Delivery Hero said that freelance riders at its Glovo unit in Spain will be hired as employees, with the move denting its 2025 adjusted core earnings by €100 million ($105.1 million)
Its shares were down 9.4% at 10:10 GMT and were the biggest fallers on Europe's STOXX 600.
Spain fined Glovo €79 million in 2022 for failing to contribute to social security and make other payments from 2018 to 2021 as it did not hire its delivery riders under formal contracts.
In January last year the country's labour ministry fined the delivery service a further €56.7 million for similar reasons, a source told Reuters.
Delivery Hero said in a statement that Glovo management had decided to change its employment model 'to avoid further legal uncertainties leading to an increase of contingencies'. It confirmed its 2024 guidance.
'While this announcement illustrates progress, it doesn’t mark a firm conclusion to the ultimate costs associated with claimed historic breaches, nor does it lower the amount payable (it raises it),' UBS analysts said.
'As such (it) is not the announcement we believe the market was hoping for. We see it as small negative.'
Glovo
Glovo's fleet has about 15,000 delivery people in Spain and most are freelancers, a spokesperson for the company said.
In a post on X platform with a link to Glovo's decision, Spanish labour minister Yolanda Diaz said, "No large company is above a law. Democracy wins. A young person with a cell phone in their hand is not an entrepreneur."
Apart from Glovo, Just Eat and Uber Eats dominate the food delivery market in Spain, having gained market share after Britain's Deliveroo exited the country in late 2021.
Shares in Just Eat Takeaway were up 1.2%.
"For Just Eat... we see this development as a small positive given they are already employing the riders in Spain, bringing the costs base of their peer to par," JPMorgan said in a note.
