Deliveroo to pay drivers compensation as it collapses, pulls out of Australia

Deliveroo Australia’s 150 employees and 14,000 drivers have been suddenly left without work after the company announced it had entered voluntary administration and was no longer taking orders.

In an email sent to Australian customers on Wednesday afternoon, the UK-headquartered company said it had decided to pull out of Australia.

Deliveroo’s Australian business has fallen into administration.Credit: AP

“Deliveroo Australia has ceased operations, meaning you can no longer place orders on Deliveroo in Australia,” the email said.

“Deliveroo, like all other companies, is now doing business in challenging economic conditions, which requires us to take difficult decisions.”

Drivers are not considered employees of Deliveroo and are technically contractors, meaning they do not get employee entitlements.

Entitlements to staff directly employed by Deliveroo Australia will receive higher priority than drivers or contractors, who are considered “unsecured creditors” in the administration process.

Deliveroo Australia staff will receive an initial compensation payment within the first eight days of liquidation, with the second to be paid after the second creditors’ meeting.

A spokesperson for Deliveroo Australia said any driver who had completed a delivery in the past three months was eligible for four weeks of compensation pay. The compensation will be calculated according to the driver’s average weekly earnings across the past 12 months.

Deliveroo admitted it had been unable to compete with other players in the Australian food-delivery market, such as Uber Eats, Menulog and Doordash, and the company’s total global earnings had taken a hit from keeping the Australian business operating.

The London Stock Exchange-listed company entered the Australian market in 2015, but failed to retain market share against its competitors.

The $3.1 billion company said in a media statement it had decided it would not be able to achieve the “sustainable and profitable scale in Australia without considerable financial investment”, and the returns would not outweigh the investment.

The business will permanently cease trading and has appointed KordaMentha’s Michael Korda, Andrew Knight and Craig Shepard as voluntary administrators. “Administrators had no alternative but to cease operations immediately in the absence of financial support,” Michael Korda said in a statement.

The Transport Workers Union, a fierce advocate for gig economy workers, is attempting to call a meeting with KordaMentha to discuss workers’ entitlements and data protection.

‘Transport workers were hit first and hardest by the gig tsunami and are now being left high and dry by Deliveroo at the first indication that it can’t rely on exploitation to make profits’

TWU national secretary Michael Kaine

“This will be a shock to the thousands of food-delivery riders who rely on Deliveroo for income,” said TWU national secretary Michael Kaine.

“These are workers that have been ripped off minimum wage and other rights, and put under deadly pressure to prioritise speed over safety when delivering food.

“Transport workers were hit first and hardest by the gig tsunami and are now being left high and dry by Deliveroo at the first indication that it can’t rely on exploitation to make profits.”

The union has previously criticised Deliveroo for forcing its food-delivery drivers to work for below-minimum pay and denying them superannuation.

Deliveroo chief operating officer Eric French said the decision to pull out of Australia was “not one we have taken lightly”, and thanked employees, customers, drivers and restaurant partners.

“Our focus is now on making sure our employees, riders and partners are supported throughout this process.”

“Certain restaurant partners” might also be eligible for compensation payments as the company worked on putting together compensation packages to creditors, the company said.

KordaMentha will hold a meeting for Deliveroo Australia’s creditors next Monday to provide them with an update. A second meeting will be held a month later, where creditors will vote on the Deed of Company Arrangement put forward by Deliveroo.

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