In a significant development for workers’ rights in Colombia, delivery apps operating in the country have reached a preliminary agreement to ensure social security payments for around 120,000 delivery workers. This move aligns with President Gustavo Petro’s commitment to bolster labor rights in Colombia.

According to the agreement, delivery companies like Rappi Inc. will be responsible for covering 60% of their workers’ health and pension contributions. Importantly, these workers will still be classified as independent contractors rather than full-time employees.

Currently, many delivery couriers in Colombia do not receive these essential benefits, leaving them financially vulnerable.

For Rappi, a delivery app backed by SoftBank Group Corp., the financial implications of this agreement could be substantial. Estimates by Americas Markets Intelligence suggest that Rappi could face annual costs of more than 6 billion pesos (approximately $1.4 million) to meet these social security obligations.

This agreement is part of President Petro’s renewed labor reform efforts, which are aimed at enhancing worker rights and expanding the government’s role in healthcare and pension provision.

While an earlier labor reform bill was put on hold earlier this year due to political divisions within the government, the Petro administration recently reintroduced an updated bill to the Colombian congress. This new proposal includes measures to restrict temporary contracts, establish an 8-hour maximum workday, and make it more challenging for employers to terminate workers.

Before becoming law, the bill must be reviewed and approved by labor committees in the senate and the lower house, a process that is expected to generate debate and discussion. Business organizations like ANDI and Fenalco have expressed concerns that stricter labor laws could lead to higher unemployment rates and informality in the labor market.

Rappi, one of Latin America’s most valuable startups, was estimated to be worth $5.36 billion by data provider PitchBook last year. It has received investments from prominent firms like Sequoia Capital, Andreessen Horowitz, and Tiger Global Management.

As the pressure from investors mounts on delivery apps to reduce costs and achieve profitability, analysts like Diego Rodríguez from Americas Markets Intelligence anticipate that the expenses resulting from these new regulations could ultimately be passed on to sellers and consumers.

This development represents a crucial step toward addressing labor rights in the gig economy, as governments and stakeholders grapple with the evolving nature of work in the digital age.