Lyft is issuing a minimum pay standard nationally for its rideshare drivers, in what it calls a first-of-its-kind effort to make industry payments more equitable.
Lyft will guarantee that drivers will earn 70% or more of rider payments each week, after external fees, starting Tuesday in most major cities and nationally in the spring. If Lyft has taken out more than that 30% rate by the end of the week, it will pay drivers the difference.
“In every one of our cars, we have two customers: a rider and a driver,” Lyft CEO David Risher tells Fast Company. “Riders get a lot of attention, but drivers not so much.”
Lyft’s own research found that, in any given week in 2023, about 15% of its drivers earned less than 70% of what riders paid, after external fees were taken out. (External fees include taxes, airport and venue fees, and commercial auto insurance.) Last year, on average, Lyft drivers earned roughly 88% of rider payments, after external fees.
Drivers will also start seeing a new earnings summary in the Lyft app that details where each cent of the rider fare goes, to help give drivers a sense of how the revenue is shared with the company, and to show what goes toward external fees. Those external fees vary widely based on different states and cities, but Lyft said that 24% of rider fares went toward those costs on average in 2023.
Lyft on Tuesday also released a white paper detailing what drivers make on average after expenses. In the second half of 2023, Lyft said the median U.S. driver (using a personal vehicle) earned $30.68 (including tips and bonuses) gross per hour of engaged time. The company then used AAA data to figure out the marginal expenses drivers were spending relating to their work. Lyft said the median U.S. driver earning $23.46 per engaged hour after expenses, including tips and bonuses.
Betsey Stevenson, a professor of public policy and economics at the University of Michigan and Lyft board member, says the transparency around earnings will help people decide whether or not Lyft is a useful option to make money. “Embracing making them fully informed means that only people for whom it is a useful option will be the ones to drive,” Stevenson says. “No one wants anyone to make a mistake, to think that they’re going to get something that they’re not going to get out of it.”
Companies operating in the gig economy have faced strong backlash over the years for the percentage of fees they take out from customer payments. Oftentimes there is little clarity around what a consumer is paying for a service versus what the driver is earning.
“The area where we said we can make the biggest difference, and I hear about it the most from drivers, is be more transparent about how much we’re taking versus how much riders are paying,” Risher says.
Lyft is also rolling out an in-app button nationally for drivers to appeal deactivations that could come after, say, a rider complains or a lapse in vehicle inspections. The button is currently available in a handful of states. Lyft said that drivers heard back on their deactivations 10 hours faster compared to the old system. The company has also created a specialized team to review drivers’ deactivation appeals and is giving more transparency into the details and status. Risher said that 77% of its drivers are reactivated within 24 hours.
“The real focus is on getting them reactivated as quickly as possible if we can,” Risher says.
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