Uber's move to increase commission from 20% to 25% in San Francisco is spreading to other cities.... [+]
Why should Uber charge its drivers less when it can charge them more?
Since it launched in 2012, Uber's popular, low-cost service UberX has always had a 20% commission, where Uber takes a one-fifth of the fare (or, in Uber's parlance, drivers pay a 20% fee to license the technology).
But last year, Uber started testing whether it could charge drivers more for the same thing. Any drivers in San Francisco who signed up after September 2, 2014 had to fork over 25% of their pay to Uber instead. Then in May, Uber put a small group of new San Francisco and San Diego drivers in a pilot program with commissions that went up to 30%.
Rising commissions aren't an experiment anymore. In the last few months, Uber has quietly bumped up commissions from 20% to 25% for new drivers in five cities. New York City drivers who joined as of April will pay 25%, as well as drivers in Toronto, Indianapolis, Boston and Worcester, Mass., who joined as of August, the company confirmed.
San Francisco drivers who joined in the last year still pay a 25% commission. An Uber spokeswoman declined to say whether the 30% commission pilot program has spread to more drivers or markets.
Keeping the higher commission to recent drivers doesn't actually limit its impact very much. Uber's workforce is constantly churning and growing: In January, an Uber-conducted study showed a quarter of its active drivers had joined in the last month. It's unclear if raising the commission deters new drivers from signing up, but if the policy has spread from its first test city, it suggests it makes economic sense.
New drivers may not even know that they're getting a worse deal than the people driving on the same streets as them. When Uber started testing a 30% commission, Luke, a San Francisco driver, told FORBES he didn't realize his handicap until Uber texted him that he was close to getting enough rides to move to a 25% commission for the week. (The system is tiered.)
"I was confused -- I thought it was 20%," said Luke, who didn't want to give his full name for fear of retaliation from Uber. "I started looking online and everywhere I saw said 20%, so I was like, 'What’s going on?'"
Lyft, Uber's biggest U.S. rival, charges a 20% commission and allows drivers to earn back the commission by driving many hours a week. Sidecar, a much smaller ride-hailing company that recently pivoted away from passengers to focus on deliveries, upped its commission to 25% in July.
