Why did Doordash change their pay model?
Over recent months, food delivery company Doordash has been announcing changes to how Dashers get paid. They declared that Doordash delivery drivers would be paid more for longer deliveries and shorter deliveries might have a lower base pay.
The truth is, the Doordash pay model hasn't changed. It's still technically the same pay model they rolled out in September 2019. All they are doing is changing how they implement it.
You could translate that to say that they never really had a pay model to begin with. They never have been transparent about how they calculate pay, and my experience is you can't trust what they do say.
We'll look at the Doordash pay model. In this article we'll discuss:
- What is the Doordash pay model?
- Why do I say there is no Doordash pay model?
- How did Doordash change the way Dashers are paid in 2021?
- How much does the Doordash model pay?
What is the Doordash Pay model?
There are three things that impact how much money you can make delivering for Doordash in the United States or Canada: Base pay, promotions and the customer tips.
Other countries pay differently. Speaking of other countries: I should mention that California pay is different as well. This is because of Proposition 22, which requires a minimum pay of 120% minimum wage per active hour plus pay per mile driven. However, that may change as Prop 22 was recently overturned by a California judge.
The way Doordash says it, the new pay structure was “designed to make earnings fair and transparent for every delivery.” I'm not sure about fair. It's definitely not transparent.
What do they mean by each of those?
Base pay is what Doordash will pay out on every delivery themselves. This is an amount independent of the tip or any incentives.
Incentives and promotions include any offers Doordash may put out to sweeten the pot and encourage people to deliver more.
Customers are allowed to tip through the app when placing an order. They can always tip in cash as well, or request that a tip be added after the delivery.
The pay model basically boils down to Base pay plus incentives plus tip.
We'll look a bit more at each of these
Doordash offers a base pay of between $2 and $10 per delivery. Here's how they describe it.
Base pay is DoorDash’s base contribution for each order. This will range from $2-10+ depending on the estimated time, distance, and desirability of the order. Deliveries that require Dashers to travel a longer distance, that are expected to take more time, and that are less popular with Dashers will have a higher base pay. Base pay will not change based on the customer tip amount.Doordash description of their pay model.
What Doordash is telling us is that they calculate base pay by factoring in how long the delivery is expected to take, how far one has to drive, and how desirable the delivery is to Dashers.
Notice that they never tell us HOW they calculate any of that. There is no transparency in how they decide what the pay is.
I've seen a lot of long distance, time-intensive deliveries offered for minimum pay. It's hard to believe time and distance are real factors. That tells me that desirability is the biggest factor.
What is desirability?
Doordash couriers have the right to accept or reject delivery offers. Usually they will decide based on a factor of how well a delivery offer pays for the time, effort and expense involved.
The customer tip is a huge factor in whether an offer is desirable. If the base pay is only $2 and there is no tip, that delivery offer is going to be rejected frequently. Thus Doordash might increase the base pay due to “desirability.”
Do you see what happened here? Doordash just said that “base pay will not change based on the customer tip amount.” Yet if the tip amount means that an order is not desirable, and base pay goes up based on desirability, didn't they just lie about the tip's impact?
Doordash caught a lot of heat for their old pay model. The official pay model was $1 delivery fee plus tips. One dollar base pay.
However, they would offer a guaranteed minimum per delivery, and if the dollar plus tip didn't meet the minimum, Doordash made up the difference.
While their wording was that base pay was a dollar, in practice base pay was calculated as minimum pay minus the tip amount.
Some used that to say Doordash was stealing tips under the old model. They were not, but the way they used customer's tips to calculate the base was shady enough that it became a PR nightmare.
It got to where Doordash CEO Tony Xu announced they would change things, and they switched to the new model (the current model) in September 2019. I commented back then that with the desirability factor it essentially made the new pay model a differently worded version of the old pay model
Promotions and incentives
Because companies cannot control the schedule of contractors, Doordash has to find other ways to get enough people out to handle the demand when things get really busy.
One way they do that is to offer incentives and promotions. They will pay extra to encourage Doordash drivers to get out there when they need drivers the most, either in inclement weather or during peak hours.
The most common promotion has been their Peak Pay incentive. Doordash will offer a certain amount of money extra per delivery in a certain region during a certain time frame. I've received as much as $12 extra per delivery (during a snowstorm). Even in normal weather, I still frequently see $1 and $2 peak pay promotions.
Another option that Doordash has been using more and more is what they call challenges. In January they offered $200 extra for any Dashers who completed 450 deliveries between January 5 and January 31. That's nearly 17 deliveries per day every day during that period, so there's quite a commitment involved in that one.
I have seen some smaller challenge bonuses pop up, such as 25 deliveries over two days. Generally the challenges have slowed through the summer. However, I would expect that with summer being a slower period anyway.
Do not mistake these incentives and promotions as bonus pay or some way of Doordash doing the right thing and taking care of their independent contractors. It is not that at all. Some think that higher peak pay is hazard pay especially for delivering in bad weather. Doordash doesn't care about that kinda thing and it's not in their nature to make things right with things like that.
Incentive pay is for one thing and one thing only. That one thing is to get enough people out delivering to meet their demand. When Doordash needs contractors out on the street, they offer incentives. If they have enough Doordash couriers to meet the demand, incentives dry up.
When customers place an order, they can tip the driver at that time. In fact, Doordash suggests a recommended tip. The order will have a default tip amount. In other words, if the customer doesn't change anything, the tip is added to the order.
The question here is, how much is Doordash recommending? I looked at two different order amounts. For a $17 total food order, the default tip amount was $4. For a $45 order, they only bumped the recommended tip up to $5.
Doordash claims 100% of the tip goes to the Dasher. In other words, that tip is paid fully to you on top of the base pay and any promotional pay that is offered.
Customers can always tip in cash. In my experience, that's pretty rare. Doordash also says they provide an option for customers to add a tip or increase the tip after a delivery is completed. I have had a couple of customers do this. However, I've tried adding a tip after a delivery as a customer and haven't been able to figure out how to do it. It is possible to call customer service and ask them to add to the tip.
The vast majority of times, the tip that is included when the customer places the order is the tip you will receive. You won't always know what that tip amount is, but we'll talk about that more when we talk about how much Doordash pays.
Why do I say there is no Doordash pay model?
The problem lies in Doordash's own description. Base pay “will range from $2 to $10.”
There is no explanation as to how Doordash calculates their base pay. Doordash will not provide a formula. All they do is give a vague description that it's based on time, distance and desirability.
However, I've seen many long distance deliveries that pay just the minimum. If distance and time are factors, how does Doordash explain that deliveries that go several miles and take an hour merit the exact same base pay as a delivery across the street from the restaurant that gets done in five minutes?
Doordash more or less admitted that they were lying when they said that time and distance were factors. When they announced a change in how they were paying, they said:
We believe every order should be worth your time, but up to this point, you were paid similarly for both long distance orders and shorter trips.Doordash notification about changes in how Dashers earn, dated June 15, 2021
If time and distance are factors, and have been factors since September 2019, why is Doordash paying similarly for long distance orders as they do shorter trips?
Maybe those things never were factors.
What that means ultimately, is that Doordash base pay is arbitrary. The biggest difference between low base pay and something better is the desirability factor. That's another thing they never tell us how they measure.
To this day I can pretty well estimate the base pay for Grubhub and Uber Eats based on time and distance. While both companies have quit making their pay formulas public, there's a pattern. Doordash has no rhyme or reason.
In other words, Doordash pays whatever they think they need to pay to get the order delivered. That's not a pay model.
But didn't Doordash just change the pay model in the summer of 2021?
No. There is no new Doordash pay model.
They did send out notices that said there were “Updates to how you earn.”
However, nothing changed in their description of the pay model. The pay model remains the same: $2 – $10 based on time, distance and desirability.
Part of my answer to this whole “did they change their pay model?” question is: “you can't change a pay model when there is no pay model.”
But didn't Doordash drop their minimum pay?
Well, sort of no.
Doorash's minimum pay was $2. That has been their minimum base pay ever since implementing this model two years ago. They have never changed that. Two dollars remains the minimum. $2.50 is not the minimum. Neither was $3.
Those are practiced minimums, not actual minimums. There's a difference.
But what about Doordash's “Updates to how you earn?”
Doordash has been notifying Dashers that there were updates to how Dashers earn. The changes appear to have been rolled out to different markets, and I'm not sure yet if the changes have been implemented nationwide.
Doordash did say they were changing some things about base pay. Here's a screenshot of the notice I received:
This was not a change in the pay model. This was a change in how they were implementing the pay model.
Because again, when you don't have a pay model, you can't change the pay model.
When Doordash rolled out the current pay model, two dollar base pay was a common thing. By spring of 2020 (when the Pandemic was forcing shut-downs) we saw Doordash settling in on always offering at least $3.00 for a delivery. If a second delivery was added on, base pay on the added delivery was usually $2.
In this announcement, Doordash announced that you may now see a base pay as low as $2.50. In return, they claimed they would start paying more for longer distance deliveries. They gave an example of a seven mile delivery that previously would have paid $3.50 and now would pay $4.75.
While the pay model didn't change, Doordash essentially put this out there to prepare people for the fact that the practiced minimum pay was dropping from $3.00 to $2.50 in the market.
The truth about this announcement: They lied. Again.
Obviously they didn't lie about dropping the base to as low as $2.50. That's happening all over the place.
What Doordash lied about was the extra pay for longer deliveries.
I've charted deliveries by distance since that announcement. I can look at at least ten deliveries that were in the seven to eight mile range. $3.50 was the highest that any of them paid. None were close to the $4.75 they listed in their explanation.
Just today, I was at a point where I was ready to call it a day and go home. I was several miles from home, but I had a delivery offer that was right on my way and would have brought me about a mile from home, so I took it. The delivery was 12.9 miles. Base pay was $3.
The bottom line is, Doordash lied about paying more for longer deliveries. It's all a story made up to make it easier to drop the base pay on minimal orders.
How much does Doordash pay with this pay model?
There is no one answer to that question.
We write more in this blog post about what people earn on Doordash in a little more detail. But the following is a summary.
Payment is per task. That means there is no hourly rate. In the end it depends on which offers you accept and how quickly you can complete them.
I saw one study that showed Dashers were making $1.45 per hour. What they didn't tell you was that the study was only looking at the base pay from Doordash. Tips were not included.
There are drivers who are barely breaking even by the time you figure in the cost of driving. There's no doubt in my mind that some are making only a couple of dollars per hour, and many are well below the federal minimum wage when all is said and done.
I also know of some who are regularly pulling in profit per hour of well over $20/hr. I've been averaging over $25 per hour, after expenses.
There's a lot of variety there.
Measuring what you are paid with profit per hour
The biggest problem with the question about how much Doordash pays is that everyone looks at different things. Some look at what they made on a particular Dash, others will pay attention to the whole day's total. Others try to figure out average earnings as an hourly rate.
I prefer to look at profit per hour. It's the best way of rounding all of those things up. With profit per hour you can look at a delivery and compare it to a day's total, a month's total or a whole year's total. Profit per hour helps you compare to salary information from a W2 job and see how you really are doing.
Why profit per hour instead of just an hourly rate? Here's the thing to remember: This is not a delivery job. Dashers are not Doordash workers. We contracted with Doordash to provide a service as a business. That's what they mean when they call us independent contractors.
When you run a business, you measure your earnings as profit (what's left over after your business expenses).
I really recommend that people understand what the overall cost is to operate their car (usually 30-45 cents per mile, rarely as much as the IRS 56 cents). Figure that into your earnings.
I calculated my car costs around 30¢ per mile. To figure my profit per hour, I do the following:
- Estimate my expenses as miles driven times $0.30.
- Subtract expenses from my total earnings (base plus promotions plus tips) to get profit
- Divide profit by the hours driven to get profit per hour.
Why do Doordash driver earnings vary so much?
There are two answers: The market someone delivers in, and the way one chooses to accept or decline delivery offers.
Some cities just seem to pay better for deliveries than others. Customers in some markets seem to tip better than they do in other markets. There may be fewer drivers per delivery in an area, thus Doordash may offer more incentives. If a market has too many drivers, there will be longer waits between offers.
Sometimes it comes down to the offers that someone is accepting. By my observation, Doordash delivery drivers who accept everything that is offered to them tend to make less. They more often are putting their time into lower paying, longer distance deliveries. Other drivers in the same market may be more selective, only accepting deliveries that make sense for the amount of time and driving.
And that brings us back to the market. In markets with fewer restaurants, there are fewer orders available, and that means drivers can't be as selective. Other markets are crowded with restaurants and thus Dashers can pick and choose a bit more.
The key here is that you are contracting with Doordash as a business. That means you have no obligation to accept every offer. They cannot legally require you to maintain an acceptance rate. It's like any other business, you can turn down business opportunities that are not profitable.
Having said that, I know people who do quite well accepting everything. I know others who struggle. I cannot tell you that one way is always going to be superior to the other.
But that's the beauty of it all. You get to make choices. It's your right to adjust, try new things, and see what works for you.
Final thoughts on Doordash, their pay model, and what you can earn.
This is my philosophy, for what it's worth.
In an ideal world, we could get Doordash to increase the base pay. They would do more to encourage higher tips (Of the three major delivery apps – Grubhub, Doordash and Uber Eats – they seem to be the worst at encouraging tips.
The extra money from a better pay model would be great. However, in the end, it's still up to you to determine how to run your business. The pay model doesn't control you. You make your decisions.
I look at Doordash as a customer. If they offer enough for a delivery, I'll accept the offer. If they don't, someone else will. Because of that, I operate with the thought that the more I take control of things with my own decision making, the less I rely on the pay model, whether it's changed, or whether it's enough.