The rapid growth of logistics and e-commerce is fuelling a race to the bottom for workers, with widespread subcontracting driving down pay and conditions.
Over recent years, two seemingly contradictory trends have emerged in last-mile logistics. While the sector has experienced rapid growth and become highly profitable, working conditions have simultaneously deteriorated, leading to significant staff turnover and recruitment difficulties despite increasing demand for workers. These tendencies are, in fact, interconnected: the logistics boom is inextricably linked to intense price competition, driven by the surge in e-commerce and the consequent need for swift, inexpensive delivery to consumers.
Subcontracting As A Cost-Cutting Strategy
A recent report by the European Trade Union Institute (ETUI) reveals that subcontracting is the predominant business model in logistics. This model facilitates cost reduction and profit maximisation by driving down pay and worsening working conditions. Subcontracting exacerbates existing sectoral problems, which stem from the relentless pressure to remain profitable in a fiercely competitive global logistics market. Alongside other forms of third-party employment, such as temporary agency work and self-employment, subcontracting further deteriorates both working conditions and the effectiveness of trade union activities.
One negative consequence of this model is the separation of power and profit from risks and responsibilities. Companies that are part of large logistics and e-commerce groups leverage their strong market position to maintain control over smaller firms, temporary work agencies or individuals, particularly drivers, who are often treated as ‘self-employed’. However, due to the “corporate veil”, clients are not held liable for violations of workers’ rights or other breaches committed by main contractors or subcontractors.
To oversee production processes and evaluate efficiency, leading logistics firms sometimes mandate their contractors and subcontractors to use algorithmic management systems. This practice further centralises monitoring and control throughout the entire supply chain.
According to four-country case studies included in the ETUI report, subcontracting worsens working conditions and increases workplace accidents. In many instances, subcontractors offer lower wages, apply inferior (or no) collective agreements, and demand longer work shifts. Poor working conditions contribute to high staff turnover, which, in turn, makes it increasingly challenging for trade unions to reach, let alone represent, logistics workers.
Subcontracting also intensifies job instability in a sector already characterised by precarious contracts. It enables clients and main contractors to easily withdraw from commercial agreements, leaving subcontracted workers suddenly unemployed. The case studies further highlight the volatility of subcontractors, many of whom operate for only brief periods before being replaced, sometimes by entities created by the same individuals. Some are merely “letterbox companies” – entities that do not engage in genuine economic activities but exist solely to reduce labour costs or facilitate tax optimisation, a practice acknowledged in a recent European Commission report.
Moreover, subcontracting fragments the workforce and weakens trade union activities. Unlike warehouse workers, who are concentrated in one location, delivery staff are dispersed and often “invisible”. As a result, trade unions struggle to reach them, and monitoring their working conditions becomes even more difficult. Subcontracting thus deepens the fragmentation of the working class, compounding the challenges of unionising a workforce already weakened by precarious employment and the extensive use of migrant labour.
Finally, subcontracting severely complicates labour inspections. Labour inspectors face difficulties identifying all companies within subcontracting chains, reconstructing the intricate web of contractual relations, and determining the true employer of each worker. This issue is particularly problematic in last-mile delivery, where vans circulate in urban areas without tachographs. National inspectorates are also hindered by staffing shortages.
The Need For European Regulation
Given the unsustainable nature of the current logistics business model, the report’s authors advocate for European regulation to diminish the advantages companies gain from subcontracting – namely, lower costs and reduced responsibility. Several European and national trade unions, including the European Transport Workers’ Federation (ETF), the European Federation of Food, Agriculture and Tourism Trade Unions (EFFAT), the European Federation of Building and Woodworkers (EFBWW), and the European Trade Union Confederation (ETUC), alongside members of the European Parliament (The Left), have called for stricter limits on both what can be subcontracted and the length of subcontracting chains.
As a general rule, subcontracting must be justified by reasons other than profit maximisation, because – as enshrined in national constitutions and the European Charter of Fundamental Rights – profit alone cannot outweigh workers’ rights.
Silvia Borelli is professor of labour law and head of the international area of the Law Department of the University of Ferrara.