Tipping Option in Uber App

13 Apr 2021

Elizabeth Weise, USATODAY

April 17, 2017

New York City could force Uber and other ride-hailing services to add a tipping option to their apps as soon as this fall, potentially resolving a bitter point of contention among drivers and opening the door to nationwide changes.

The New York City Taxi and Limousine Commission on Monday granted a petition by the city’s Independent Drivers Guild to create a rule that would require ride-hailing services to add in-app tipping.

If Uber incorporates tipping into its app for New York City, it’s much more likely to expand the feature to the rest of the U.S. That would be a huge reversal for the company, which has argued since its inception that not allowing in-app tipping was one of the things its riders liked best about it.

“Tipping is a consumer ‘dissatisfier,’ because it forces the customer to decide how much to give the driver as a gratuity, and it is difficult to know what is the right amount,” said Jack Nerad, executive market analyst for Kelley Blue Book.

But drivers, who have periodically sued the company over the lack of benefits or chafed under reduced fares, have lobbied for it. Lyft has used the in-app tipping option as a lure for drivers disgruntled by Uber’s policies.

“New York City’s professional drivers have traditionally depended on gratuities for a substantial portion of their income. Cuts to driver pay across the ride-hail industry has made tipping income more important than ever,” said Independent Drivers Guild founder Jim Conigliaro, Jr.

Uber has about 80% of the ride-hailing market in New York City, according to the Independent Drivers Guild. The rest is divided between Lyft and Juno, both of which offer in-app tipping.

Adding the tipping function could mean an additional $300 million per year in income for New York City Uber drivers, the Guild estimates.

The Independent Drivers Guild is an affiliate of the International Association of Machinists and Aerospace Workers. Uber drivers aren’t unionized, but the Guild said it advocates for 50,000 ride-hail drivers in New York City.

The San Francisco-based company, which has been roiled by charges of sexism and a video of its CEO Travis Kalanick berating a driver, has made no secret of its distaste for the tipping feature. A year ago, following two class-action settlements with drivers, Uber said in a Medium post that it believes it’s better for both drivers and riders to know up front how much they would pay or earn on each trip. Instead, riders reward drivers with star ratings, which improve their standing within the app.

“Riders tell us that one of the things they like most about Uber is that it’s hassle-free.  And that’s how we intend to keep it,” it wrote.

Cash over star ratings

Drivers and their representatives disagree. “Star ratings don’t pay the bills,” said Conigliaro.

The company argued it treated its drivers so well they did fine without tips. But as the ride-hailing company has lowered prices, drivers say their incomes have decreased.

“I found myself having to work longer hours away from my family to make the same money I did when I started,” said Uber driver Luiny Tavares at the New York press conference.

Should tipping come to New York and then to the rest of the nation’s Uber drivers, it could change the equation both for riders and drivers as they chose between Uber and Lyft.

“Uber drivers may be happier if they could accept tips, which might keep them driving with Uber instead of going to Lyft, knowing their earning potential could be higher,” said Michelle Krebs, executive analyst for Autotrader.

For riders, it could mean they end up paying more per trip.

The company’s statement suggested it would not fight the rule.

“Uber is always striving to offer the best earning opportunity for drivers and we are constantly working to improve the driver experience,” said company spokeswoman Alix Anfang.

Uber riders are free to give drivers cash tips but the complaint has been that without it being easy to do, too many riders don’t. In addition, drivers say many riders are confused about whether a tip is already included in the fare or whether they’re allowed to tip at all.

The rule itself has not yet been written. Monday’s news was that the city’s Taxi and Limousine Commission had agreed to create a rule requiring tipping for ride-hailing services that operate within New York City.

The Commission will write the rule by July 1 and then it will be subject to a 90-day public comment period, said Conigliaro.

Uber wouldn’t comment on whether the addition of in-app tipping in New York City would move it to add the function to the app for drivers elsewhere.

However, once it’s available in New York, it’s difficult to imagine how drivers elsewhere could be asked to forgo the extra income. Uber driver Tavares said he expects drivers everywhere to eventually have access to tips.

“It is my hope that drivers in other cities across the country can come together to achieve this critical improvement as we have been able to here,” he said.