Last Updated on August 23, 2019 by CCAR Staff
One month ago, DoorDash Chief Executive Officer Tony Xu promised to change the company’s tipping policy following an outcry from customers and food delivery workers. On Thursday, the company released the outline of a new pay model that it says will increase delivery workers’ earnings from the app.
The revised policy, which the company plans to roll out widely next month, includes an increase in base pay for deliveries, which will now range from $2 to $10 or more per trip, and a promise that customers’ tips will be added on top of a “Dasher’s” earnings paid by the company, regardless of the delivery fee or promotions.
“The decision to change our model was difficult,” Xu wrote in a blog post published on Thursday, saying the company’s model was built to consider worker feedback, despite mounting public criticism. “We realized that we couldn’t continue to do right by Dashers if some customers felt we weren’t also doing right by them,” he added.
DoorDash came under fire earlier this year for its policies around customers’ tips, which the company sometimes folded into workers’ base pay. Under the old model, if a customer tipped generously, the company’s pay to a worker could go down, because the customer tip would cover more of a worker’s guaranteed base pay. That policy, which was also used by some other delivery companies, sparked outcry from workers and customers who felt that tips should amount to additional pay for a delivery worker. In February, the grocery delivery app Instacart said it would drop a similar policy following the widespread backlash. At the time, DoorDash stood firm on its pay model.
In the blog post, Xu defended his company’s decision not to change its policies until now. “We thought we were doing the right thing for Dashers by making them whole if a customer left no tip,” he wrote, “but the feedback we’ve received recently made clear that some of our customers who were leaving tips felt like their tips didn’t matter.”
DoorDash, which counts SoftBank Group Corp. as an investor, is valued at $12.6 billion after raising $600 million from investors in May. The San Francisco-based company” which competes with the likes of Grubhub Inc. and Uber Technologies Inc.” announced a deal earlier this month to buy Square Inc.’s food-delivery service, known as Caviar, for $410 million. DoorDash is said to be in talks with Wall Street banks over securing a line of credit ahead of a possible initial public offering.
