I wrote previously about the six things I love about delivering for Uber Eats, Grubhub, Doordash and Postmates, but I have to be fair and say there are at least as many reasons you may not want to do that. I came up with seven, and might be missing a few.
When you work for any of these companies, you do so as an independent contractor. That has some wonderful advantages. However, if you aren’t aware of what that means, it can also have some huge disadvantages. The independence is the key reason I’m doing this right now, but if you’re looking at this like a job it could really disappoint you.
The bottom line is, you are not an employee. You are on your own. Technically you are running a business and that involved all the risks. Make sure, be absolutely sure, you know what you are getting into before you pull the trigger on any of these platforms.
1. There are no guarantees.
When you start a business, there is no guarantee that you will get customers. There is no wage guarantee. You have no promise of getting anything.
Here’s the reality: No one owes you anything.
None of these delivery companies owe you the obligation of good deliveries or any deliveries at all. There is no promise.
And that means there’s no minimum wage. No overtime. No nothing.
Some companies might offer some form of minimum guarantee, but there are strings attached. In my experience, those strings would cost me more than what any guarantee would offer.
You can go out there and spend all day and make nothing, and no one will make it up to you. Just like with any business, you’re rolling the dice a little.
2. You will wear your car out.
If you drive for delivery, the miles you put on your car will catch up. It costs more than just gas to use your car. For most of us, it doesn’t cost as much as the 57.5 cents per mile we can claim (2020), but the actual cost is closer to that than you might realize. The newer or the more valuable your car, the more expensive to operate.
What that means ultimately is, you are making less than you think you are. Often a LOT less.
Put it this way: Your car is a credit card on wheels. Every mile you drive means that certain maintenance things will happen that much sooner. From oil changes to timing belt changes to new tires. Every mile you drive means you will get less money for that car when the time comes to sell it or trade it in. In fact, loss of value in your car because of the miles can often be a greater expense than your fuel.
3. You are probably uninsured when delivering.
Most personal insurance policies have an exclusion written in that specifically states that they will not cover any claim that results from using your car to transport goods or passengers for hire. In fact, if they find out you are so much as logged in and available for delivery on any of these delivery platforms when the accident happens, they will deny the claim.
That means you are uninsured when you are delivering.
Honestly, I don’t understand why these delivery companies aren’t warning their drivers about this. Maybe it’s because if people knew this going in, they might be less likely to sign on as a delivery contractor.
Only one delivery company that I know of, Uber Eats, provides actual insurance coverage for you while you are delivering. Some might have some liability coverage but won’t cover your own vehicle (or your injuries). Some offer nothing at all.
What that means is, if you are going to do this, you need to make sure you are covered. Usually that means either getting an addition to your policy if available, and if not available getting commercial insurance.* You are probably looking at increased insurance costs if you are going to do delivery, especially for anyone other than Uber Eats.
4. You are on your own for taxes
No one is withholding taxes for you. Grubhub, Doordash, Uber Eats, Postmates and any other gig company that you contract with will send you payment for your services. This is not the same thing as a paycheck. There is no money held out for you when they do this.
But the thing is, you still have to pay the taxes. That means you have to set the money aside yourself. A lot of independent contractors get in big trouble here. They either don’t realize that they have to save the money, or they neglect to, and can often end up paying in thousands of dollars when they are used to getting a refund at tax time.
The part that people really don’t realize is the self employment tax. It’s basically our version of FICA/Medicare/Social Security. We pay double the percentage that an employee pays. When you are employed, your employer pays half of those taxes. When you are self employed, you pay the employee half AND the employer half. That adds up to over 15%
Put it this way: If you earn $40,000, you pay $6,000 in self employment tax alone. Standard deductions or personal exemptions don’t count against that, you pay tax on every dollar you earn. And we haven’t touched on the income tax part of it.
There is good news though. You don’t pay tax on every dollar you get. You pay it on every dollar of profit. It’s on what’s left over after your expenses. But that means you have to treat this like a business and keep track of your expenses – especially your miles. You can get more information on how taxes work and what you can do with our online tax guide.
5. You get no benefits
There is no vacation pay. You don’t get any sick days or paid time off. A self employed person gets no unemployment insurance or workers compensation. There is no company provided health insurance or 401K plan.
You CAN have benefits, but you have to give them to yourself. After all, you are your own employer. It’s up to you.
The COVID-19 Coronavirus pandemic has exposed what a major issue this can be. The impact has been bigger on rideshare drivers, who have seen business drop dramatically. Fortunately, delivery business has been pretty strong to date. However, if you choose to stay home for safety concerns, you’re stuck. You aren’t making the money that you rely on and there is no safety net. While the stimulus package that was passed is supposed to make gig workers eligible, this is a one time thing. Even still, the New York times reported that guidelines that were released may disqualify a lot of self employed people.
The bottom line: You don’t have the extras and you don’t have the safety net that a lot of employees have. If you rely heavily on this income, you need to create your own, and the cost of creating that means you have to earn more money to have an equivalent level of earning as a traditional job.
6. These delivery companies won’t have your back
I say this often – these gig companies are scum. Yes, I appreciate the opportunities that go with them, but the manner in which they do things is too often exploitative.
There’s a large movement to force gig companies to use employees. I don’t want that to happen, I don’t want to be an employee. However, the way these companies exploit the independent contractor status, I understand why it’s happening.
The bottom line is, they want to have their cake and eat it too. They want to skip out on the expenses and obligations of having employees by designating us as contractors, but they will still try to control you and bully you into thinking like an employee. If you understood your freedom and your rights as a contractor, you would know your freedoms. That freedom is not in their best interest. That’s why I believe they purposefully blur the line, and don’t fully explain exactly what it means to be an independent contractor.
I see it in the promises and the spin. When they change up the pay model in a way that slashes your payments, they’ll state “we’re improving the way you are paid.” Many companies promised they would pay drivers who had to stay home due to the COVID-19 pandemic, but many drivers are reporting denials of claims even when the documentation they provide is everything the companies ask for.
The bottom line is, you don’t matter to these companies. They don’t want you as an employee but want you to act like an employee. You are an easily replaceable tool for them.
7. The whole opportunity could disappear
I approach this as a day by day opportunity. The whole thing is based on the independent contractor model. Despite the downfalls that I list, I prefer being an independent contractor. However, due in part to the exploitation of these companies, that independent contractor model is in danger.
California passed AB5 into law last year. It was legislation that was designed to better define when a company could and could not use independent contractors. It’s going to be hard for gig companies to get around the definition, and it seems pretty apparent to me that much of this was aimed specifically at those gig companies. New York’s highest court recently ruled that Postmates couriers are considered employees, and who knows that the repurcussions of that ruling will be?
I’m also not sure these companies can survive on the current business model. It’s not profitable and it’s not efficient. Watching the customer and support debacles so far during the pandemic makes me wonder if the lack of support won’t result in long term damage for these companies.
The bottom line is, there is a potential that this whole business opportunity could disappear within a matter of months or years. If you go into this, you need to have a backup plan because of that.
Does this mean you shouldn’t do delivery?
No. Not at all. I know all these things and yet I still deliver. But that’s the thing about being the boss (which you are when you run your own company) – it’s up to you to counter these things or work around them.
These issues are all very real. But they are not deal breakers. I think you can actually embrace a lot of these, and take steps to protect yourself.
But here’s the other reality. Sometimes a business model doesn’t work where you are. I see 7-Eleven franchises popping up everywhere around here lately and some people are making good money with it. I’m also seeing some shutting down. They’re not making it. That’s going to be a reality in delivery – some will do great and others, not so much.
My purpose here isn’t to talk you out of delivering. Neither is it to talk you into delivering. My purpose is to help you understand the pros and cons. To make sure you know ahead of time what you are walking into. I think you need to know these things because when you embrace the reality of what you are doing, and take control of it for yourself, you have a better chance of thriving within that environment.
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