As an independent contractor, you need to make sure you understand the Postmates pay model. Knowing how they pay is key to determining if they can be a profitable option for you.
The most important thing you need to understand about delivering for Postmates is that you are doing so as an independent contractor. That means you are not an employee, and there is no hourly amount, no minimum wage, and no overtime. You are technically operating a business and your earnings are all about profit and loss, not about wages.
How the Postmates Pay Model Works
Understand that payments from Postmates are primarily on a delivery by delivery basis. As an independent contractor, there is no hourly wage, which means that there is no minimum wage or overtime. You receive payments for individual deliveries that are completed.
As of this writing in August, 2019, Postmates has a base delivery fee that they pay out that weighs four components:
- A pickup fee
- A dropoff fee
- Payment per minute for waiting at the restaurant
- Payment per mile for estimated delivery route between the restaurant and the customer location.
The fees and payment amounts vary by market. Postmates has a listing of payments by market that can be found here.
Postmates will calculate a delivery fee based on the above four factors.
Additional Payments For Postmates Deliveries
My experience is that most deliver fees are in the $3 to $5 range, which often just isn’t enough. However, there are additional factors that can make Postmates more profitable.
Tips with Postmates.
Customers can tip through the app. With Postmates, the tipping is done after the fact, customers go back into the app and leave a tip after the delivery is completed. Postmates will generally hold that tip for at least 24 hours – they call it processing time. Understand that with some exceptions, tips may not show up for at least a day, and sometimes it can be several weeks before the customer goes back into the app and leaves a tip.
My experience is that tips tend to be pretty good with Postmates. Because tips are made after the fact, you have a greater opportunity to positively (or negatively) influence the tip amount. Your level of customer service can directly impact the amount of money you receive in Postmates tips.
Bonuses and Incentives with Postmates
Postmates will also offer some bonuses and incentives especially during peak times. Because you are independent contractors, they cannot require you to work at certain times. As a result, they will offer extra money from time to time to encourage couriers to go out and deliver.
One of the most common incentives for Postmates is to offer a guaranteed amount if a certain number of deliveries are completed in a time frame. They often offer such an incentive for new drivers. For example, as I write this, new drivers in my market are being offered a guarantee of $425 in base pay and bonuses if they complete 55 deliveries in fourteen days. That averages $7.72 per delivery. Sometimes they’ll offer guarantees for smaller time frames, such as $60 for 8 deliveries in a four hour period.
Understand that the guarantees are NOT a bonus on top of the delivery. If you complete the required number of deliveries, they will add up the fees you earned, and if you did not meet the guaranteed amount, they will pay you the difference. In the example of 8 deliveries for $60, if your total delivery fees and bonuses added up to $40, Postmates would pay the difference of $20. Your tips earned during those deliveries are added to the amount as they come in. This is a positive with Postmates.
There will be times also when Postmates will offer Blitz or individual delivery bonuses. Sometimes they’ll offer an extra amount for particular restaurants that go on top of the delivery fee. You’ll usually see with the offer when that extra bonus is added.
Is the Postmates Pay Model a Good One?
I think the answer to that depends on some variables. You hear a lot of people who will complain about how poor the pay is with Postmates, however personally my profit per hour on Postmates deliveries tends to be higher than most of the others. Having said that, I earn less with Postmates overall because they aren’t quite as busy in my market as some of the others, which means I have to mix it up more with other delivery providers.
Some of it depends on how you measure your pay. Sometimes the pay itself for a delivery can be lower, but if you can complete the delivery quickly, the effective hourly rate and profit per hour are higher. I am selective on orders that I deliver and tend to avoid orders that are further away.
Tips are probably the biggest wildcard. Comparatively, I find the delivery fees with Postmates to be competitive with other providers. When tips are good, the pay is better. I get tipped about 80% of the time, and tips tend to be based on purchase amount. In some markets people may not tip as well. Personally, I kind of enjoy the challenge of upping my game in customer service to receive better tips.
In the end, it depends on you, your market, and your preferences
In my market, I don’t think I could do well if all I did was Postmates. However, as an option that I can use mixed in with other providers, I find them to be very profitable. In some markets where Postmates has a higher market share or a lower ratio of drivers per delivery, they can be a stronger option for being a primary source of revenue. You may not like the uncertainty of not knowing your total payment until the tip is received, sometimes days later. Whether the Postmates pay model works for you depends a lot on you and your approach.