Uber is piloting a retirement savings program for its drivers in certain areas, USA Today reports:
Uber said Wednesday it was partnering with Betterment, an online investment and wealth management company, to provide a year of automated investment management advice for drivers in Seattle, Boston, Chicago and the state of New Jersey. The company hopes to roll the plan out nationally. The post notes that drivers can use their Uber app to “open a Betterment IRA (individual retirement account) or Roth IRA for free. People who drive with Uber can get started with no minimum account balance.” After the free year expires, users with a balance of less than $100,000 pay an annual fee of 0.25% of the average annual account balance for the year, or $25 on $10,000.
The new benefit comes at a time when Uber is facing multiple class-action lawsuits by drivers seeking to be reclassified as employees rather than independent contractors. The ridesharing platform contends that it does not exert enough control over drivers’ work to be considered their employer, though researchers have suggested that it practices “algorithmic management.” To placate drivers and avoid a reclassification that could upend its business model, Uber has offered to adopt some more driver-friendly business practices and has agreed to let drivers in New York City form a guild to represent their interests to management.
The Boston Globe’s Curt Woodward sees a similar rationale behind the partnership with Betterment:
The new offering could help Uber compete with a smaller mobile app-based car-hailing company, Lyft Inc., for the loyalty of drivers, many of whom use both services to find fares. Lyft also offers discounted IRA services through a third-party service called Honest Dollar, along with savings on fuel, tax software, and car rentals.
Unlike 401(k) plans, which are sponsored by employers, these accounts won’t get contributions from Uber; the drivers contribute their own money. The distinction is critical for Uber, which has been roiled by controversy over the employment status of its drivers. Uber treats its drivers as independent contractors rather than full-fledged employees, a decision that saves the company money because it doesn’t have to remit payroll taxes or bankroll employee benefits. …
Uber has arranged for other discounts and special services for its drivers, including health insurance recommendations, savings on car repairs, and cheaper wireless plans. Drivers also can qualify for discounts on new car purchases and flexible car leases for low-credit borrowers offered by an Uber subsidiary.
Allison Griswold at Quartz notes that Uber “is walking a fine and often blurry line in managing its hundreds of thousands of US drivers”:
Because Uber considers these drivers independent contractors, it can’t set their schedules, provide training, or do anything else that the courts might deem employer-like. Companies can save as much as 30% on labor costs by hiring workers as contractors instead of employees. Uber says frequently that its drivers like the flexibility they have as contractors, and prefer it to the structured demands of traditional employment.
The company can only offer drivers so many benefits before stepping into the role of traditional employer. It attempts to get around these restrictions with things like its “power driver plus” program, which promises drivers extra cash if they complete a minimum number of trips in a given week.
At the Washington Post, meanwhile, Jonnelle Marte explains what’s in it for Betterment:
For Betterment, the deal presents a chance to gain thousands of customers, says Joe Ziemer, a spokesman for the financial firm. After launching its investment business in 2010, Betterment serves 80,000 retirement accounts. While there is no telling how many people will sign up, the move will eventually make it easier for hundreds of thousands of Uber drivers across the country to open IRAs, both companies say. Betterment now has more than $5 billion in assets under management.
This new offering may be a boon to Uber drivers, but in the long run, they have a bigger problem to worry about than saving for retirement: namely, being replaced by self-driving cars.