Milkrun failed because it was “trying to do the right thing” by employees, union says

Instant delivery startup Milkrun failed because it could not compete against platforms offering riders lower pay and worse conditions, a major union says, intensifying debate over workplace standards in the volatile sector.

Milkrun will lay off its staff and cease trading on Friday, co-founder Dany Milham announced Tuesday, just 16 months after the buzzy startup raised $75 million on the promise of 10-minute grocery deliveries across inner Sydney.

High operating costs contributed to the closure, with the operation reportedly losing $10 per order midway through 2022.

On top of rising wholesale grocery prices, rents for its neighbourhood delivery ‘hubs’, and the cost of expansion into Melbourne, Milkrun also faced a significant wage bill.

Unlike delivery platforms like Uber Eats or DoorDash, Milkrun recruited delivery riders as employees, guaranteeing them minimum pay rates and conditions.

That model was a point of pride for the company.

“We’re not part of the ‘gig economy,'” its website states. “We offer MILKRUN riders full-time employment with all the benefits, like holiday pay and super.”

In an email to employees, Milham said the company bowed out of the market “while staying true to our values, people and culture”.

Transport Workers Union (TWU) national secretary Michael Kaine said Milkrun did right by its riders by engaging them as employees, and failed in the market by holding itself to a higher standard than other players.

“Milkrun was a company trying to do the right thing by its workers, but you can’t do the right thing and stay in business unless there are minimum standards,” he said.

Hundreds of Milkrun employees have been left in the lurch “because of the cannibalistic competition that’s squeezing companies like Milkrun out of existence”, he added.

The TWU has long advocated for new minimum standards in the broader gig economy, arguing that a lack of minimum hourly pay rates means some workers technically earn below the minimum wage.

Gig work that pays per job completed encourages riders to prioritise speed and efficiency over their own welfare, the union claims.

The federal parliament should enact reforms ensuring “fair and sustainable standards” in the gig economy, Kaine added.

“Until then, companies trying to do the right thing will continue to be pushed out of business because lack of regulation means the floor for standards is rock bottom.”

Gig work platforms consider their options

Milkrun is not the only delivery player to earn kudos from the TWU.

In March, the union and delivery platform Menulog jointly signed a charter of gig economy principles.

It includes a call for federal lawmakers to establish minimum standards for “all on-demand delivery couriers who are not engaged as employees, while maintaining the level of flexibility and choice sought by these workers”.

The agreement was signed “without losing sight of employment as providing the greatest security for ensuring fair standards for workers.”

Menulog also agreed to continue “good faith discussions” about how best to offer its riders full employment, following a trial in which the company treated some workers as employees.

“We welcome this agreement, which is aligned with our ambition to ultimately offer couriers the choice of how they work with Menulog with appropriate benefits and protections, regardless of whether they are engaged as contracted couriers or employees,” said Morten Belling, managing director of Menulog ANZ.

However, other players are frostier to the idea of riders as employees.

Uber — which operates restaurant meal and grocery delivery through Uber Eats, and works with Woolworths on its Metro60 rapid delivery service — has long maintained that workers appreciate the flexibility afforded by contact work.

Riders and drivers working across peak hours can earn well in excess of minimum wages, the company claims.

In a 2021 submission to the Senate Select Committee on Job Security, Uber claimed that over 98% of its drivers and riders earned above the minimum wage, after costs, over a two-week period.

Uber signed its own agreement with the TWU in mid-2022, in which it called for an independent body to set minimum standards for platform workers “who are not engaged as employees”.

Deliveroo — the restaurant delivery platform that spectacularly exited the Australian market late last year — also fought in favour of the independent contractor model.

“Deliveroo provides self-employed people with opportunities to complete the delivery of orders of food at times suited to them, their other work or responsibilities, and lifestyle priorities,” the company’s submission said.

“That is, it is flexible work as opposed to being insecure or precarious.”

Government approaches “employee-like” middle ground

While some industry players advocate for minor tweaks, the Albanese government appears amenable to heightened standards across the gig economy.

Labor made a crackdown on ‘insecure work’ a cornerstone of its 2022 election platform, and Minister for Employment and Workplace Relations Tony Burke has met with industry players to thrash out an “employee-like” middle-ground in the sector.

“There are — I’m not pretending there aren’t — people across the board who want more secure jobs than they can currently get,” he said in February.

“Absolutely, that’s true, and we are delivering on that — but we also don’t want to fall into the trap of pretending that everybody who is not an employee wants to be an employee.”

Burke was not immediately available for comment when contacted by SmartCompany on Wednesday morning.