Delivery Companies Differ in Reaction to Tipping Controversy
Americans love to tip — as in we tend to tip more people more money than other cultures: Tip the waiter, tip the hairdresser, tip the taxi driver, tip the doorman… It goes on and on. As a result, tips have become an expected portion of compensation in some of these lines of work: For instance, some waiters need tips to reach minimum wage. As a result, the restaurant industry is driven by tips. But what about emerging industries without a ton of precedent — like online restaurant and grocery delivery? To what extent should tipping be intertwined with drivers’ base pay?
That question received a ton of attention last week after an NBC News report shed light on how a couple of major delivery companies — Doordash and Instacart — used tips when calculating whether an employee needed additional compensation. But interestingly enough, despite the controversy the report seemed to spark, only one of those two companies changed course on the way it pays employees. And frankly, the change may not really be that much better for employees anyway.
On February 6, Instacart Founder and CEO Apoorva Mehta took to Medium to say his company was changing the way it compensated the shoppers who pick and/or deliver customers’ groceries. At its core, the change was to raise the base pay minimum Instacart offers without including tips to between $7 and $10 (or $5 on delivery only orders) and getting rid of the guaranteed minimum that did include tips, which was $10. Is this better for drivers? Well, maybe. It definitely means that tips won’t be used for calculating if Instacart owes anything extra to its workers, but it also means in the rare case where an order doesn’t reach the $10 mark, these employees won’t get any additional compensation.
Meanwhile, Doordash appears to have stuck to its guns for that very reason: It would seem that company would rather offer a higher guarantee that includes tips than offer a base payment that is lower. So, which sounds more appealing: A $7 guarantee plus tips or a $10 guarantee that takes tips into account? Despite all the media hoopla this issue has gotten, the latter example is far from unprecedented. This system is essentially what exists in states that allow for a lower minimum wage to be paid to waiters. If those tips don’t bring a server’s pay up to minimum wage, then the restaurant is required to make up the difference.
In some ways, the real question that keeps being avoided isn’t “Is the way these workers are getting paid fair?” but instead “Do we want the food delivery industry to go down the same path as the restaurant industry where tips are a necessary part of the compensation?”