Lyft finally started charging riders waiting time fees in December, but drivers complain that those fees aren’t hitting their wallets. At least not yet.
Lyft’s wait time charges, or the charges passengers incur if a driver has to wait for them at pick-up, start two minutes after on-time arrival for standard fares and five minutes for Black and Black XL. The costs are charged per minute.
Drivers in several U.S. markets who posted on Reddit and who spoke to AapkaDost say they haven’t seen those charges appear on their bills yet. Lyft told AapkaDost that the slowdown is not intentional and that it is floating in certain markets goods in fact receiving those fees. The rest should see them appear in the coming weeks, according to Lyft.
Lyft has never formally announced the new wait times; the company just quietly implemented them and updated their website and never promised the money would go to the drivers. That hasn’t reassured drivers angry about getting “Gryfted,” a term some use on a Reddit forum to describe their feelings about missing out on the extra money.
Drivers claim that increased driver costs have become the industry norm in response to macroeconomic trends. But that does not always mean that the extra costs have been passed on to the drivers.
In March 2022, as the Russian invasion of Ukraine sent gas prices soaring, both Lyft and Uber added temporary surcharges to rides to help cover fuel costs. In that case, all that money went to the drivers, who struggled with higher gas prices. However, as Lyft grappled with the rising cost of driver insurance in October, the company raised the service charge riders in the U.S. pay for each ride and pocketed the money.
Drivers who spoke to AapkaDost said the wait time costs should go to them, not Lyft, because they lose precious minutes every time a passenger is late.
Drivers also said they expected the two rival ride-hailing companies to follow similar playbooks. Uber gives its wait time allowances to drivers, according to some drivers who spoke to AapkaDost. They said it’s “pennies” and that Uber actually just extended the grace period for late riders from five minutes to seven minutes, but it’s something.
Lyft told AapkaDost that drivers in markets with “up-front driving information” do now receive redundancy pay. (Advanced ride information means drivers can see where the trip is going before accepting a ride. Regions where this is active include New York City, Washington State, Portland, Toronto, and Vancouver.) Any other market is considered as a region with “pay in advance,” and drivers in those regions will see the hold in their wallets “within the next few weeks,” Lyft spokesperson Katie Kim told AapkaDost.
Kim did not confirm whether Lyft would retroactively pay riders for wait time charges incurred in the past two months.
Lyft introduced prepayment last October, a few months after Uber launched a similar feature in July. This feature allows drivers to view trip information and see what they are earning before accepting a trip. While the companies have marketed prepayment to drivers as a transparency tool, some drivers say it’s just a pay cut in disguise. Drivers who say their earnings have dropped since the feature’s introduction have guessed that the prepayment model is actually designed like an auction, where Lyft or Uber show a ride at the lowest possible rate and see which driver will take the ride.
Some drivers have been experimenting with the system to see if they can play it: “I declined a request for 28 miles (34 minutes) for $10.26, and about 40 seconds later the same ride cost $21.74,” one wrote. Redditer. Others have called for massive action from drivers to collectively refuse rides until prepaid charges reflected what they consider a fair rate.
Uber and Lyft both denied the charge that prepayment is intended to provide drivers with the lowest fare. Both companies also said driver earnings are high, about $35 per hour of busy time. Please note that busy time is the time a driver drives to pick up or drop off a passenger and does not include time spent driving around and waiting for a performance. Many drivers say that this means that the working time does not correspond to a real hourly wage.
The dance of driver retention
Uber and Lyft have only just emerged from a driver shortage crisis accompanied by increased spending.
In the fourth quarter of 2022, Lyft reported that it has the most active drivers on its network in three years, and that drivers spent more time driving than in Q3 2022 or Q4 2021. Bringing drivers back to the platform after COVID -19 cost Lyft and Uber hundreds of millions of dollars in incentives, which took a chunk out of their margins and plummeted their share prices.
These days, the ride-hailing companies seem to have a little more power. Drivers do not return to the platform due to incentives. A looming recession coupled with inflation that has made buying groceries as expensive as eating out has motivated drivers to use the app again.
That gives Lyft some wiggle room on how it pays its drivers in the short term. The question is, is it worth the risk of losing drivers to Uber in the long run?
“Dwindling incentives could benefit Uber as drivers look to them for higher pay, along with the greater earning opportunities Uber offers with delivery,” Nicholas Cauley, an analyst at Third Bridge, a global investment research firm, told AapkaDost. “Our experts have noted that the duopoly between Uber and Lyft keeps both players in check, ultimately benefiting riders, drivers and the rideshare industry. If one raises prices, the other benefits. If one reduces drivers’ incentives, the other benefits. One player cannot make dramatic changes outside the market equilibrium without benefiting the other.”
It’s that tit-for-tat that caused Lyft shares to fall after reporting Q4 2022 earnings. Lyft lowered Q1 revenue expectations, in part because the company expects inclement weather to depress demand to influence. However, Lyft also had to cut prices slightly to “stay competitive with the industry” — “the industry” is Uber, Lyft’s oft-described “big brother.” Uber, in turn, posted strong profits and investors reacted positively.