DoorDash will change controversial tipping model

DoorDash CEO Tony Xu announced via Twitter that the company will be changing its model for compensating Dashers (a.k.a. DoorDash drivers and other delivery people).

The company faced criticism this year for its payment policies. Under the current system, a Dasher’s payment consists of a $1 base from DoorDash, the customer’s tip and — when the first two items fall below the guaranteed minimum — an additional payment boost from DoorDash.

In other words, although DoorDash insists that Dashers get to keep 100% of their tips, it starts to look like those tips are being used to subsidize payments that would otherwise come from DoorDash. (Instacart has been criticized and sued for similar practices, leading to a CEO apology and policy changes.)

Xu has defended this approach in the past. For example, when the company announced raising a $400 million round shortly after the controversy broke, he said the system was tested “not in a quarter, not in a month, but tested for months” before being implemented in 2017.

However, the issue didn’t go away. Last month, DoorDash tried to address it — not by changing the system, but by offering more transparency.

In his recent tweets, Xu insisted that the company designed the system “to prioritize transparency, consistency of earnings, and to ensure all customers get their food as fast as possible.” However, he acknowledged that DoorDash “didn’t strike the right balance.”

“We thought we were doing the right thing by making Dashers whole when a customer left no tip,” he said. “What we missed was that some customers who did tip would feel like their tip did not matter.”

So Xu said DoorDash will be changing that model. The company isn’t releasing all the details yet, but the key change is that “Dashers’ earnings will increase by the exact amount a customer tips on every order.”