Cash is king when it comes to ensuring your delivery carrier gets to keep their tips.
Some delivery apps are reportedly using customers’ tip money to pay delivery workers a fixed rate, and pocketing some of the money to maximize their own earnings instead of boosting employee income, consumer advocates say.
DoorDash, one of the most frequently used food delivery apps in the U.S., gives workers a “guaranteed minimum” for each delivery they complete based on an algorithm that takes into account distance traveled, wait time at a restaurant and number of items being delivered. The determined guaranteed amount includes customer’s tips.
If you use DoorDash, it defaults to applying a 15% tip.’
A recent report in The New York Times showed first hand how the company uses consumer’s tip money. Times reporter Andy Newman worked as a DoorDash carrier with a “guaranteed minimum” of $6.85 for his first order delivering to the Brooklyn neighborhood Boerum Hill. The woman reportedly tipped $3 via the app, but Newman still only earned the $6.85.
DoorDash will pay at least $1 out of pocket, plus tips, so workers get the agreed wage for the job, according to a report from PayUp, an advocacy group for gig-economy workers. (Because DoorDash has a $6.85 flat fee, Newman said he earned more on orders from DoorDash than UberEats or Postmates.)
However, there’s no way to know how much DoorDash is shelling out for a job and how much of that money comes from a customer’s tip. If Newman’s customer didn’t leave a tip, DoorDash would pay him $6.85, but because she left $3, it only coughed up $3.85, which saved the company $3.
“Tip in cash,” Sage Wilson, a spokesman for PayUp told MarketWatch. “If you use DoorDash as a consumer it defaults to applying a 15% tip … that 15% tip does not add a penny to the worker’s pay, it’s just a free contribution to DoorDash, which most consumers would not be inclined to make.”
Other courier services have been under fire for how they use workers’ tips.
DoorDash also makes it complicated for users to change the default tip on delivery. “You can do it, you just have to call,” Wilson explained.
Wilson also says money transferring apps like Venmo PYPL, +0.15% could even be a better option than tipping through the DoorDash app.
Last month, DoorDash rolled out changes to its payment system, including a breakdown on how workers (referred to as “Dashers”) are paid.
“We guarantee Dashers will earn a minimum amount, including tips, for completing each delivery. This ‘guaranteed minimum’ — which Dashers see before accepting any delivery — is based on the estimated time and effort required to complete that delivery,” DoorDash spokesman Chris Buscombe told MarketWatch.
Other courier services have been under fire in recent months for how they use workers’ tips. Instacart was reportedly using customer tips to pay out workers earlier this year, with some reporting their earnings dropped by up to 40%.
“The law requires delivery workers employed directly by restaurants to earn at least the minimum wage, but those who deliver for third party companies are often classified as independent contractors,” Andrew Rigie, the executive director for New York City Hospitality Alliance, told MarketWatch.
“Whether delivery workers are appropriately classified as independent contractors has been up for legal debate. So when in doubt, a cash tip and a genuine thank you is always appreciated by delivery workers,” he said.
Here’s how tipping works on other popular food delivery apps:
A spokeswoman for UberEats UBER, -0.92% told MarketWatch couriers get 100% of customer tips. Users can tip their delivery person via the UberEats app. Once the order is complete, they are asked to rate the delivery person and then they’re given the option to add a tip.
“Giving cash directly to your delivery partner is also an option,” the spokeswoman said. Customers can also tip on a past order via the app by clicking “rate order.” Once an order is finished, customers have 30 days to add in a tip from the app and Uber says it doesn’t take service fees on tips.
Grubhub GRUB, -1.11% determines a delivery driver’s pay separately from tips he or she earns, a spokeswoman for the delivery service confirmed to MarketWatch. “A driver’s total order earnings are determined based on time and mileage, in addition to the full tip from the diner,” the spokeswoman said in an email.
The pay calculation takes into account mileage at pickup and dropoff (i.e. $0.44 for pickup and $0.66 for dropoff) plus driving and waiting time (i.e. $3.90) and then drivers keep 100% of the tip (i.e. $4.15) putting an estimated pay calculation for one example of an order at $9.15.
Consumers can tip directly on Grubhub’s site or app. “Grubhub has sent more than $2 billion in tips to drivers, and we’ve been an advocate for tipping for years,” the spokesperson said.
Instacart, a grocery shopping app, previously used customer tips to pay out workers or “shoppers,” with some workers reporting their earnings dropped by up to 40%.
Last February, in a blog post entitled, “Doing Right by Our Customers,” Instacart changed its policy. “Based on your feedback, today we’re launching new measures to more fairly and competitively compensate all our shoppers,” Instacart CEO and founder Apoorva Mehta wrote.
Among the changes: “Tips should always be separate from Instacart’s contribution to shopper compensation” and “Instacart will retroactively compensate shoppers when tips were included in minimums.” Instacart was not immediately available for comment.
Once food delivery is completed on Postmates, customers are asked to leave a tip and can’t place a new order until they do so and tips are processed 24 hours later, according to its website. Drivers keep 100% of the tips earned.
Employee earnings are calculated based on an amount for each completed pick-up, drop-off, a rate for time spent at the pick-up location, a per-mile rate for distance between pick-up and drop-off locations, and bonuses during peak meal delivery hours shown when a driver accepts the delivery.