Feb 6, 2024 - Business

Lyft promises cash payments for some drivers

A hand holding a phone showing the Lyft app with a dollar sign

Illustration: Lazaro Gamio/Axios

Lyft will start doling out cash payments to drivers who make less than a minimum share of rider fares each week, the company announced Tuesday — part of a broader effort around pay consistency and transparency.

Why it matters: Gig drivers' incomes are often inconsistent, and heavily dependent on pricing algorithms tied to supply and demand fluctuations — even pop-up thunderstorms or Taylor Swift concerts can play a role.

  • A lack of income security and pay transparency leads to dissatisfaction that could make it hard for Lyft to recruit and keep drivers.

What's happening: Lyft is now guaranteeing that drivers will earn at least 70% of rider payments each week (after external fees, such as insurance and taxes) by making up the difference if a driver's cut falls below that level.

  • Drivers will also see how each rider's payment is split among themselves, Lyft and external fees.
  • And they'll get a new, more detailed earnings summary each week.

What they're saying: "Drivers have been telling us for years that they don't feel they're treated well and they don't always know how much they'll earn in a given week," Lyft CEO David Risher tells Axios.

  • "They want to understand what the split is: what they're taking in and what we're getting."

By the numbers: Nearly a quarter of Lyft's 2023 fares went to external fees such as taxes, airport charges and insurance, per the company.

  • For one sample $100 rider fare, $24 went to fees and insurance. Of the remaining money, Lyft got $9 (about 12%) and the driver got about $67 (88%).
  • Drivers generally earn roughly 85% of rider fares, excluding fees.

Yes, but: In any given week last year, approximately 15% of Lyft drivers earned less than 70% of what their riders paid after fees.

  • That can happen when there's a temporary lag between Lyft's dynamic pricing and its driver earnings algorithm — for example, in the case of bad weather that leads to higher fares but no matching increase for the driver.
  • Almost two-thirds of drivers had it happen to them at least once.
  • Risher said it was difficult to explain each of those cases, so instead the company decided to boost transparency — including this "new floor" for drivers.

Of note: Lyft isn't saying how much these new cash payments are expected to cost the company.

Go deeper