MADRID (Reuters) -Delivery Hero on Thursday cast doubt over the future of its Spanish subsidiary Glovo, citing potential social security charges and penalties that could threaten its ability to continue operating in Spain.
The country introduced gig-economy worker rights legislation in 2021, mandating food delivery platforms to employ riders under formal contracts. Glovo faced fines for non-compliance between 2022 and 2023, though the company said it had appealed and won some cases.
Delivery Hero transitioned its freelance riders in Spain to full-time employees last year, incurring a 100 million euro hit to earnings and prompting a drop in its share price.
In Thursday’s earnings report, Delivery Hero said Glovo was exposed to additional social security charges and penalties, with rider reclassification risk-related contingencies ranging between 562 million euros ($658 million) and 923 million euros, mostly in Spain.
“If these risks should comprehensively materialise, such payments may not be satisfied within (the unit) operating business activities without additional financial support of Delivery Hero,” it said in its earnings report.
Consequently, “significant uncertainty” exists with respect to the ability of Glovo Spain to keep functioning as a stable company, it said.
($1 = 0.8542 euros)
(Reporting by Emma Pinedo; Editing by Kirsten Donovan)
