Harry here. Rate cuts have obviously been on a lot of driver’s minds lately and I’ll be writing about that next week when I get back from Mexico City (side note: give me a few extra days to respond if you’ve e-mailed me).
But today, RSG contributor Christian Perea tackles the new hourly guarantee structure with Uber. Uber has made some changes since last year’s guarantees and since the rules are often quite complex, we want to make sure that if you are driving during guarantee times, that you’re doing everything you can to meet the terms and maximize your income.
I’m no fan of Uber’s price cuts, and I am certainly not a fan of hourly guarantees. However, we have been getting a lot of requests to go over how this newest round of guarantees work, and today I’ll help clear up some confusion to make sure you can at least qualify for the hourly guarantees during the slow winter months.
You Have to Receive an Email From Uber to be Eligible
Update 1/18/16: A conversation with Uber’s reps has confirmed that you do not necessarily need to receive the email to be eligible.
In order to be eligible for Uber’s minimum fare guarantees, you have to have received an email from Uber stating that you are eligible for them. If you did not get an email that looks something like this, then you are out of luck.
This kinda sucks because if you did not receive the email, it seems like Uber has put you on their “bad kids” list.
How Do These Guarantees Work?
If you received an email, you will notice that Uber will offer different incentives during different blocks of hours throughout the week with differing minimum average ride requirements. Here is an example for Detroit:
How Last Years Guarantees Worked: Uber Guarantees Dissected
Gross Pay: The thing to remember about these hourly guarantees is that they are before Uber’s cut. Which means if you’re paying 20% to Uber, a $20/hr guarantee is actually only $16/hr.
Hour Blocks: Think of each segment of hours as a “block“. This means that Friday from 10 PM to 3 AM constitutes a 5 hour block in which your average trips per hour within that block will be calculated to see if you qualify for minimum earnings. For example, you will need 8 trips to average above 1.5 trips per hour if you drive all 5 hours of that block.
The same hours on Saturday are a completely different “block” and even though it has the same minimum trips per hour requirement, it will still be calculated separately from Friday or any other blocks of hours. Which means you would have to do another 8 rides during that block to get paid in full. The same goes for all of the other blocks (although they have different ride requirements).
Minimum Trips/Hour: Each block of hours has a minimum ride requirement. They are calculated by dividing the total trips you did in that block by the total time you were logged in to drive. For example, we see above that for the $20 dollar blocks, the requirement is 1.5 rides per hour. This means that if you get 8 rides between 10PM and midnight in Detroit without getting another ride until 3AM, you will still be paid out because you averaged 1.5 trips per hour.
It is important to note that trips are counted by the hour in which you accept the ride. So if you accept a ride at 8:55 and end it at 9:00 it will count towards whatever trips are measured in the 8 O’clock block.
Acceptance Rate: There is a minimum acceptance rate you must maintain in order to qualify. Most markets are at 90%. If you got the guarantee email, it will be listed there. The acceptance rate is calculated throughout the week instead of for each hour or “block” of hours. We are still unsure about cancellation rates but will update once we find out.
Surge Pricing: You know that surge pricing you get all excited about? It means very little now because whatever you make on surge will go towards your hourly guarantee. Last year I found that I would have several slow hours and get a big surge ride at 2 AM. It didn’t matter though because those rides were still under what I made via the guaranteed hourly, and all I did was take a lot of risk driving drunk people for no extra benefit.
Check Your Email:
The hours and conditions vary in every market. My suggestion is to make a sketch of each block throughout the week. This can come in handy because come Friday at 9:50 PM in Detroit, you may want to logout to catch a ride early in the 10 o’clock hour. Just make sure that you calculate that you met the 1.2 ride minimum for the previous “block”.
Other markets have strange terms and conditions and those may need to be taken into account as well. Feel free to forward your hourly guarantee emails to christian@therideshareguy.com and I will update accordingly.
You don’t have to drive the entire “block” of hours to qualify
Important to note is that you do not have to drive a whole block to qualify. As long as you maintain the right acceptance rate, average ride requirements, and watch your blocks of hours, you will still qualify.
Can You Still Hack The Guarantees?
Relevant From Last Year: Ubers Fare Guarantees Hacked
Last year Harry wrote about how to hack Uber’s fare guarantees. The strategy involved going to a place which had a high volume of short rides and spending a couple hours racking up the rides.
Once you have the needed number of rides, you re-locate to an area of low demand. This worked great for drivers who lived in a really slow area since they could watch Netflix and drink beer while getting paid hourly guarantee money.
Uber has upped the hourly ride requirements this year but I think it’s still possible to take advantage of this strategy.
Don’t Request Yourself: Last year, a lot of drivers would attempt to do the rides they needed and then request themselves to log hours and get paid for them even though they weren’t actually giving rides. Uber has security measures in place to prevent this from happening, so if you do it, don’t be surprised if you get caught and deactivated.
Hourly Guarantees Are Actually a Price Ceiling.
Related: Why Hourly Guarantees Are a Sham
The more you drive, the less you bring home in profit. Here is a really basic graph I made. It’s not scientific. I didn’t gather lots of data on drivers or anything, its just a general outline. (Yes this is recycled, but its very relevant)
You can see that by giving the fewest number of rides/driving the least amount of distance that qualifies for the criteria, you are making the highest margin in profit. Fewer miles driven, lots of “guarantee” money collected. As you try to “beat” the guarantee, you effectively lose money. Unless you give a large ride on high surge. Since all hours have only 60 minutes in them, you are limited in being able to beat it.
So for most hours, your guaranteed hourly will actually act as a price ceiling. If you qualify for the guarantee hours and give a big ride on one of those hours, it means nothing because it is used to subsidize the guarantee. It takes all the fun of driving around and hunting for whales.
Workforce Control
Uber has a pretty consistent history with their wonderful Winter Warm-Up Guarantee, where they lower prices in almost every market throughout the United States every January and put drivers on an hourly guarantee.
You Have To Play Their Game
This means that the only way to earn an income for full-time drivers at this point is to play Uber’s Warm-Up game and to follow their requirements to a tee. The picture above shows how drivers were placed into a position to meet strict standards that really resembled being an employee in order to make any money. You still had the option to not play their game, but at much lower rates obviously!
So a lot of the Winter Warm-Up effectively allows Uber to control and predict driver behavior. If you want to make any money, it’s a system where drivers are forced to log certain long hours in order to survive financially.
In the past, Winter Warm-Up forced drivers to accept calls that made no sense, often more than 20 minutes away. It forced drivers to take any call they could on a slow day no matter how shady or poorly rated the passenger was, all in the name of racking up enough rides during each promo block.
Competitive Lock-out
If you subscribe to chasing the guarantees on Uber, it effectively locks you out from driving for other services. As a strategic measure it prevents driver attrition to Lyft or delivery companies. If you have to meet minimum ride requirements then you won’t have time to meet Lyft’s new Power Driver bonus scheme. Effectively drivers end up having to choose one or the other.
Our Take
This year’s guarantees are lower than last year, which I find strange since Uber says drivers ‘earn more when prices go down’. Shouldn’t the guaranteed payouts be the same as last year then? I think that pretty swiftly disproves their theory, although you should already know that.
Either way, I suspect that many drivers will not make as much as in years past after they account for the expenses of running their vehicle, and Uber takes their cut from the guaranteed hourly rates. Suffice it to say, many drivers will probably start leaning more heavily on alternative players in this space.
What do all of you think about his years Winter Warm-Up from Uber? Plan to drive?
-Christian @ RSG
