- A new compensation philosophy. DoorDash recently announced that its drivers will now be able to choose whether they earn money for each order or receive a flat hourly amount.
- Assess the business case. Before even beginning to implement a system similar to DoorDash, an organization should first understand if this is something that employees even want
- Risk assessment is needed. When rolling out rewards programs that provide workers a choice in how they will be paid, education and awareness are particularly critical.
- Provide education and resources. Employees should be trained on the pros and cons associated with the options available to them. They can benefit from real-life case examples or “employee personas” that illustrate how a particular choice can affect their potential earnings at the end of the day.
DoorDash recently announced that its drivers will now be able to choose whether they earn money for each order — usually a few dollars in base pay plus compensation for miles driven — or receive a flat hourly amount.
Couriers who choose to be paid hourly and those earning money per delivery were likely to earn a similar amount, according to the New York Times. The minimum compensation will depend on the region and range from $10 to $19.50 per hour, the company said.
The hourly rate includes only the time worked delivering orders and not the time spent between orders. Drivers will be able to switch between the two payment methods and tips would be applied on top of the hourly base pay, the company said.
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“One of the things we’ve heard a lot is around choice: Choice of when, where and how they earn is really important,” said Cody Aughney, head of the company’s dasher & logistics team.
Will DoorDash’s decision trigger a sea change in how other organizations allow their workers to choose how to be compensated?
Making the Switch
Before even beginning to implement a system similar to DoorDash, an organization should first understand if this is something that employees even want, said Justin Hampton, founder of CompTool.
“It doesn’t make sense to go and try to start solving something for which there is no problem,” he said. “Companies should lean on data versus perception. Although recruitment teams and managers may believe that a large number of employees want a benefit like this, they may find that it’s actually a small percent of the organization.”
After determining whether the switch to choice would be advantageous to workers, one of the biggest challenges is to provide fast and efficient access to all of the elements of rewards so the employee can make the choices all in one place, said Steve Brink, president and chief revenue officer at uFlexReward.
Virtually all companies have different systems that house different elements of total rewards, such as human capital management, equity systems, retirement systems, multiple benefit systems, wellness and global mobility, Brink said.
“There is not a single database of all total rewards,” he said. “There are systems out in the marketplace now that can aggregate this disparate and disconnected information. Technology is key to enable the choice in an efficient and effective way, while engaging employees through total reward statements.”
Assessing Risk Tolerance
By allowing employees to choose how their compensation is computed, organizations are essentially assessing their risk tolerance for how much pay the workers are guaranteed to earn, said Justin Sun, global compensation adviser at Expedia.
“Whether employees choose to earn based on time or by offers picked up will vary based on how risk-averse they are and how much control they seek to have over their potential earnings,” Sun said.
The tangible benefits of this program include ensuring that low value orders that would typically go unfulfilled via “earn per offer” dashers will get picked up by those earning by the hour, resulting in potentially higher customer satisfaction and increased revenue.
Another possible benefit is that employees will value their total reward more than without choice, which could lead to improved engagement and ultimately lower turnover.
But DoorDash’s “earn by time” option could also create potential negative consequences, Sun added, such as dashers intentionally taking longer to deliver orders because they’re being incentivized by the hour rather than based on orders taken.
“This behavior could result in customer dissatisfaction if orders take longer than expected to fulfill,” he said.
Education and Awareness
When rolling out rewards programs that provide employees choice in how they will be paid, education and awareness are particularly critical, according to Sun.
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Employees should be trained on the pros and cons associated with the options available to them. They can benefit from real-life case examples or “employee personas” that illustrate how a particular choice can affect their potential earnings at the end of the day.
In DoorDash’s case, employees could be provided a toolkit with frequently asked questions to help them understand what option might make most sense for them given their past earnings history.
For example, the “earn by time” option may not be worthwhile if employees are currently earning more via the per-order option while the earn-by-time option may be more advantageous if their guaranteed hourly rate is as much or more than what they’re confident they could earn via the per-order method.
As organizations companies implement more of these personalization options, Brink said, “other companies will find themselves at a potential competitive disadvantage in attracting, retaining and motivating talent.”
But CompTool’s Hampton said he is skeptical the DoorDash decision will lead many organizations to do the same.
“I do believe that companies will strive to offer greater flexibility, and find ways that continue to appeal to candidates and employees,” Hampton said. “However, I do not see this becoming mainstream.”
Nonetheless, workers want to make as much as they can from the hours they spend on the job.
“So educating them on how to maximize their earnings is key,” Sun said.
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