Is Uber's new tipping feature an excuse not to address their controversial independent contractor model?
This week, Uber’s newsletter used its usual controversy-free, warm and conversational voice to deliver a tone-deaf cultural barb: tipping.
Tipping is an American custom that is controversial even in America. It is used to top up the wages of service people who are exempt from minimum wage laws. Or, conversely, it is used as an excuse not to pay service people a living wage. The idea is that you, the consumer, give a certain percentage to your driver, server, maid to top up their wage to keep costs low for their employer and, thus, you.
The problem arises when people take out their frustration on the tipping system by not tipping – hurting the serviceperson but not the system.
In New Zealand on the other hand, we have an expectation our service people will be paid adequately without needing a system to top that up. So we have minimum wage laws and we do not tip. We place the onus on a company to pay their workers fairly, and the laws support that.
The way rideshare companies and other pay-per-service companies get around this is by classifying their workers as independent contractors – not employees, so that they are paid a certain percentage of a fare, rather than an hourly wage or entire value of the fare.
The problem is that Uber takes 25 percent of the fare while drivers pay for vetting, checking, training, testing and warranting that costs over $1500 as well as petrol, vehicle costs, tax and insurance. Since they are not employees, drivers don’t get a guaranteed minimum wage, sick leave or holiday pay. The drivers have to pay for petrol, tax, vehicle costs and obviously, as humans who need to eat and sleep, have limits to how much they can drive.
We reached out to Uber about that and they responded with the results of a recent survey:
“In early 2019, we asked New Zealand driver-partners in a survey administered by YouGov about their perspectives on driving via the Uber app. In this:
- Almost all driver-partners in New Zealand (96%) said flexibility is the key attraction to drive.
- 89% agree they enjoy driving on the Uber app to make money.
- 78% would recommend driving with Uber to friends and family that are interested in making money.
With almost 10,000 partners in New Zealand, we are confident this is an attractive, flexible working opportunity.”
Yet no matter how many drivers say they are happy with the system, the glaring lack of sick days and holiday pay are still a gaping hole in Uber’s would-be perfect system.
The tipping seems to imply an acknowledgement that their drivers aren’t getting quite enough and call for Kiwis to top that up, yet Uber insists that “Partners, riders and eaters have all been asking for us to introduce tipping as an option ever since it first launched in the US in 2017 and we are pleased to answer this demand.”
Yet their announcement email says “choose to give a little gratitude with in-app tipping.” It reiterates that word choice by saying, “tipping is optional.”
But as a way of making up for an inadequate pay system, is that the case? When your Uber driver asks for five stars and hasn’t done a bad job, you give it to them because you know they aren’t paid well. Will it be the same for tipping? And if it is, will other companies jump on the bandwagon and infect New Zealand’s service wages with that American mentality to top up an inadequate minimum wage?
The good news is that there are alternatives. Zoomy is similar rideshare app that is just as convenient. Yet the drivers get 10% more of the fare than Uber drivers. Zoomy also doesn’t ask you to top up their driver’s fares with tips. The app even had the tipping function added when the app was built. They just never switched it on.
New-to-New Zealand rideshare app Ola says drivers always make more on every ride with Ola.
"We take only 18% commission, compared to nearly 28% with Uber. Riders should not have to put their hands in their pockets to cough up more money for drivers. This is just a way around the real problem – that drivers aren’t earning enough with our closest competitor. It’s the rideshare companies who should be paying more. Our lower commission rate means that riders who choose Ola are automatically giving the driver 10% more anyway, and paying no more for their trip.”
And the fares are lower for both of those too.