People aspiring to join Uber as drivers tend to ask, how much does Uber pay? This is a very important question that you should bear in mind before joining Uber. Unfortunately, as is often the case, the answer is: “it depends”.
Factors that affect the answer to “how much does Uber pay?”:
- rates and guarantees in your city
- percentage Uber takes on your fare, based on your contract; generally 20% but sometimes higher
- competition in your city
- number of passengers in your city
- when you choose to drive during the day, week and year
- where you choose to drive; hotspots, coldspots or the airport
- your car costs
- how many freebies you give out
- how good you are at recruiting other drivers for bonuses or signing up new passengers for bonuses
- if you can pick and choose when to drive
Rich, my blog partner, generally makes roughly $15 to $25 an hour net before taxes (adjusted for wheelchair van costs and extras), even with Winter rate cuts. He has another part time job that starts early in the morning. The hours for this employment often varies and he is often required to work in the early evenings on Thursdays, Fridays, and Saturdays as well as during the day on Sundays.
Uber uses crowd-sourced drivers and their cars. This allows Uber a huge driver field to draw from, as well as helping the drivers themselves to make good income. Although there are mixed reports from drivers about their personal income, Uber remains a great alternative for those with cars and some spare time, wishing to make extra income.
Uber has reported that a typical UberBlack and UberX driver makes $19.7 per hour after paying 20 percent commission.
Annual fare cuts
Uber claims that it is always looking for ways to lower prices and make themselves an everyday option for their customers. Since 2014, the taxi service has been cutting prices for various cities, usually in the slow winter months at the start of the year. The cuts aim at increasing demand for their services and therefore their drivers’ income. High demand means more trips per hour for the driver and generally a higher income.
For the past three years, Uber has been cutting prices to fend off the post-holiday slump. The latest cut comes at a time when the company is managing a huge and increasing number of drivers and facing extra competition from Lyft.
Uber driver reaction
Many Uber drivers are now feeling exploited following the recent price cuts in over one hundred cities. Fares have been reduced by as much as 45% in some cities. Although the ride-share service is assuring drivers that fare reductions will improve their earnings, many feel the opposite is already happening. Some drivers have even reported making as little as $2.89 per hour on the road. The rates are now very low and drivers are likely to make less because more trips per hour imply higher expenses.
Why some people make more than others
Part of the problem is that many Uber drivers are ex-taxi drivers. They clog up airport waiting areas and don’t make much per hour. What worked as a taxi driver without the Uber platform, does not work as well as staying in high use areas for a given city.
Uber also provides fare guarantees for some drivers in the Winter. In my town of Portland it is $12 an hour during off-peak hours and $16 during peak weekend and evening hours.
The guarantees may last for a few months if the past is anything to go by. The fare guarantees means that if a driver earns less than a given amount, the company will top up the difference. There are guidelines that a driver must meet, however, such as a high acceptance rate and availability on the platform (i.e. you can’t switch back and forth between Lyft and Uber as many find is the best way to earn).
My state just raised it’s minimum wage
The Senate’s six-year plan would give Oregon the highest minimum wage rates in the nation: $14.75 inside Portland’s Urban Growth Boundary, $13.50 in a middle tier that includes Eugene and Bend, and $12.50 in sparsely populated “frontier” areas. Oregon’s current minimum wage is $9.25, the eighth-highest in the nation. The federal minimum is $7.25.
Seattle has a similar wage and it was one of the few cities where the fare cuts were reversed.
The cost of driving for Uber: Other things to consider when answering “how much does Uber pay?
Car value and depreciation: To get started as an Uber driver, you will require a fairly new car (ten years old or less), a clean driving record, a driver’s license and a smartphone to access the Uber app that connects drivers with riders. Drivers who don’t have a smartphone can rent one from Uber at a cost of $10 per week.
Car insurance: You will, of course, need auto insurance. The policy should cover you even when using your vehicle for commercial purposes as opposed to coverage for personal use only. If your insurance provider offers a hybrid of personal and commercial coverage, chances are, your premium will go up when you tell you disclose to your agent that you are driving for Uber.
Taxes: All Uber drivers should pay attention to taxes. As an Uber driver, you should be aware that you don’t actually work for Uber. Instead, you are an independent contractor. You will receive a 1099-MISC form instead of W2 form. The 1099-MISC form reports the gross income that you make while working as an Uber driver. Uber doesn’t withhold taxes from your paycheck, meaning you are responsible for paying full federal and state taxes. You are supposed to figure out your net income by subtracting business expenses from the gross income. You are responsible for all the expenses incurred when using your car. These include, but are not limited to:
- Car wash
The IRS allows independent contractors to deduct such expenses. You can use either the actual expenses of operating your car or the standard mileage rate which varies from year to year and is 54 cents for every business mile driven is 2016. Once you deduct all these expenses, you will get your net self-employment income, which you will use to calculate how much to pay the IRS.
Other taxes: In addition to income tax, you are responsible for paying other taxes that an employer would have paid for you if you were employed. This includes:
- Social Security taxes/self employment tax (double what an employee pays)
- Medicare taxes
- Health insurance fee as outlined in the Affordable Care Act
Lack of fringe benefits
As an independent contractor, you don’t enjoy fringe benefits which include:
- Paid sick leave
- Paid vacation days
- Subsidized health insurance
- Employer contributions to your saving plans
- Educational assistance
- Group term life insurance
Uber generally keeps 20 percent of every trip as a lead generator cost, although this varies from city to city and type of service you qualify for. This percentage is common among taxi services and it is usually referred as a farm out fee.
Uber drivers who take more customers generally earn more. It is up to you to decide when to drive, depending on your financial requirements. You can easily increase your profits by:
- Using a fuel efficient, used car
- Operating during peak-demand hours
- Providing excellent service. A quality service ensures you receive a good rating that will entice more customers to use your services
- Minimizing movement between passengers
- Avoiding airport lines
It is evident that there are several costs of driving as an Uber driver. All the same, the Uber taxi service offers a great opportunity to make a fair and decent living, especially if you don’t want to be stuck in a nine-to-five job or if you are a part time Uber driver. The service will make you your own boss which means complete flexibility.
You will be working whenever you want. You may need to consider the issue of flexibility carefully before coming to this career, especially if you want to make a lot of money. The demand for Uber rides is very high which assures you good earning provided you have good ratings and your car has a good reputation.
Here is what Rich has to say about why he likes driving for Uber part time
Check out our Uber Driver Store for some items we recommend for drivers