Uber Technologies Inc. said it will grant its U.K. drivers an employment status entitling them to vacation pay and pension contributions, a costly shift in one of its largest overseas markets amid a global debate over the treatment of gig-economy workers.

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The changes may presage legal wrangling, however, because the ride-hailing company says it will guarantee its drivers the U.K.’s minimum wage only after they have accepted a trip—not from the moment they sign into the app and are ready to work, as labor activists have demanded.

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Uber announced the changes, effective Wednesday, after losing its final appeal last month of lower-court decisions that had granted a group of former Uber drivers a type of U.K. employment status that falls between employee and self-employed.

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The company’s move, which reclassifies Uber drivers in the country as “workers” rather than independent contractors, will make the U.K. the first place where Uber is paying directly for its drivers’ vacations and pensions. The company already offers medical insurance in many markets.

Uber’s decision could give momentum to labor activists in a global tug of war over whether and how to grant more employment rights to workers in what is often called the gig economy, where apps distribute individual tasks to a pool of people whom the app makers generally regard as independent contractors.

Read more @The Wall Street Journal