Food delivery is a staple in most cities, and in every city, the low pay rates for drivers is a growing issue. As food delivery apps start to reckon (or avoid reckoning with) their undercompensated workforces, they also can’t come up with a one-size-fits-all solution. Just as the cost of living changes the calculus in different cities, it turns out the cost of driving also varies dramatically depending on where the drivers are working. For gig workers, the cost of making a delivery in Los Angeles is 14% higher, for instance, than making a similar delivery in Boston.
If you’re shuttling pizzas across a city in your own car, then you also have to pay for gas, insurance, maintenance, and so on. Not every third-party delivery app that relies on gig workers currently reimburses their drivers for expenses such as mileage, though that may change soon. California recently passed a bill known as AB5 that requires food delivery apps such as Grubhub, DoorDash, UberEats, and Postmates to reimburse their drivers for gas and other expenses such as parking and maintenance, because these drivers will now be considered employees instead of independent contractors.
For mileage, those delivery drivers will see the same level of reimbursement: 58 cents per mile traveled, the standard mandated by the IRS. But that’s not necessarily the number companies should use, says Danielle Lackey, chief legal officer at workforce management company Motus, who outlined the numbers in a new report. “It’s important for businesses that do have a large driver base that they plan to reimburse, that they think about how to make sure that they’re customizing those rates to drivers.” (Postmates currently reimburses mileage, and the payout varies based on location; one estimate says Los Angeles drivers get 69 cents per mile.)
That’s why Motus, which helps employers calculate mileage reimbursements, put out this report that takes a look at food delivery trends. One big takeaway: Food delivery, especially through apps, isn’t going away anytime soon, with Motus estimating that by 2022, apps such as UberEats and DoorDash will account for 70% of all delivery orders. What does that mean for drivers? More restaurants may be turning to these apps instead of hiring in-house, and that could affect their pay.
In-house delivery workers usually get reimbursed since they’re being paid as an employee, and restaurants have to make sure the costs they incur in doing their job doesn’t net them less than minimum wage. The Motus report compares the wages, using data from Indeed, of an in-house delivery worker making $13.50 an hour and a third-party delivery driver making $15 an hour. Though the initial pay is higher, when the in-house worker gets reimbursed the average driving cost, they come out on top: $94.50 compared to $76, each for 7 hours worked.
In that example, Motus used an average delivery cost of $29, though that’s not broken down into specifics. Ken Robinson, market research analyst for Motus, says the company calculates those costs every month to provide its customers with accurate reimbursement information, factoring in things such as gas prices, insurance costs, and taxes—all of which can vary by region. Los Angeles delivery drivers see delivery costs 14% above average, while Seattle drivers only experience a 6% above-average expense, and Boston drivers have costs that are just 0.3% above average. Houston was the one city to see below-average delivery costs at a 5% difference.
Motus may have a vested interest here, as they want third-party apps to use their service to calculate such differing reimbursements, but Lackey says whether or not UberEats and Grubhub turn to them, they should still be turning to some sort of calculation that takes all these differences into account, so their reimbursement rates are more accurate. Robinson adds that the differences are important for these delivery drivers to be aware of too. “When people are performing delivery jobs, whether it’s as an employee or an independent contractor, they should really be cognizant of what all the costs are that are going into performing that job,” he says. “There’s a cost that starts to impact how profitable a job is to perform, so it’s important for people to understand that and understand how big of a difference geography can make in some cases.”