The new Uber Eats pay model has hit my market finally, and I'd like to talk about what I have seen so far. Bottom line is that no matter how you spin it, it's a reduction in pay. That shouldn't come as a surprise. But that said, I may be more likely to turn on Uber Eats as a result of the changes.
In my weekly newsletter I announced that the friday article and podcast episode would be a wrapup that compares my observations for each of the delivery companies. However with having experimented now with the new Uber Eats pay model, I thought this was a good time to talk about those changes because it's a fresh enough topic now for enough drivers. Here are seven takeaways I've had so far on the new structure.
The Base Pay on the new Uber Eats pay model is a dramatic reduction
One of the beautiful things about the previous pay model was that you could calculate what you should be paid based on the distance and time. In my market it had been a pickup and dropoff fee of $1.63, 65 cents per mile and 7.8 cents per minute (these are the actual paid amounts AFTER the quirky 35% ‘Uber Eats Receives…' is taken out. I could really get on a soapbox about how Uber is charging us a commission for what THEY are paying us, but I won't go there.
Under the new pay model, there is no more transparency. There is no more formula. In their FAQ, they published this:
Rather than publishing base fare rates to explain earnings, we will be showing an upfront guaranteed minimum amount that is inclusive of your total trip earnings before you accept it. We believe this is the easiest way to understand how much you will earn at the time of a request. To view exact base fare payments, refer to Trip Details once a delivery is completed.From the Uber Eats FAQ about their new pay model
Translation: We're going to pay you whatever we want to pay you and it's easier for you to just blindly take whatever it is. The way they state it at the end, it makes it look like there might still be a breakdown when you dive into the fare details.
As you can see, there's no more breakdown, no more transparency. However, based on the length and distance, you can still calculate what it would have paid under the old pay model. The new Uber Eats pay model has been ranging between 50 and 60 percent of what the old model. Overall, it's been on average 57%, meaning it's a 43% pay reduction.
They added a “Trip Supplement”
Uber Eats explains that their new pay model has a lower base pay. As they explain:
Because we are adding an expanding payment called trip supplement which helps make earnings for each trip more reflective of that trip, we have reduced base fares. Surge and Boost promotions will continue to work the same and maybe available when it's busy.Uber EATS FAQ about their new pay model
So, they are reducing base pay, eliminating a formula based structure that pays for time and distance, which are perhaps the most reflective things you could have for a trip, all so they can add an undefined and arbitrary element that is reflective of the trip. Reflective in what way? Who knows?
In their email explaining the changes they say this is an element that's added to make every trip worthwhile. You don't have to reduce fares to make trips worthwhile, you know. If there's an issue that the current fare structure fails to compensate for, all you have to do is make up for it in another way. Such as increasing fares by a percentage in busier times or adding a per trip bonus or…. oh, wait…. aren't they already doing this?
The bottom line is, the trip supplement is an excuse to reduce fares. They add this element and the added element is lower than what the fare reduction is. So far, my total of base fare plus trip supplement is about 90% of what the old fare structure would have been. I've had trips where there was no supplement at all. I've had a 13 cent supplement. Start the party folks! Some supplements make the total higher than it would have been but overall, it's a fare reduction.
Uber Eats is playing the same ‘post new model' game as everyone else in artificially increasing pay to begin with.
The first day that the pay model was rolled out was a Tuesday. The slowest day of the week. In my market, Uber Eats offers boosts usually between 11 and 2 and between 5 and 9. The boosts are offered at times when there is a higher demand. Usually in the busiest times the highest boost you see is around 1.5 (meaning a fare that would have been $5 would now be $7.50).
So, 3 PM Tuesday afternoon, probably THE deadest, lowest demand time for delivery in the whole week, Uber Eats is offering 2.7 boosts.
It makes sense though when you see the pattern that has happened with Grubhub and Doordash. When Grubhub rolled out their new, less transparent pay model, I noted originally that when you calculate the trips based on the old pay formula, Grubhub was initially paying paying more for the deliveries. Within a few weeks, they had gradually lowered the payment amounts. I noticed the same thing with Doordash, that payouts seemed much higher overall under their new pay structure, and that too seems to be dropping.
The idea here seems to be, pay more right when you introduce the new pay, make it look like it's a good thing, and then wean your drivers off that pay increase to the point that you're ending up with the pay reduction. With the higher boosts, Uber Eats is paying out more right now and it's a better time to deliver than ever. In time you can guarantee the boosts will go down as will the trip supplements.
The new Uber Eats pay model is old Doordash revisited.
I swear, they had to have hired a spin doctor away from Doordash when they announced this model. They use language about how the new pay model will make ‘every trip worthwhile.' Where have you heard that before?
The other thing you see is that you are getting a ‘guarantee pay' listed now when an offer comes in. Your pay will never be lower than that amount. If the customer tips, your pay will be higher. I've already had one trip where the actual pay was higher than the guaranteed amount.
This is kind of a psychological game. Every once in awhile you offer a payout that is higher than was offered, and that distracts you from the overall low pay you are getting. Doordash did this with their old pay model with great success. When the customer tip was higher you had an ‘above guarantee' payment, but that distracted you from the fact that the actual payment from Doordash was only a dollar. I think this is a lot of what's going on here.
The information provided on the offer is greatly improved, but the impact is limited.
There is one piece of good news with the new structure. It's kind of like a trade, where Uber said we're going to cut your pay but we're finally going to give you the information you need. And I'll be honest, because of the way I prefer that trade over the old structure.
When the information is actually available, that is.
The new structure introduces additional information on the offer screen.
There are four major improvements. The first is, you get the name of the restaurant now with the offer screen. The second is, you can see on the map where the food is being dropped off. This alone is HUGE – it's something they've been needing to do for a long time. The third is, they show how many minutes you can estimate the drive from the restaurant to the customer will be. This is one thing that goes beyond what Grubhub or Postmates offer, trailing only Doordash. The final thing is a minimum payment amount.
I have rarely delivered Uber Eats in the past year simply because none of this information is available. Because I work with multiple apps and because I make decisions based on how long I think the delivery will take, not knowing where I'm picking up from or dropping off make it nearly impossible to make good decisions. This is a huge improvement.
However, the information is of limited value
I say this for two reasons.
The first issue may be an Android only issue. I don't think that iPhone has the ‘always on top' functionality that Uber utilizes and that creates this issue. How it works on Android is that you give the Uber Driver app permission to have priority appearance. When an offer comes in, the details pop up over whatever you have open. You can accept or decline right then and there. It sounds great in paper, right?
There's a problem. Look at this example:
Ignore the twitter information in the background.
Wait…. actually, don't ignore it. You know why not? Because it's there. In the background. And what isn't there?
The map. The MOST helpful information on which to make a decision is missing.
And I can't pull it up. I can't switch to the app to get the full map. I can't switch to ANY app to get ANY information because this is locked onto the screen until I either accept or decline the order.
In other words, I have to have the Uber app open when the order comes in to see the full details. That's a minority of the time. There's a workaround that once you log in, you can disable the ‘always on top' permission. But you have to do that every. time. you. go. available. You cannot go available without that permission enabled. It almost completely kills the advantage here.
The second issue comes when an order comes in while you are on delivery. Even when you have the Uber app open, if you are on an active delivery it only displays information about the active delivery. The map with dropoff doesn't display at all.
I discovered that Uber was lying about their old pay
When doing the calculations based on the old pay model, I noticed something on the old pay details.
This little snippet came off the screenshot towards the top of the article.
Okay, that's pretty straight forward. Right? Except for one problem: 2.73 miles at 78 cents is $2.13. I went through my history for the whole year and it's the same thing. And no, this is not that the real rate is 78 cents per mile but the payment after they take their cut is 65 cents – the Uber cut is 35% and that doesn't add up. Now I do know that the official rate for my market was $1 per mile, so the 65 cents they were paying was the correct amount, I was not underpaid. But the fact that they display this as the amount I'm being paid is just…. wrong.
Tipping is still horrible.
To be fair, it's not that I would expect the new model to change this. But the reality is that tipping on Uber Eats is still far below everyone else, INCLUDING Postmates. The number of times I get tipped has definitely improved since they implemented the option to choose your tip when ordering, but the percent of what you earn on Uber Eats is dramatically lower than with anyone else.
What do these takeaways mean in the long run?
Personally, even though it is a reduction in delivery fees, I see myself delivering more often for Uber Eats now that this has been implemented. The main reason is that I have more information on which to make a decision. The increase won't be dramatic, simply because of the issues with the ‘always on top' feature that I mentioned above. If they fix that issue, that will improve the amount of time I choose to deliver.
Why did they do this? I think it has to do with the tipping issue.
Here's the deal: Tipping with Uber Eats is terrible under the old pay model and the new one. I find it to be about 20% of what I earn when delivering for them, and more than 50% of what I earn for everyone else (INCLUDING Postmates). What this means is that for a $10 delivery, Uber Eats is paying $8 of that out of their own pocket while all the others are paying $4 or $5. That puts them at a terrible competitive disadvantage.
Uber EATS has been improving tipping lately. They added the option to choose your tip when ordering, and I think that makes people more likely to tip. When I started, you had to dig to figure out how to tip with them, now they are doing more to actually encourage people to tip. Tipping IS improving slowly. It's going to take time to overcome the culture that Uber established themselves back in the days they told people they didn't need to tip because drivers were paid well enough. This was a line they used to compete with taxis in their rideshare, and that is a culture that takes time to overcome.
The thing is, they know now they need to have their customers tip better, because they can't afford to keep paying what they pay out right now for drivers. But they have to have a system to allow them to reduce those payments as tipping improves. So now they introduce a less transparent pay calculation. That formula allows them to pay delivery fees at a level comparable to the other providers. The trip supplement gives them the ability to add to the fare at a level that keeps them competitive in driver pay while tipping is low. However, now they can slowly reduce that supplement as tipping improves. In fact, they can now adjust the base fare calculation at will.
Concluding thoughts on the new Uber Eats pay model
The bottom line is, the new structure is a pay reduction. Right now I'm seeing it as about a 10% overall reduction. They'll spin it to look like an improvement, and they'll boost some pay in other areas temporarily to mask how much of a reduction it really is. Either way, just like everyone else, it's a significant reduction.
And the thing is, it's designed to allow them to make further, steeper but more gradual reductions. I used to think that with Uber's pay structure, that if customer tipping could be more like everyone else, Uber Eats would quickly become the best option for delivery. The reality is, just like everyone else, more tips means less they have to pay themselves.
Does this mean they are less attractive as a delivery option? Here's the thing – Uber Eats is just like everyone else: Everyone else has introduced a new pay model and it's their attempt to have to pay less. Uber is just late to the party, that's all. But does that mean you end up making less? It doesn't have to. The bottom line is, there will continue to be plenty of offers that are profitable. There are plenty of chances to get a delivery that meets your per minute price. The good news is we have more information to help us decide now, but the flip side is, with the reduction you just have to be that much more selective.