There’s been a lot of anger lately over the recent fare cuts from Uber but one of the silver linings has always been the accompanying rate guarantees. In LA/OC, the peak guarantee sits at $26/hr which isn’t too bad considering there’s no pressure to do a ton of rides and you can still make just over $20/hr after Uber’s commission.
But now that pay statements are starting to roll in, drivers are discovering that these guarantees aren’t nearly as good as they once sounded. For one thing, the guarantees are before commission. So if you’re guaranteed to make $20/hr during peak times, you’re actually only guaranteed to make $16/hr.
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We’ve known about this though and other requirements like 90% acceptance rate, online 50 out of 60 minutes and a minimum of 1 trip per hour. But it turns out there is a lot Uber hasn’t told us about how these guarantees work too.
Average Of Your Gross Fares
The biggest hidden requirement is that the hourly guarantee is spread out over an entire pay block. So in order to see if you qualify for the hourly fare guarantee, you need to take the entire amount of money you made during peak hours (for example) and divide that by the number of hours you drove during peak times. That number is then compared to the hourly fare guarantee and if it’s below the guarantee, you’ll get a bonus. If it’s above the guarantee you don’t get anything.
A Dis-Incentive To Work Hard
These guarantees can actually be a bad thing for drivers though since all of the hours where you make more than the guarantee could effectively be subsidizing the hours where you didn’t hit the guarantee! Here’s an example of what I mean:
Let’s say you drive a total of 10 peak hours over a one week pay period. Your hourly guarantee during this time is $20/hr and you make $10/hr for the first 5 hours of the week and on the last 5 hours of the week you actually make $30/hr. Your total pay for the week (that you earned) is $200 ($50 + $150) and you worked 10 hours. So when you take your total pay and divide by your total number of hours worked, you averaged $20/hr and that means you won’t get any type of bonus from Uber.
I was under the impression that I would be paid $50 extra ($10/hr) in a situation like this since I didn’t hit the guarantee during 5 of those hours. Why should I have to take money out of the higher grossing hours to cover my own lower ones? That’s actually not much of a guarantee at all if you ask me.
What upsets me most about this whole situation though is the lack of transparency. If this was the policy from the beginning and was laid out clearly with examples, we would all know what to expect. But even to this date, there is not a single published document from Uber explaining how these guarantees really work and all of the complex details. It took a ton of back and forth with other drivers and Uber support to get to the bottom of this and there are still quite a few unanswered questions.
No Lyft Driving
The other more subversive aspect of these guarantees is that it effectively bars you from driving for Lyft. Now most drivers will tell you they get more requests and make more money with Uber but that doesn’t mean you won’t get a fair number of rides with Lyft too. I almost always drive with both apps on and leverage Uber and Lyft to maximize my earnings when I’m out on the road.
But when you have to be online for 50 minutes of each hour and accept 90% of requests, it’s nearly impossible to drive for more than one app. When you combine this fact with Uber’s latest ‘$500 steal a Lyft driver promotion‘ it should be clear that these guarantees, fare cuts and promotions are all an attempt to destroy Lyft.
How To Leverage Uber’s Guarantees
Going forward, I’m still going to drive for Uber but I’m also going to try and stay under the hourly guarantee as much as I can. The reason why is that any time I go over the hourly fare guarantee, I’ll be subsidizing all of the hours where I did not meet the guarantee. So if you’re a smart driver you may want to consider a strategy that allows you to do the least possible driving while still meeting the requirements and never making more than the hourly guarantee. Here are some strategies to keep in mind:
- Go for the Uber guarantees in the slow hours. As long as you can average 1 ride per hour and keep your acceptance rate above 90%, you’ll be guaranteed the hourly rate. So looking at the chart to the right, let’s say you drive Fri/Sat from 5 pm – 10 pm, that would be 10 of the slower hours on a Fri/Sat night and let’s say you only make $20/hr. You would then get a $6/hr bump up so you’d get a free $60 from Uber. If you make less per hour but still meet the guarantees, that’s even better since now you’re spending less money on gas and Uber’s bump-up will be higher.
- Go to a low request area whenever you’re trying to get the Uber guarantee. Since you don’t care how little you earn during the guarantee hours (as long as you can still average one request per hour), it makes the most sense to do as few rides as possible. That means less wear and tear on your car and less money spent on gas. I am going to try and position myself in low demand areas whenever I’m going for the guarantees so that my costs will be as low as possible but I’ll still get bumped up to the hourly guarantee rate. And remember, the 1 ride per hour average is over your entire week, so even if you sit in the same place for 3 hours and get no rides, as long as you get 6 over the next 3 hours you should still qualify for the guarantee.
- Never make more than the hourly guarantee with Uber. Unless you’re going to make over the hourly guarantee every single hour that you work during the week, you are effectively subsidizing your lower earning hours with your higher earning hours. This is probably the most counter-intuitive part of the guarantee but it’s also the most important point. If you have any hours where you under-perform the guarantee, your higher earning hours will be subsidizing your pay, not Uber.
- Leverage both apps during the busiest times. Most drivers should have a pretty good idea by now what hours they can make more than the guarantee with. The thing to keep in mind though is that you have to leverage both apps to do it. My plan is to drive during the busy times with both apps on and take whichever request comes first. If I get close to the guarantee with Uber (or even go over by a couple dollars), I’ll turn off Uber for the rest of that hour and wait for a Lyft request. At that point, I’d rather not get a request (while waiting on Lyft) than do an Uber ride since I won’t see one penny more, even if I did more Uber rides. Any rides I get on Lyft would be extra. (And if you’re not sure whether it will be busy or not, you could always start out with just Uber on and see how many requests you get)
Now some of these strategies might seem a little counter-intuitive but they are really all about working smarter, not harder. Uber seems to want to play this game with drivers so I don’t see anything wrong with fighting back a little bit. It’s definitely not the simplest concept to grasp since going for surge is so ingrained in our DNA but I think you can actually make some pretty decent money by under-achieving the hourly guarantees and leveraging both apps during the busier times.
(Update – 3:15 pm 1/21/2015: A couple commenters have noted that it’s important to keep in mind the 1 ride per hour is an average of your rides over the entire week for each block. So if you do 10 rides in the city in 2 hours and then go sit at home for 8 hours in a very low request area you will have 10 rides over 10 hours and still qualify for the guarantee. (h/t to Jeff)
If you’re like me and you want to figure out how to make more than the guarantee though, you’ll have to leverage Lyft (and even Sidecar if available). If you drive Uber and Lyft during the busy hours, just be careful that the money earned from partial hours don’t go towards your subsidies (h/t to Jill). So for example, if your hourly guarantee is $20/hr and you’re online/on a trip for 15 mins, anything over $5 will go towards subsidizing your lower earning hours. So what you really need to hope/look for is a bunch of long PT rides with Lyft during these times to make more than $20/hr.
I’m waiting to confirm the above statement, it may be that any money you make in hours where you work less than 50 minutes will not count towards your gross guarantee earnings.)
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Drivers, what do you think about my strategy to work less and make more money? Does it sound like something that will work or is there a better way?
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