reward strategies in its human resource approach, and what impact does this have on its operations and workforce?

Answer

Introduction

The human resource management is a very significant aspect of any organisation. In this assignment, the focus will be on critically analysing the Deliveroo’s approach to human resource following two models. These include the reward strategies and the psychological contract. Deliveroo, is a start-up based company in the UK, founded by Greg Orlowski and Will Shu in the year 2013. The company provides food delivery services through an app. It operates with the restaurants partners and delivers food to the customers through its riders. The customers order high quality food, online, from the restaurants in Singapore via Deliveroo app. The company not only satisfies its customers but also considers its riders providing them adequate flexibility. Through its effective HR practices, the company has expanded into 14 nations and 500 cities around the globe.

Application of theoretical models

Deliveroo has been operating successfully in various countries across the world. In Singapore, it delivers food to the customers from its restaurants through the online app booking. For delivering the foo, the company depends on riders and for handling the entire operations it has efficient staff. The way the company uses the psychological contract and the reward strategies to its HR approach will be discussed in the below give section.

Psychological Contract

The psychological contract is such a model under human resource which defines the terms between the employer and the employee. The relationship between the two is determined through this approach (Costa, 2021). The employer and the employees enter into short term activities and there develops a bond. This bond is defined through the psychological contract. This model is aligned to the gig economy concept, which is characterised by the increase in the flexibility. This also comprises the short term agreements between the two parties. Deliveroo puts emphasis on the flexibility being provided to the riders. The co-founder of the company, Shu is of the opinion that the job of the riders should be flexible so that they want to retain and continue working. If the job offered to the riders by Deliveroo becomes inflexible, many would quit their jobs(Lwin et al, 2022). The psychological contract is closely analysed and applied here. The riders have given their feedback that they are comfortable with the flexible working structure at Deliveroo. In fact, the staff have also shared their reviews where they mentioned that they have a healthy attitude and inclination towards working from home. The company has realised the significance of understanding the psychology of the employees and addressing their needs in the job offered.

For Deliveroo, the psychological contract is significant because it is based on the sense of trust and fairness of the employees. It depends on the belief of the employee that their employer is honouring their agreement. The breach or violation of the psychological contract with the employees by the company could have sudden and strong consequences on the organisation and other stakeholders (Sherman & Morley, 2020). This could include high attrition rate or low productivity and lack of efficiency of the employees. By honouring the psychological contract, Deliveroo can enhance their food delivery services in Singapore, gain a better reputation in the market and have a happy and string workforce. To keep the employees, including the riders, motivated, committed and morally boosted, the psychological contract model has to be applied by Deliveroo. The riders will be able to realise their value in the business and the role they play. This would make them more responsible and passionate about their job. The employer and employee should eliminate the unrealistic expectations from each other based on the psychological contract they share (Torrington et al, 2020). There should be regular and transparent communication between the two parties and amendment of the terms of contract from time to time as required.

At Deliveroo, they try to provide their employees a friendly work environment and maintain good communication from the management side. The psychological contract should also consider certain other aspects of the employee-employer relationship. For instance, a good salary is not enough, the employees need certainty. There is a lot of uncertainty about the job at Deliveroo. This has a negative effect on the employees. The company needs to provide coverage to the riders in case of injuries, bike accident (broken or stolen), etc. and consider situations like bad weather or poor demand for deliveries. This highlights the realities of ‘gig economy’ which impacts the workers. Deliveroo is a company which works on the basis of the gig economy. In this structure, the riders do not get categorise as employees for the company. The riders are therefore, treated as contractors, which implies that they are self-employed. The riders under Deliveroo are considered to be independent contractors where they are paid as per their jobs (Goods, Veen & Barratt, 2019).

Strengths and Weaknesses of Psychological Contract

There are different advantages and disadvantages of the psychological contract. The strengths of this HR approach include the agility. The real time equation in the relationship of the employer and employee defines the agility. Loyalty is another strength of the psychological contract. As long as employees are happy with their employer, they offer their loyalty. Empathy is also ensured by psychological contract. This implies that the employees and employers are empathetic towards each other (Ran, 2021). Psychological contract also fosters openness in communication, honesty and integrity.

The weaknesses of the psychological contract is that the approach is redundant, not-on-paper and inconsistent. The approach is imprecise, covert and implicit which implies that the expectation are not communicated by employers to employees clearly. The psychological contract is unstable because the approach is based on assumptions and hidden expectations. The unwritten nature does not make the psychological contract binding on either of the parties (Gillani, Kutaula&Budhwar, 2021). The psychological contract is an approach to HR which changes with time. The equation and situation is too dynamic for adapting.

Reward Strategies

The reward strategy is another very crucial model of human resource management. According to Turnea&Prodan(2020), the reward strategy is useful because it facilitates encouraging the employees, enhancing their loyalty towards the organisation and developing a behaviour which is aligned to the goals of the organisation. The reward strategy is a comprehensive package of the bonuses and benefits which motivate the employees. The company, Deliveroo uses the reward strategy for boosting the morale of the employees, enhancing their job performance and increasing their productivity. The employers and the human resource department of the organisation reward their employees so that they are encouraged to go an extra mile and achieve their targets (Edwards, 2017). Deliveroo is a delivery service-based application that works in a gig economy. As a result, the employees working under this company has been categorized as riders. In other words, Deliveroo regards its employees as contractors that indicates that they are self-employed. The employees working under this sector are independent contractors who are paid for the job they do. The HR trend of Deliveroo shows the use of algorithmic management under which the employees are managed through the app. The HR practices that Deliveroo follows has been mostly contracting employees rather than hiring them. O’Connor (2016) argued that the gig economy has caused a lot of disturbances for Deliveroo. The major challenge has been the right of employees as freelance riders. As a result, the CEO of Deliveroo, Shu involved flexibility for all riders. In other words, the employees will get the flexibility to provide delivery services based on demand. In the year 2017, Deliveroo won a legal fight that permitted them to call their employees as riders and categorize them as freelance contractors.

Deliveroo also provides focus on extra perks in the form of rewards that included providing accident cover, medical insurance as well as in training first aid. Independent contractual option has attracted several employees as they do not get entitled to the similar benefits as well as rights as permanent employees. Kalra (2018) argued that the way in which HR practices are carried in Deliveroo might raise question regarding violation of employees interests. Deliveroo has been recruiting riders on a continuous basis by inspiring them with bonuses that includes first delivery rewards. This recruitment procedure makes sure that Deliveroo meets the supply requirements, but it does not appear to consider the riders job safety. The company provides perks to their employees for better performance. The riders and other staff are paid good salaries. The perks, salary hikes, incentives, etc. are all part of the reward strategy implemented by the company for generating better employee performance. In Singapore, Deliveroo has been looking forward to launch a business intelligence (BIU). This will mostly cater to APAC region that will headed by DemisBhojoo to recruit specialised talent in data analytics. The business strategy of Deliveroo Singapore is to raise the overall expertise in the APAC region. This will in turn will provide the best probable solutions and services to restaurants, customers and riders. The regulatory environment is likely to be improved through Deliveroo in Singapore as the online food delivery app is likely to improve environmental impact with the help of carbon free strategies mostly by using bicycles to deliver. A huge amount of carbon emissions comes from transportation of goods and delivery companies are an important part of this. Deliveroo will be able to act in response to the local regions they will be based within they choose to introduce Business Intelligence Units to comprehend and retort to local demands. Deliveroo has been witnessing a flexible labour market in Singapore. In Singapore to become a driver, the riders require to submit a 5-minute application that will include Singapore citizenship, a motorbike that requires to be compliant with legal necessities, a Smartphone specifically, iPhone or android that has to be 5.0 or above. In Singapore, Deliveroo has been following branching out services that includes just deliveries with food markets (Healy,Nicholson &Pekarek, 2017). The company has been following the branching out services to remain ahead of the competitors. The plan behind providing additional support for riders comes up from an acknowledgement of repercussion of the ‘gig economy’ has received because of the fact companies for example Deliveroo are treating employees as independent contractors instead of employees which incurs less cost for the company. Using contractors rather than employees in the company has been providing benefits in terms of both flexibility as well as cost for employers by familiarizing between temporal, functional as well as numerical flexibility types.

Strengths and Weaknesses of Reward Strategies

The major strength of reward strategy will raise productivity of employees by providing them with perks. This has been followed by higher profitable margins as well as improved productivity. This in turn will make the employees more conscious about time provided appropriate incentives. This strategy is likely to raise the overall expenditure for Deliveroo as this strategy will hold elevated monetary value that is effectual. Another extensive misunderstanding about employee awards is that they require to be of overgenerous value.

Conclusion

It could be concluded that Deliveroo won a legal bout that allowed the company to refer their employees as riders and classify them as freelance contractors.The riders under the psychological contractprovided their feedback that they are contented with the flexible working structure at Deliveroo. It could be inferred that Deliveroo has been following branching out services that involved just deliveries with food markets. It could also be concluded that the company have confronted several issues mainly surrounding rights of employees for their freelance riders.

References

Costa, S. (2021). New Psychological Contracts, Old Breaches?. In Redefining the Psychological Contract in the Digital Era (pp. 111-127). Springer, Cham.

Edwards, J. (2017). Will Shu talks about the workers’ rights litigation that threatens $2 billion Deliveroo. Retrieved from: https://www.businessinsider.com/will-shu-deliverooworkers-rights-employment-status-ruling-2017-11?r=UK.

Gillani, A., Kutaula, S., &Budhwar, P. S. (2021). Psychological contract breach: Unraveling the dark side of business-to-business relationships. Journal of Business Research, 134, 631-641.

Goods, C., Veen, A., & Barratt, T. (2019). “Is your gig any good?” Analysing job quality in the Australian platform-based food-delivery sector. Journal of Industrial Relations, 61(4), 502-527.

Healy, J., Nicholson, D., &Pekarek, A. (2017). Should we take the gig economy seriously?. Labour & Industry: a journal of the social and economic relations of work, 27(3), 232-248.

Kalra, A. S. (2018). Deliveroo to set up BI unit in Singapore, may expand to Hong Kong. Retrieved from: https://www.humanresourcesonline.net/deliveroo-to-set-up-bi-unit-insingapore-may-expand-to-hong-kong/.

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O’Connor, S. (2016). When your boss is an algorithm. Financial Times, September 2016. Retrieved from: https://www.ft.com/content/88fdc58e-754f-11e6-b60ade4532d5ea35?mhq5j=e5.

Ran, L. (2021). Predictors of Job Performance and Psychological Contract Fulfillment as Mediator among Household Service Workers in Beijing, China. The International Journal of Business & Management, 9(2).

Sherman, U. P., & Morley, M. J. (2020). What do we measure and how do we elicit it? The case for the use of repertory grid technique in multi-party psychological contract research. European Journal of Work and Organizational Psychology, 29(2), 230-242.

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