Who Wins With Lyft's New Driver Bonus Formula?

03:18
Save ArticleSave Article

Failed to save article

Please try again

This article is more than 3 years old.
A Lyft driver in San Francisco. (Kelly Sullivan/Getty Images)

If you use Lyft to get around, you might have heard your driver complain about the new surge pricing formula called Personal Power Zones. It was first introduced a year ago and fully rolled out this summer. Some drivers, like Lauren Swiger in Oakland, say it’s eating into their profits.

"We actually jokingly call them personal poverty zones," Swiger says, "because they haven't helped me at all."

Swiger started driving five years ago and earlier this year joined Gig Workers Rising, a group that advocates for changes in how Lyft and Uber treat drivers.

"They don't want to pay us more," Swiger says. "Their bottom line is to pay us less."

Personal Power Zones are a different way to calculate how much of a bonus drivers make during times and in places where Lyft says there are more riders than drivers. Before, drivers made bonuses as a percentage — for instance, 40% more than they would earn on a regular ride. Now, with Personal Power Zones, drivers get a flat rate bonus instead.

So, for example, Swiger gets a $30 ride to San Francisco from Oakland. Instead of earning a 40% bonus — $12 — she’d now make whatever flat-rate bonus was in effect in the Personal Power Zone where she picked up the ride.

"Sometimes it maxes out at $4," Swiger says. "So $4 instead of $12 is obviously a ridiculous incentive."

Lauren Swiger has been driving for Lyft for five years and says she's seen her earnings drop by about 50 percent.
Lauren Swiger has been driving for Lyft for five years and says she's seen her earnings drop by about 50%. (Sonja Hutson/KQED)

Lyft says that while drivers get lower bonuses, more drivers are getting bonuses. They say Personal Power Zones were designed to be more predictable, stable and equitable. But Swiger says the new system is costing her, and that she's seen her earnings drop about 50% over the past five years.

"To come up with all these creative ways to pay us even less, and then call it an improvement, it’s pretty insulting," Swiger says.

Lyft says, on average, driver earnings across the country have increased over the last two years. Lyft calculates a driver's hourly pay in two ways:

  1. Time giving rides: This includes the time between when a driver accepts a ride to when they drop off a passenger. Nationwide, the average hourly earnings under this metric is $30.84, a 7.34% increase from two years ago, according to Lyft. This metric does not count time spent waiting for a ride request.
  2. All online time: This includes all time that a driver is logged on to Lyft. They could be waiting for a ride request, driving to a Personal Power Zone or working on another app. Nationwide, the average hourly earnings under this metric is $16.29, a 9.33% increase from two years ago, according to Lyft.

Neither of these metrics include tips ($2.27 per hour), or expenses ($3 to $5 per hour), according to Lyft.

Sponsored

Tom White, a financial analyst studying Lyft at the financial services company D.A. Davidson, says the new system, along with other payment formula changes, "generally resulted in drivers seeing their payouts reduced."

Because Lyft does not release raw driver earnings data, White's calculations are a little complicated. Let's try to break it down.

More on Lyft and Gig Workers

The total amount of money coming in from customers through fares is referred to as total bookings. Lyft takes a percentage of those bookings. That percentage is called a take rate.

White says Lyft's take rate is 8% higher than it was two years ago, so they're taking about 8% more money from total bookings. That has to largely be coming out of drivers' pockets, according to White.

Lyft argues the take rate is higher because it has introduced bikes and scooters. The company takes 100% of every fee for a scooter or bike rental since there's no driver to pay, which would drive up the overall take rate.

However, White says, bikes and scooters are still too small a part of Lyft's business to meaningfully affect the take rate.

White says the new payment model is an important step in the direction of profitability for a company that lost more than $900 million last year.

"A couple of quarters of time has been bought, but you know investors won’t be patient forever," White says.