DoorDash says its food delivery drivers make more money since the company, under pressure, began giving drivers their tips instead of using them to reduce its costs.
DoorDash said on Tuesday that U.S. drivers now earn 12.5% more than before, citing an analysis by consulting firm Beacon Economics that DoorDash paid for. Overall, earnings excluding car costs increased to $18.54 hourly in October from $17.24 in August, DoorDash said.
“This is not where we stop,” said Max Rettig, DoorDash’s head of policy. “We’re going to continue to analyze our own data … and continue hold ourselves accountable.”
Before the switch, DoorDash paid drivers a flat fee, regardless of how much customers gave in tips. For example, DoorDash may have said a a job would pay $10. But if a customer gave a $9 tip, the company would only pay an $1 out of it own pocket. If a customer’s tip did not reach the $10 minimum, DoorDash paid the difference.
That model, according to DoorDash, was meant to guarantee that drivers earned a minimum amount. But the policy upset customers, who wanted their tips to serve as a bonus for workers rather than subsidizing DoorDash’s operations.
Under pressure, DoorDash CEO Tony Xu relented in July, saying the company “didn’t strike the right balance.” The new policy rolled out a month later.
Under the new policy, to ensure Dashers wouldn’t earn less as a result of customers not tipping, DoorDash increased the amount it chipped in per delivery. The company now pays $2 to $10 per delivery out of its own pocket to cover the minimum payment. It previously paid $1 per delivery and used tips, if given, to meet the minimum.
“DoorDash is paying more out of the revenues we receive,” Rettig said. “But we’re confident that’s a good course for us as a business.”
DoorDash said it’s still working to reduce the number of deliveries that pay drivers little money.
In August, 5% of deliveries earned drivers less than $3 due to the short distance, small amount of time expected to complete the delivery, and the job’s desirability. The company said it reduced that number to 4% by the end of October by increasing pay for single, low-dollar jobs.
With the new policy, DoorDash also started letting customers tip after the delivery is done instead of only letting them do it beforehand. The company said that feature has now been rolled out to all customers, but declined to disclose whether that it has resulted in increased tips.
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