After Scrutiny, Instacart Will End Its Controversial Tipping Policy
The company’s decision to stop using customer tips to cover a guaranteed pay minimum for delivery workers follows an organized labor campaign and pressure from elected officials.
Instacart will change a controversial tipping policy, the company told BuzzFeed News on Wednesday.
The policy, which attracted the ire of both its delivery workers and customers, meant Instacart used customer tips to subsidize the $10 per delivery minimum payment the company guarantees its workers, BuzzFeed News and other outlets reported earlier this week.
In an email to its delivery workforce that BuzzFeed News reviewed, Instacart CEO Apoorva Mehta apologized for its tipping policy, which it introduced as part of a larger rehaul of its payment algorithm at the end of 2018.
“Based on your feedback, today we’re launching new measures to more fairly and competitively compensate all our shoppers,” Mehta wrote. “Tips should always be separate from Instacart’s contribution to shopper compensation.”
Instacart also said it will compensate workers affected by the previous policy. “For example, if a shopper was paid $6 by Instacart, to compensate for our mistake, he or she will receive an additional $4 from Instacart,” Mehta wrote.
“Customer tips will no longer have any impact on Instacart’s contribution to shopper earnings,” the email continues. “With an average tip of $5, our customers regularly recognize shoppers with tips for the services they provide. We believe that with these changes customers will continue to be able to recognize great service and have full confidence that their tips are going to the shopper who delivered their order, with no impact whatsoever on what the shopper receives from Instacart.”
In addition, Instacart also said it would adjust the minimum pay per delivery to between $7 and $10 for deliveries for which the driver buys and delivers the groceries, and $5 for delivery-only jobs. Previously, Instacart guaranteed $10 per delivery, but sometimes included customer tips in that amount.
DoorDash, a startup that delivers food from local restaurants, has a similar tipping policy to the one that Instacart is canceling; a spokesperson for DoorDash did not immediately respond to a request for comment.
Instacart’s decision follows an labor campaign against the policy organized by the Working Washington nonprofit. On Tuesday, California Rep. Ro Khanna told BuzzFeed News that he, as an Instacart customer, found the policy deceptive.
"Instacart finally admitted they’ve been taking tips. They finally admitted that 80¢ isn’t enough. And workers even won backpay for the tips that were taken," a spokesperson for Working Washington said in a statement. The organization said it would continue to pressure Instacart to be more transparent about how it determines workers' pay.
You can read the email to delivery workers from Instacart's CEO here:
To Our Shopper Community:
Every day, millions of people entrust Instacart to help get the food they need to feed their families and get back valuable time to spend with their loved ones. By delivering to and for our customers, you’ve become household heroes for millions of families across North America. This past week however, it’s become clear, that we’ve fallen short in delivering on our promise to you.
As you know, we’ve made changes to our shopper earnings model over the last year. These changes were designed to increase transparency while also keeping pace with a rapidly-evolving industry. In doing so, we’ve tried, in good faith, to balance those needs, but clearly we haven’t always gotten it right.
As a company, we remain committed to listening and putting our shoppers more at the forefront of our decision making. Based on your feedback, today we’re launching new measures to more fairly and competitively compensate all our shoppers. As part of this, our earnings approach moving forward will adhere to the following:
Tips should always be separate from Instacart’s contribution to shopper compensation
All batches will have a higher guaranteed compensation floor for shoppers, paid for by Instacart
Instacart will retroactively compensate shoppers when tips were included in minimums
Below are details on each new element of shopper earnings, which we will be rolling out in the coming days.
Tips Should Always Be Separate From Instacart’s Contribution to Shopper Compensation - After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time. To help with this, we instituted a $10 floor on earnings, inclusive of tips, for all batches. This meant that when Instacart’s payment and the customer tip at checkout was below $10, Instacart supplemented the difference. While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided. We apologize for taking this approach.
All Batches Will Have a Higher Guaranteed Floor for Shoppers, Paid by Instacart - We’re instituting a higher minimum floor payment from Instacart on all batches. Today our minimum batch payment is $3. Depending on the region, our minimum batch payment will increase to between $7 and $10 for full service batches (where a shopper picks, packs and delivers the order) and $5 for delivery only batches (where a shopper delivers the order after a separate person picks the groceries). These increased batch floors will be consistent for all shoppers within a particular geographic area. In addition to the higher guaranteed floors, Instacart will also pay a quality bonus and peak boosts for orders that qualify. Any tips earned by shoppers will be separate and in addition to Instacart’s contribution.
Instacart Will Retroactively Compensate Shoppers When Tips Were Included in Minimums - Over the coming days, as we transition to the new higher minimum floor payments, we will make you whole on the transactions that have occurred since the launch of this feature. Specifically, we will proactively reach out to all shoppers who were adversely affected by instances in which Instacart’s payment was below the $10 threshold. For example, if a shopper was paid $6 by Instacart, to compensate for our mistake, he or she will receive an additional $4 from Instacart.
In creating these changes to improve, enhance and create clarity for shopper compensation, these new measures will do the following:
1. Better protect shoppers from smaller, outlying batches. We heard loud and clear the frustration when your compensation didn’t match the effort you put forth. As we looked at some of the extreme examples that have been surfaced by you over the last few days, it’s become clear to us that we can and should do better. Instacart shouldn’t be paying a shopper $0.80 for a batch. It doesn’t matter that this only happens 1 out of 100,000 times - it happened to one shopper and that’s one time too many. We believe that these new guaranteed floor minimums will better protect our shoppers going forward.
2. Customer tips will no longer have any impact on Instacart’s contribution to shopper earnings. With an average tip of $5, our customers regularly recognize shoppers with tips for the services they provide. We believe that with these changes customers will continue to be able to recognize great service and have full confidence that their tips are going to the shopper who delivered their order, with no impact whatsoever on what the shopper receives from Instacart. As always, shoppers will receive 100% of their tips, regardless of the batch compensation.
3. These changes will increase Instacart’s overall contribution to our shopper’s earnings and we believe that the change in tip structure will separate Instacart from an industry standard that’s no longer working for our shoppers and our customers.
Finally, I want to thank you for your feedback. It’s our responsibility to change course quickly when we realize we’re on the wrong path and we believe today’s changes are a step in the right direction.
Founder & CEO of Instacart