Detailed Analysis of Instacart Pay Cut From Tips to Service Fees
In my last post, I highlighted how many shoppers would be getting a pay cut due to Instacart changing Tips to Service Fees. Customers can choose to pay an optional service fee and it will go into a general pool where Instacart can pay whoever they like.
Instacart wrote an updated post stating that 100% of the service fees will still be given to Full Service Shoppers and In-Store Shoppers. However, take a look at the new pay scale:
As you can see from the new pay scale, it doesn’t mention anything about the service fee. This is how I understand how the payments on Instacart work:
- Instacart delivery fee + Tip ==> Full Service Shopper (base + item commission + tips) + In-Store Shopper Wages. Instacart matches a portion of the tips and gives a percentage to In-Store Shoppers in some markets. This comes directly from Instacart since they can’t legally split the tip. FSS gets the full tip.
- Instacart delivery fee + service fee ==> Full Service Shopper Fee (see above) + In-Store Shopper Wages + In-Store Shopper % of service fee + Bonus (for top 25% of FSS).
As you can see, it is not clear exactly where the service fee is going. Part of it is going to In-Store Shoppers. It is to help them pay the In-Store Shoppers, which was coming from Instacart. The only thing in the equation that is changing now is that FSS shoppers are not getting tips but a higher base pay. All else being equal, where is the service fee going to?
Before I argue where it is going, I will show that the new pay scale is a pay cut for every shopper I have talked to.
Below is the data from my own deliveries in the past month:
Feel free to copy it and use excel and figure it out.
Explanations of Calculations
So we were given the new pay scale (see above). What I did was calculate what my new pay would be if I were to get the same batch under the new pay scale. For reference, on the old scale, we were given 25 cents per item (not units, so 12 apples is one item, 12 units). At Costco, we are given 50 cents an item typically because the store is larger and items are usually so much bigger. Base fee for shopping is $6, base for Costco is 8 and delivery only batches are $2.
Doing this makes it very clear how much I would earn under the new pay scale. If you tally it up, I have a net pay cut of 17%. On some days, it would be closer to 34% while some days I would earn more on the new pay scale by about 10%. However, my net pay decrease would be about 17%.
- Pay on old scale: $1043 ($19.32 per delivery)
- Pay on new scale: $863 (17% drop, $15.98 per delivery)
- Percentage of earnings as tips: 53%
- Percentage of customers who tip: 50/55 (90%) (Instacart claims 80% on average)
Day to Day Breakdown:
So here are my daily breakdowns and calculates the difference between the old pay scale and new pay scale:
You can see that there were two days I would do better with the new pay model, but I would also have much worst days also. On 9-7-16, I would actually earn 20% more on the new pay scale, which I will analyze further below. This is mostly due to the lack of tips but you can see that I have many more good days than bad.
Here is another example from another shopper:
- Sunday August 21st – 38% less – Loss of $100
- Saturday August 20th – 32% less – Loss of $50
- Friday August 19th – 33% less – Loss of $60
- Thursday August 18th – 28% less – Loss of $80
- Wednesday August 17th – 22% less – Loss of $50
- Tuesday August 16 – 27% less – Loss of $90
- Monday August 15th – 46% less – Loss of $120
So in this case, in just one week alone, the shopper lost about 31% of earnings in a week, and if you add that all up, it equates to $550. In just one week. The shopper was tipped 90% of the time and the shopper had over 60% of the earnings in tips, quite a bit higher than my own numbers.
Analysis of Batch Payout
Each group of orders is called a batch. There are specific elements in some different batches that show different things under the old and new pay scale:
Delivery Only Batches (DO)
Here is a normal delivery only batch. You can see that they left a decent tip for both deliveries in this batch. On the current system I earned $27. In the new system, I would earn $17. It is a $10 drop, or about 30%. Of course its a gamble since if none of those people tip, I would’ve only earned $4 instead of $17. However, most shoppers were willing to take that gamble because we get tipped so often. Even in my above statistics, you can see I got tipped 50/55 times, which is 90%. Instacart claims a 80% percentage tips.
On the new system, we would be paid less for Costco items now, from 50 cents an item to 45 cents an item.
You can see that the tips were fairly good on this order. The new pay scale is not that much worst because the there is a good bump for Costco ($8 vs $15) and that makes up for much of the tips. The item commission is slightly lower of course. Now this principle doesn’t hold up for very large orders or orders with many more units than items since its all about time and not about the tip. So the more units you have, the less your profitability is.
My Worst Day
Lets take a look at my worst day as an Instacart Shopper:
You can see that I was only tipped 50% of the time and they were larger orders (20 items from Costco, 12 items from a supermarket). You can clearly see that the new pay scale is much better on this one day only. However, almost everyone I talked to didn’t have a day like this at all. However, if you have some bad luck one day and get a lot of single order batches that also do not it well, the new pay scale is better.
Back to Service Fees
So how can you explain if surplus service fees? From the above calculations, we can surmise that part of the service fee is being used to pay the In-Store shoppers. But what if some people tip more? Where does the extra money go? They said they would be varying the base rates from week to week, which is very democratic of them. But there is no transparency into that at all.
Also, the service fees don’t get associated with orders. For FSS, it goes into a big pool that we can’t see. Some orders are harder than others. This means that the guy carrying 50 cases of water gets the same pay as someone who is carrying 50 packets of cold medicine. The whole reason why there are tips is to reward the shopper for their services. When there is more work done by some and everyone is equally paid, there is no incentive to do well or do those jobs at all.
The new pay scale is bad because you would earn more with the inclusion of tips. Here are some specific situations on when the new pay scale is on-par with the current system:
- Customers that don’t tip
- A multi-order Costco batch with very few items and units
- Delivery only orders with high number of items
However, from my numbers, you can see that 90% of people tip. So where is the service fee really going? What if there is a surplus of service fees? Instacart never said how they were going to be delegating those out at all. We all know that tips go up and down from week to week. They could pocket it and that is why we are so concerned. And it is important because so much of our income is in tips. It is not just the tip that we’re concerned about. It is our livelihood.
They’re playing around with terminology when what they are really doing is messing up our livelihoods.Have more questions about Uber or Lyft? Head on over to our Rideshare Driver Training Course!