Ridesharing and the Gig Economy – Is it worth it?

Ridesharing and the Gig Economy – Is it worth it?

cost of uber driving

With more and more people seeking flexible work arrangements, ridesharing and related services have surged in popularity. Companies including Uber, Lyft, Instacart, Postmates, Dolly and others aggressively pursue recruitment efforts to get more drivers on board. With promises of lucrative sign-on bonuses and flexible working terms, many people have turned to these companies to provide a little extra side income.

Own your own car? – Have some spare time? – Want to make extra money? Sounds like an easy proposition for most, but those interested in working for ridesharing and app-based delivery services need to think be aware of these top warning signs.

According to a recent report, only 4% of Uber drivers stick around for more than a year. Considering it is a part-time job that promotes reasonable wages, it may be surprising to note that the majority of people leave over the low pay. Many drivers discover that the money you have to put in barely matches the compensation.

As essentially an independent operator, ridesharing drivers need to take into full account all of the expenses that the position requires. Gas? Vehicle maintenance? Insurance? Breath mints for passengers? All of these additional expenditures add up and significantly cut into a driver’s take-home pay. Most insurance companies also require enhanced commercial coverage for drivers offering ridesharing or delivery services, so if you get in an accident with only personal coverage while working, you may get slammed with a large repair bill. And if you suddenly don’t have a working vehicle, you have no way to make an income.

While ridesharing services often promote average wages of $20/hr or more, the reality is a little more bleak. For example, Uber drivers in Detroit average only $8.77/hr. Furthermore, despite the promises of flexible schedules and work-when-you-want-to hours, drivers should note that nothing is guaranteed. With driver commissions always changing and and demand constantly fluctuating, drivers find it difficult to earn a consistent living. Furthermore, the more drivers ridesharing companies recruit, the fewer rides there are to go around and the less money there is to be made.

There are additional drawbacks to working for ridesharing companies. For example, on-the-job training and employee support is minimal. Have an issue? Expect to be put on hold with their support team. While the barriers to entry are next to none, the ongoing support they provide to drivers is minimal. With such high turnover rates, ridesharing companies aggressively recruit new workers to fill in the gaps. This leads to a less-than-loyal workforce and an employment atmosphere where they factor in the consideration that you are likely to leave within a short period.

Another significant drawback to working for a ridesharing company is the lack of any defined benefits. Classified as an independent contractor, ridesharing companies are not obligated to provide any benefits such as healthcare insurance or retirement savings plans. Additionally, drivers should note that they will be responsible for their own taxes.

Is there any good news? There have been multiple attempts with limited success to re-classify ridesharing drivers as employees entitled to company benefits and compensation packages. For example, state commissions in both California and Florida have ruled in favor of individuals seeking unemployment benefits following termination from Uber.

Additionally, drivers have been voicing their criticisms of ridesharing companies. Drivers for Uber in Lagos, Nigeria declared a strike protesting promotional prices offered by Uber that cut into drivers’ take-home pay. Elsewhere, ridesharing companies have come under increasing scrutiny by employees, users, regulatory boards and competing businesses like taxi cab drivers.

Those thinking of pursing a position with a ridesharing company need to be careful in weighing all of the considerations beforehand. In instances, it may turn out to be more of a hassle than you imagined. If you are looking for a steady income, employer reliability and benefits, working for ridesharing companies should be your last option.

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