Image Source: DoorDash
Will DoorDash Drivers Go For Its Hourly Pay Option?
DoorDash said yesterday that it is giving its drivers (AKA Dashers) the option of continuing to be paid per delivery or choosing to receive a minimum hourly wage instead.
The delivery service said that its Dashers have always listed the flexibility of the work as their key reason for doing it. It has expanded over the years to give them job options beyond just making restaurant deliveries and the new compensation options – Earn By Time and Earn By Offer – are in keeping with that spirit of flexibility.
Drivers will have the option before taking each order whether to be paid hourly for their time or by the order, where they receive a small fee plus gas money. Dashers receive 100 percent of their tips under each of the payment options.
A New York Times article posits that the new hourly wage option will help DoorDash rebut criticisms that delivery services are not compensating third-party drivers fairly. It may also encourage drivers to take smaller deliveries that they might usually pass on over concerns over pay.
Drivers choosing the hourly pay option have their clocks start when they accept an order and stop when the delivery is made. They are not compensated for the time spent waiting on orders to be ready.
DoorDash’s hourly model is similar to Proposition 22, a November 2020 California ballot measure that sought to protect drivers’ earnings while allowing companies to continue classifying them as independent contractors. Proposition 22 was ruled illegal by a superior court judge in 2021 before being reversed on appeal earlier this year.
Sergio Avedian, a driver and a contributor to The Rideshare Guy blog, told the Times that DoorDash’s hourly compensation “gives the drivers a little bit of a comfort zone” when accepting orders. He has encouraged drivers to decline deliveries when they don’t pay well or are being made to individuals with a history of stingy tipping.
DoorDash also said it was introducing new features to its app to benefit drivers.
Post-checkout tipping enables customers to add and/or increase a tip to drivers up to 30 days after a delivery is made.
Drivers can also use the “Dash Along the Way” feature to receive offers that take them to the zone they’ve designated as their starting point, leading to reduced downtime and higher earnings.
Safety is also important and location sharing within the app will enable Dashers to share their real-time whereabouts with up to five contacts.
Discussion Questions
DISCUSSION QUESTIONS: Do you expect DoorDash’s compensation options to be popular with drivers? Will this model become the norm among delivery services that rely on third-party drivers?
Poll
Loading …BrainTrust
DeAnn Campbell
Head of Retail Insights, AAG Consulting Group
Neil Saunders
Managing Director, GlobalData
I suspect DoorDash’s move is to get ahead of the trends started by California and now NYC.
The NYC law, which requires app-based delivery workers to be paid $17.96 per hour before tips, is the first such minimum wage in the country for an industry that has exploded in popularity. This dramatically changes the economics of delivery to no longer be on the back of the worker. The apps will continue to try to structure the process so they are taking the biggest bite. Therefore, it will be the restaurants or the customer that are making the profit for the app. One wonders if the customer were charged to the real cost of delivery, as they should be, if there would be less demand.
I am not sure DoorDash has solved the problem. Their program is convoluted and strikes me as a “shell game.”
This is a smart move that will give drivers a base income they can plan around, and relieve some of the pressure of worrying about the tip if they hit too many red lights. Another benefit of this strategy is that it can potentially grow the client base for Door Dash by ensuring that even poor tippers can get service when they need it.
I expect that this is driven by necessity rather than any particular desire to be generous on the part of DoorDash. The fact is that the labor market remains tight and retaining and recruiting staff requires more effort. Not all orders compensate equally, so to ensure it can service all demand efficiently DoorDash has had to change the model. On top of all of this, there are ongoing legal shifts in how some gig workers are remunerated. Of course, what this does to profitability remains to be seen. DoorDash lost $1.4 billion last year and lost $162 million in its first quarter. Like most fast-delivery firms the model has not yet proved itself.
This business model only works if the customer pays for delivery. Even Amazon’s Free Shipping is paid for by the customer. The customer just doesn’t see it.
If DoorDash charges customers an additional $1.4 billion, will they have any customers? And, at that, they are only breaking even,
This is a way to show drivers (and those criticizing the program) that DoorDash cares. Some people like the idea of a steady income based on an hourly wage. Others will be more entrepreneurial and like the idea of being paid for performance (or delivery). Regardless, this is DoorDash’s way of showing that they are trying to create the right experience for their drivers.