Food-delivery startup DoorDash has been under pressure for much of the year over a pay system in which customers who tip delivery people—known as “dashers”—end up subsidizing their pay. In essence, the more you pay your dasher, the less DoorDash pays them.
The optics of a company valued at nearly $13 billion relying on customer generosity to subsidize its operations finally become untenable this week. On Tuesday evening, DoorDash CEO Tony Xu announced a revamp that, it appears, will end the practice of counting tips toward dasher pay.
“Going forward, we’re changing our model—the new model will ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order,” Xu wrote. “We’ll have specific details in the coming days.”
Pressure had been mounting for months, beginning with extensive media coverage at the beginning of the year (including by Fast Company). DoorDash, responded by conducting surveys and holding roundtables with dashers to air their grievances. Pay “transparency” emerged as a major concern, and DoorDash announced some tweaks. But it stuck with the tipping policy.
Just as things were calming down, a July 21 first-person New York Times article about working for various delivery services, including DoorDash, went viral. While the Times article didn’t break any news about the payment system, it thrust the issue back into the spotlight, prompting a new round of outrage.
Xu had long defended the practice of using customer tips to pay drivers, with DoorDash chipping in only as a way of “making Dashers whole when a customer left no tip,” as he described it on Twitter. “But it’s clear from recent feedback that we didn’t strike the right balance,” he wrote.