Spanish deliver company Glovo to employ riders on a permanent basis

A Glovo delivery rider drives through the city. Glovo, the Spanish subsidiary of the German food delivery service Delivery Hero, is to offer its riders permanent contracts to avoid possible legal uncertainties. Clara Margais/dpa

Glovo, the Spanish subsidiary of the German food delivery service Delivery Hero, is to offer its riders permanent contracts to avoid possible legal uncertainties.

The step, taken in response to accusations from Spain's labour authorities, will cut Glovo's operating profit by millions of euros.

At the group level, Delivery Hero does not intend to change its previously published annual targets. Investors initially acknowledged the news with a slide in the share price on Monday.

Until now Glovo has employed its drivers as freelancers, which has drawn criticism from the Spanish authorities over alleged labour law violations.

Delivery Hero secured a majority stake in Glovo in late 2021.

The MDax-listed parent company, based in Berlin, also announced that Glovo's earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for special items, are now expected to be around €100 million ($105 million) lower in the coming year.

Nevertheless, it should still be possible to achieve an adjusted profit in day-to-day business.