Uber Changes Its No-Tipping Policy

Have you ever wanted to pay a tip to an Uber driver as a gesture of appreciation? Now recent revisions to the company's app will allow you to authorize online tips for rideshares. The software change resolves a longstanding source of friction between the ridesharing company and many of its drivers. While most taxi companies allow their labor force to accept tips, Uber previously sought to distinguish ridesharing by dispensing with this practice.

The Pros And Cons of Tipping

Whether or not ridesharing firms should authorize tipping inspires intense debate in some circles. While most brick-and-mortar taxi companies welcome tipping as a way to enhance driver revenues, ridesharing companies have had to approach this topic delicately. Unlike their heavily regulated competitors, these global entities have largely avoided some local motor carrier rules and business requirements because they employed a "sharing" model for ride acquisition and transportation. Uber drivers use their own vehicles and set their own service hours. Embracing the practice of tipping might well bring firms such as Uber and Lyft one step closer to having to comply with the sometimes burdensome government transport regulations applied to commercial passenger carriers in many cash-strapped jurisdictions.

Uber previously refused to permit tipping in part because an expectation of tipping might infuse a degree of confusion and embarrassment into the rideshare experience. How much should Uber customers expect to tip drivers? Will tipping become a de facto social expectation in the future, or remain a genuinely voluntary token of appreciation? Reportedly, Uber's management also hesitated to embrace tipping in the past due to concern that some drivers, like many taxicab competitors, might skew their availability in favor of serving patrons in affluent locations where customers presumably tip more heavily.

Factors Favoring Tipping

While the change in Uber's tipping policy will likely please most Uber drivers, it may also assist the company in driver recruitment. One of Uber's leading ridesharing competitors, Lyft, implemented tipping with considerable success through its app some time ago. In fact, Lyft recently announced its drivers earned $250 million in tips during the past four years.

Allowing tipping through the Uber app will provide a welcome boost in revenue to many ridesharing drivers. As independent contractors, these self-employed workers face an impressive roster of out-of-pocket expenses. High vehicle acquisition and operation costs, maintenance bills and the absence of employee benefits such as paid vacation time or sick leave have possibly contributed to ridesharing driver shortages in some places. Drivers pay self-employment taxes without the assistance of company withholding, for instance. With Lyft offering its drivers a stream of revenue from tipping, Uber's management may have felt extreme marketplace pressure to find a way to enhance driver compensation.

Implementing Tipping at Uber

Reportedly Uber will implement its new tipping feature gradually. Already Uber patrons in the cities of Minneapolis, Houston and Seattle can use the app to pay tips during the driver rating process. Uber anticipates enabling drivers in more locations to accept gratuities soon.

The Uber app lists three possible tip amounts ranging between $1 and $5. However, it also allows customers the option of designating a gratuity of their own choosing. Drivers will receive the entire sum without the imposition of any service fees or processing charges.