- Lyft says it will start guaranteeing drivers earn 70% of their riders’ payments each week.
- The company also said it would provide drivers more insight into how their pay is calculated.
- Many ride-hailing drivers have complained about declining pay and a lack of transparency.
Some drivers who have struggled to make ends meet driving for Lyft may soon receive some relief.
Lyft announced Tuesday it will guarantee weekly earnings for drivers at 70% or more of what riders paid, after accounting for external fees such as local taxes and government-mandated extra insurance. The decision was intended to attract more drivers to its platform and increase transparency about how drivers are paid, Lyft said.
Lyft noted that last year, about 15% of drivers nationwide earned on average less than 70% of what riders paid after accounting for external fees. About two-thirds of drivers said they were paid less than 70% of what passengers paid at least once. Lyft reported that drivers, on average, took home 88% of rider payments after external fees.
The new commitment guarantees drivers will be paid the difference if they earn less than 70% of rider payments.
In recent months, several Uber and Lyft drivers have told BI that ride-hailing has become less profitable than it used to be. Many have blamed changes to company algorithms they say have resulted in them receiving a smaller slice of riders’ payments — and called for greater transparency about how their pay is calculated. Some drivers with disabilities who rely on gig driving said they have lost their homes or struggled to put food on the table, reporting declining earnings and growing competition.
In part, Lyft’s earnings guarantee is a response to drivers’ concerns.
“We take driving as seriously as drivers do. That’s why we spend so much time listening to drivers and getting behind the wheel ourselves,” said David Risher, Lyft CEO, in a statement. “We’ve heard lots of feedback around consistent themes — earnings, deactivations, and safety — and we’re taking action to address them.”
Lyft also noted that drivers can now see the breakdown of how each rider’s payments are split between drivers, Lyft, and external fees. Drivers will also see “where every cent of the rider fare goes” on a new earnings summary in the Lyft app.
However, some ride-hailing drivers are skeptical about how much Lyft’s policy changes will benefit drivers. Sergio Avedian, an Uber driver who is a senior contributor to the gig-driver-advocacy blog and YouTube channel The Rideshare Guy, told BI that up to a quarter of rider payments could continue to go to external fees — so drivers may only be guaranteed 70% of a reduced figure.
Avedian acknowledged that Lyft’s change would benefit the 15% of drivers who earned less than 70% of rider payments after external fees. But he said he’s not confident that the typical driver, who Lyft said is earning roughly 88% of rider payments after external fees, will continue to earn this share of the ride in the future.
“That 88% hold rate could be lowered slowly to 70%,” Avedian said.
Drivers have complained of declining pay, lack of minimum earnings
In 2022, Uber and Lyft began rolling out “upfront fares” programs across select US cities that provided drivers with more information about their trips before they accept them — including how much they pay, the estimated time and distance, and the destination. However, several drivers told BI that they were earning less per mile driven than they had before the change.
“Upfront pricing has given me rides that wouldn’t even cover my gas, and many days I’m out working, I won’t even make our states’ minimum wage,” said a Cleveland Uber driver who spoke on condition of anonymity.
In December, an Uber spokesperson declined to address whether upfront fares could be hurting drivers’ earnings. They pointed to the company’s November earnings call, where the company said drivers’ earnings levels are “high at about $33 per utilized hour across the US.” Lyft did not respond to BI’s request for comment at the time.
In response to drivers’ concerns, some cities and states have passed legislation to guarantee minimum pay for ride-hailing drivers.
In February 2019, New York City established the nation’s first minimum pay rate for ride-hailing drivers. Seattle, California, and New York State have enacted their own measures, and proposals are under consideration in Minneapolis, Chicago, and Massachusetts.
In its announcement, Lyft said it hopes to be more transparent about how much drivers tend to earn, which could better prepare people deciding whether to drive for Lyft and how many hours to devote. Lyft noted in a separate white paper that in the second half of 2023, the median US driver who used a personal vehicle earned $30.68 gross per hour of engaged time, meaning when driving to a rider and dropping them off. This value includes tips and bonuses, and Lyft said it has grown 18% since the second half of 2019.
Lyft calculated the total marginal cost per mile at $0.31, accounting for fuel costs, maintenance and repair, marginal depreciation, and cleaning. As calculated by Lyft, the median marginal cost per hour comes out to $7.02, bringing earnings down to $23.46 per engaged hour after expenses, factoring in tips and bonuses. Still, 94% of Lyft drivers only drive less than 20 hours a week and use driving to supplement other income.
In an interview released last October with Kara Swisher, Uber CEO Dara Khosrowshahi said the company’s take rate — the amount of passenger fares the company keeps — was about 15%, exclusive of commercial insurance costs. The company does not have a guaranteed earnings policy similar to the one Lyft is rolling out.
Improving driving conditions
Lyft’s announcement also included additional information about scheduled rides, which include extra earnings to cover wait times in most major US cities, as well as clearer guidance on queued rides and airport rides, and its Elite tier, where drivers get 10% cash back on gas and status protection. Elite, Platinum, and Gold drivers can receive 24/7 phone support, and all drivers can get $20 for returning lost items from riders. Drivers can also more easily appeal deactivations in the Lyft app.
In some cities, drivers who complete 50 rides in an EV weekly will earn an extra $100 for a few months. This will be coupled with new features for EV drivers allowing them to opt-in to only get rides in their battery range.
Many investors say ride-hailing companies will continue to see robust demand while more and more drivers look to gig driving as a form of primary or supplemental income.
In November 2023, Lyft agreed to pay $38 million to settle claims that it improperly collected some fees and taxes from New York drivers — Uber agreed to pay $290 million.
Are you a gig worker willing to share your story about pay, schedule, and tipping? Are you a Lyft driver willing to share your story about pay and how Lyft’s new policy has impacted you? If so, reach out to these reporters at [email protected] and [email protected].