The impact of food delivery apps’ payment model on drivers

Due to their job position as independent contractors, delivery drivers’ pay is determined by an algorithm. This algorithm sometimes allows workers to earn much more money than other minimum-wage workers, but often they earn much less than the minimum wage. Generally, an hourly wage on a delivery app is determined by the subtotal of what drivers are paid for each delivery. Therefore the wage is a combination of the amount of orders that are completed, how far away those orders are, whether a driver does multiple orders in one go, and how quickly they are completed. In addition to being paid by the app for their delivery, drivers are also sometimes tipped by customers. 

While the payment system seems quite straightforward, it often isn’t. Menulog, an Australian delivery app, does not explain their payment model. There have been reports of deliveries that cost the exact same, though they were very different in terms of distance. The response that Menulog gave to these complaints was that they use a confidential algorithm and can’t explain its logic. This confidentiality of payment algorithms seems to be a deliberate tactic to get around minimum wage laws. 

In Berlin, Germany there is a distinction between those workers who get paid hourly rates versus those that are paid per delivery. The app Foodora actually pays its delivery drivers an hourly rate of €9, which is above the €8.84 minimum wage in Germany. Additionally, there are some other ways to earn extra money, such as bonuses for working more than a year. The drivers for Foodora are actually employed by the company, whereas the drivers for Deliveroo are self-employed contractors. Though Deliveroo used to offer part-time contracts in Berlin, workers are now self-employed and earn €5 per delivery. This is different from the food delivery app norm of having a varied pay depending on the type of delivery, though it is also different from the actual employee status that Foodora drivers benefit from. 

Foodora riders in Berlin

The COVID-19 pandemic has seen a great number of people joining the apps as drivers, as financial hardship has become prevalent and more people are searching for jobs they can do socially distanced. Though delivery apps have become more popular during lockdown, as people cannot go out to eat at restaurants anymore, the increase in new drivers has surpassed the increase in customer demand. This has greatly driven down the number of jobs that delivery drivers can do in a shift, decreasing their wages. According to testimonies in a Vice article, Malik Allah Yar, a delivery rider for Uber Eats in Sydney, could earn between $6 and $12 per delivery before the pandemic, which would add up to $35 an hour, safely above the national minimum wage of $19.49 an hour. Now that there are more delivery drivers on the app, he can barely make $15 an hour. 

A survey conducted by the Transport Workers’ Union in Australia in September has shown that most delivery drivers on average were only making around $10 an hour, which is a clear violation of minimum wage laws. This survey has encouraged the government of Victoria in Australia to inquire into the gig economy and perhaps start to regulate this sector.