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Under fire, Instacart changes personal shopper pay model

CEO Apoorva Mehta announces new policy for customer tips

Instacart is instituting a new earnings model for its personal shoppers following criticism that the online grocery delivery company was shortchanging their compensation.

In a blog post this week, Instacart founder and CEO Apoorva Mehta unveiled changes aimed at ensuring that orders carry a guaranteed payment level — including for collecting groceries and/or delivering them — and that personal shoppers receive their full tips from customers.

The move responds to widespread shopper complaints, including in social media and published reports, that a new earnings structure introduced by Instacart last fall ended up siphoning their tips by counting them toward minimum payments for orders.

“By delivering to and for our customers, you’ve become household heroes for millions of families across North America. This past week, however, it’s become clear that we’ve fallen short in delivering on our promise to you,” Mehta (left) wrote in a blog Wednesday to Instacart’s shopper community, which numbers about 50,000. “As you know, we’ve made changes to our shopper earnings model over the last year. These changes were designed to increase transparency while also keeping pace with a rapidly evolving industry. In doing so, we’ve tried in good faith to balance those needs, but clearly we haven’t always gotten it right.

“Based on your feedback, today we’re launching new measures to more fairly and competitively compensate all our shoppers,” he said.

Going forward, Instacart will keep customer tips separate from the payments it makes to personal shoppers in fulfilling orders — with tips earned by shoppers coming “in addition to Instacart’s contribution,” Mehta noted.

“After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time. To help with this, we instituted a $10 floor on earnings, inclusive of tips, for all batches. This meant that when Instacart’s payment and the customer tip at checkout was below $10, Instacart supplemented the difference,” he explained. “While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided.”

San Francisco-based Instacart also will raise its minimum batch payment from $3 to $5 for delivery-only batches (in which a shopper delivers the order after another person picks the groceries) and to $7 to $10 (depending on the region) for full-service batches (in which a shopper picks, packs and delivers the order). The company will pay quality bonuses and peak boosts for qualifying orders as well.

“We heard loud and clear the frustration when your compensation didn’t match the effort you put forth. As we looked at some of the extreme examples that have been surfaced by you over the last few days, it’s become clear to us that we can and should do better. Instacart shouldn’t be paying a shopper $0.80 for a batch,” Mehta wrote in the blog. “We believe that these new guaranteed floor minimums will better protect our shoppers going forward.”

In addition, Instacart plans to retroactively compensate shoppers for transactions when tips were included in the minimum payment — particularly when Instacart’s payment was below the $10 threshold. For instance, if shoppers were paid $6 by Instacart in these cases, they will receive another $4.

“Over the coming days, as we transition to the new higher-minimum floor payments, we will make you whole on the transactions that have occurred since the launch of this feature,” Mehta said.

In January, Seattle-based labor group Working Washington had started a petition for Instacart personal shoppers to protest the earnings model implemented in October and to demand a more transparent, predictable pay structure. The group claimed on its website that, with the change, Instacart was engaging in “tip theft” because “customers' tips are essentially being paid to Instacart rather than to the workers.”

Based on receipts sent by Instacart shoppers nationwide, Working Washington said shoppers experienced hefty pay cuts, with some seeing wages drop 30% to 40% overall. For example, one Instacart shopper in Tacoma, Wash., reported that she went from making about $1,000 per week before expenses to $600 to $700 per week. And a receipt from another Instacart shopper showed that, for a delivery that took him 69 minutes, he made just 80 cents despite a $10 tip from the customer.

Mehta’s blog this week to Instacart shoppers signals a step in the right direction, according to Working Washington, whose petition has received more than 3,600 signatures.

“In the space of two weeks, Instacart workers came together, sparked a national media sensation and transformed the entire pay model of a $7 billion corporation. Instacart finally admitted they’ve been taking tips. They finally admitted that 80 cents isn’t enough. And workers even won back pay for the tips that were taken,” Working Washington said in a statement. “It’s not over. Workers continue to call for a transparent pay structure so they can verify that what the company says they’re going to do is what they’re actually doing.”

In announcing the new changes, Mehta said Instacart is improving the payment model for personal shoppers and making it clearer. “These changes will increase Instacart’s overall contribution to our shopper’s earnings, and we believe that the change in tip structure will separate Instacart from an industry standard that’s no longer working for our shoppers and our customers.”

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