Grocery Delivery Company Instacart Promises to Pay Drivers a Flat Fee After Criticism

Tip Jar

Grocery delivery company Instacart is keeping its $10 minimum per order policy for drivers after an intense wave of criticism following the revelation that the company was lowering pay for drivers based on tips received from customers. Competitors including DoorDash and Amazon Flex are not yet following suit.

Companies like Instacart, DoorDash, and Amazon Flex offer a way for customers to connect with “personal shoppers,” or delivery drivers. After a customer places an order, a personal shopper goes to the selected store and shops for the order. They then deliver the order to the customer.

In October 2018, Instacart announced that all personal shoppers would receive $10 for every order that they completed. This may sound good at first glance, but it effectively meant that personal shoppers would be earning less. Under the new policy, a customer’s tip would count towards the $10 minimum, lowering the amount that Instacart would have to pay each driver.

Instacart reversed this policy last Wednesday. Now, drivers will get paid a flat rate per order by Instacart regardless of the size of the customer’s tip. Despite this good news, DoorDash and Amazon Flex have not changed their mind. Tips made on those services continue to impact how much drivers make directly from the company.

Sylvia Allegretto, an economist at UC Berkeley, spoke to Forbes magazine about this recent trend. “Tips are not always tips. Tips are not always gratuities,” Allegretto said. “A lot of tips are actually a wage subsidy to the company and not to the worker.”

This new form of payment is called a tipped wage. By letting customer tips count towards an employee’s hourly wage, companies are getting away with paying employees less.

The concept is called subminimum wage or a tipped wage: Under federal government regulations, restaurants or other businesses can pay workers who receive tips a minimum of $2.13 per hour instead of the federal minimum wage of $7.25. The idea is to make up that difference (and hopefully exceed it) with tips. However, if a worker’s tips don’t reach the minimum of $7.25, then the employer is forced to make up the difference.

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