Case Study: Uber

UK
24/07/2020
─

Maria McGlade Segovia

1. Introduction
2. Topic 1: The Psychological Contract
3. Topic 2: Reward Strategies
4. Conclusion
5. References
 1. Introduction
Human Resource Management is a key element in the creation and development of
a company. It benefits both the company and the employee to have a correct
strategy from recruiting to employers’ contracts, rights, rewards and motivation.
This case study will look in to how Uber UK applies different Human Resource
Management strategies to their company and how much importance they give to it.
Uber UK is a transportation company that uses a app to connect the driver with the
customer. This analysis is done based on two models; The Psychological Contract and
Reward Strategies (Torrington, Hall, Taylor and Atkinson, 2014).

2. Topic 1: The Psychological Contract

Research through the years has advised a ‘realistic job preview’ benefits both employers
and employees, its finality being that employees get a realistic expectation of the job and
hence encouraging them to stay in the company. Why would something so simple be key in
job satisfaction you might ask? The answer is that some companies sell the job to the
employee creating them unrealistic expectations and only sending out positive messages
when the reality is that sending a more realistic message is going to get a worker’s trust and
satisfaction in the long run. In this case, Uber recruits differently for executives than it does
for drivers. The gap between these two and how they treat them is created from this very
first step. As mentioned earlier this case study will focus on the driver’s recruitment as it’s
the part of the company that lacks human resource management beyond recruitment. Uber
recruits’ drivers partly through ads on Facebook and Twitter. But as it’s gained popularity a
lot of the recruitment is done through user experience and word of mouth. Uber needs an
abundance of drivers, as this is it’s selling point, there should be a car available near you in a
matter of seconds, at most minutes. Uber calls its drivers Uber Partners, creating an
impression that is for from reality, which matches with Uber driver’s satisfaction rates in the
short run in comparison with the long run. It’s highly important to incorporate a realistic
preview in the recruitment statement as it will guarantee the company to attract the correct
candidates for each task.
This is also supported by what we call the ‘psychological contract’. To explain this concept,
we need to understand that when a company hires an employee a legal contract is created.
It arranges obligations both of the employee and employer have with each other. Although
this relationship goes much further than just a legal contract. Here is where the
psychological contract comes as this is expectations and obligations beyond the legal
contract that involve both sides. If an employee breaks any of these two contracts it will
lead in psychological or legal consequences. As legal consequences can be monetary,
psychological could be lost of loyalty or commitment.
Uber lacks this ‘psychological contract’ as its drivers are hired as self-employed workers.
This eliminates a great part of obligations on the company’s side as starting from a legal
point of view. Some of these obligations they evade because of their drivers being self-
employed such as they don’t have to worry about paying minimum wage or paid holidays.
As we mentioned before this is all introduced through the induction process as it’s the
initiation of the relationship between the employer and employee. In this process the future
employee will learn general tasks of the workplace while it adjusts to their new working
environment but in the worker will also get the first impression of the organization’s
relationship with employees, the message they want to send and the issues that concern
the company. It’s fairly easy to forget the importance of this task when being in a rush to get
an employee to complete a task when in reality, to get the most productivity out of a task it
is key to get the right worker, it is as important for them to be qualified as it is for them to
be committed and motivated by their job and not be let down once they’ve started working
but the other way round. Uber strategy is based mostly on performance appraisal which is
explained further in the “Reward Strategies” segment and flexibility in working hours. They
are in a rush to have an abundance of drivers to meet demand but because Uber rates are
based off of demand this affects negatively the rate that Uber drivers get paid for a trip. This
flexibility in the hours is also misleading, a lot of the drivers started with Uber as a second
job and then made it their only job because of this ‘perk’ but have admittedly said it has
ruined their life outside of work, having to do extra hours as the times people usually use
this service is concentrated in a small timeframe. The responsibility of an employee leaving
because of misleading expectations is to blame on this first interaction.
It’s so important to insist on this stage is it creates a foundation for the psychological
contract to build on. This should also be explained in the following months of the
employment whereas in Uber, they tend to have a very impersonal relationship with their
drivers contacting them only if there have been numerous complaints from passengers.

3. Topic 2: Reward Strategies

Reward strategies have been used for years in a companies and organizations to support
their business strategy. The basis to create or use a reward strategy is a sense of direction,
we need to know how to focalize our strategy to get the most out of it and for a company to
be able to progress.

Every company needs a different strategy based on their goals and challenges. No matter
your goal, the strategy your company or organization chooses will carry a message that is as
important as other parts of employee deals.
As mentioned earlier Uber bases their strategy on appraisal and rewards. It bases the
driver’s performance from customers on a 5-point scale, then the main evaluation is done
with a combination of the drivers rating, the number of rides the driver accepts and the
number of drives the driver rejects or cancels. Based off this there are certain incentives or
accomplishing targets.

Aside from the direction another major point is the time you apply this reward. Rewards
runs on an annual cycle and it’s critical to know when to apply this as if you miss the right
time you’ll have to wait another year for the opportunity. To unlock these rewards Uber
drivers must have at least a 4.85 and a cancellation rate of under 4 %. Considering the Uber
rating can be bias as drivers could be drunk when giving this rating or not like the driver
being too friendly or find them too rude, or even in some cases give a bad rating to get a
free ride. It’s not fair to only have access to these rewards when 4.85 is quite a high score.
But without a doubt one of the most important decisions in developing a reward strategy
relates to the mechanism your company chooses to determine the basic pay rate of the
employees of the company. This is a key factor considering Uber does not have a basic pay
rate. The drivers earn a percentage based off each individual ride they do. Not having a
basic pay rate gives the drivers little to know security on their job or even in their daily
shifts, to know if the hours spent working are going to make it worthwhile.

There are two main factors that restrict employers when making this decision. The first one
being that in most countries the law a national minimum wage, which in the UK is £7.83 in
2018 and with of equal pay law. These define the amount of additional pay that an
employee can receive annually while staying in the same job. The other element that
restrains the company in its decision making is staying competitive in its industry as there is
always a limit that the employer can pay without limiting himself to attract and retain
employees to the company. This has proven in other countries with major competitors like
Lyft in the US or Cabify in Spanish and Portuguese speaking countries to attract them to
other companies, that also have similar conditions but might have better rewards at the
time. This makes it hard for Uber to maintain their employees.

With this said we can determine four main mechanisms in the decision of base pay; external
market comparisons, internal labour market, job evaluation and collective bargaining.

Starting off with external market comparisons, we can find that when making these
comparisons its main focus is on external relativities, having as an objective to recruit and
retain employees. Parting from this model employers can decide if they want to pay over
the market rate therefore trying to secure they’re best employees or to follow the market
rate by paying bellow the going rate but using other reward mechanisms to secure their
workers like flexibility or job security. In Uber by not having a minimum wage because of
self-employment, they are choosing for their workers to be earning bellow the market rate
and basing their strategy or reward mechanisms which do not give security in most cases.

Continuing with these mechanisms we find the internal labour market. This is simply a
labour market inside the company, so it can guarantee the correct function within it. Here
we find to kinds of internal labour market. The enterprise where jobs are ranked creating a
hierarchy where the highest paid jobs that are considered to have more responsibility are
filled by promotions from those within the company and the lowest paid or those that have
the least responsibility are completed exclusively from outside the company. The problem
with this mechanism is that there’s less ingression of new employees and there’s more
seniority within the organization. It’s important to remember that the performance itself of
the employee receiving the pay is less important than the maximization in the performance
of employees further down the hierarchy rank. As we mentioned earlier there is a big gap
on how Uber recruits and treats its executive workers versus its “partners” Some of the
most common reasons drivers leave Uber are lack of career advancement opportunities,
hostile work environment, dissatisfaction with senior leadership and burnout.
The other internal labour market is the craft market. This market involves the obtainment of
a formal qualification. Completely opposite to the enterprise market, jobs and projects are
shared between the workers. It is accepted and agreed by everyone in the company that
those who achieve the established qualification will get a certain pay. This goes back to how
Uber drivers who have a certain qualification will get a certain reward, but then again, this
qualification is influenced by a lot of factors outside of the driver’s job in the workplace.

When doing a job evaluation, we establish a system which we use to measure the size and
significance of all jobs in a company through points creating a hierarchy. The focus in this
mechanism is giving value to a job based on comparisons with the company rather than
influenced by external factors, its basic rules being objectivity and fairness. The usage of this
technique has increased in the past years specially within the public sector, it’s effective
since few companies drop it and despite newer techniques being in use. This technique
produces a structure of pay rates and is a systematic technique that evaluates job over
performance. As many start-ups do, Uber hasn’t given the importance to Human Resource
Management other than just for recruitment purposes. If they were to apply job evaluation
which evaluates job over performance, their whole business model would fall, although
chances are drivers would have more security financially and feel more protected.
4. Conclusion
As a result, Uber UK has demonstrated they don’t consider Human Resource
Management a priority in their growing company, especially with drivers. Which is
although quite common in many start-ups and gig-economy companies, it reflects in
their driver’s satisfaction and in their fidelity with the company. The lack of Human
Resource management is so significant, their whole business model would have to
change if they offered their drivers a proper contract. As of reward strategies, they
only work well long term when combined with a good base, which Uber lacks and
being attentive and checking in with their employees need sand priorities.

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