Apoorva Mehta’s Instacart is instituting a pay model for its delivery workers following criticism that the online grocery delivery company was siphoning their tips by counting them toward payments for orders. 

Instacart, a San Francisco based home delivery service, allows shoppers to order groceries from more than 300 retailers like Costco and Walmart using its mobile app. In October 2018, Instacart raised $600 million at a $7.6 billion valuation, according to TechCrunch.

Instacart quickly relented and added the tipping feature back. But with a catch: The company made tipping much harder to find in the app, Business Insider reported.

Instead of the tipping option appearing on the checkout page as it originally had, a default 10 percent “service fee” sat in its place. To get to the tip option, customers would have to click on a small arrow to the right of the service fee that doesn’t give any indication where it leads.

Company founder and CEO Apoorva Mehta, in a blog post, said that the changes were aimed at ensuring that orders carry a guaranteed payment level and that personal shoppers receive their full tips from customers.

The change responds to widespread shopper complaints, including in social media and published reports, that a new earnings structure introduced by Instacart in September 2018 ended up siphoning their tips by counting them toward minimum payments for orders, according to Supermarketnews.

In January this year the grocery delivery startup cut pay for some workers in at least four cities, according to Recode. It was the second pay reduction in ten months, with the earlier cuts being 30% to 45%. 

In September 2018, the grocery delivery company replaced tips with a “service fee” that would be collected by the company instead of the people delivering orders. At the time, Recode reported, the company said the changes were designed to even out pay between workers and to make sure their income wasn’t tip-dependent.

The startup’s explanation was that Instacart workers were too reliant on tips — around 80 percent of orders had one — and that the service fee would allow the startup to pay everyone a more reliable wage.

Many workers looked at it another way: Instacart, in their eyes, saw all of the tips they were making and wanted to capture that revenue for itself. And when Instacart’s best workers realized the tip-to-service-fee transition would mean lower pay for them, they, in turn, freaked out.

This isn't the first time that Instacart has come under scrutiny for its payment and tipping structure, Business Insider reported. In 2016, it removed tips and replaced them with a service fee, which went directly to the company. The tips were later reinstated, but shoppers said they were too hard for them to find in the app. Earlier in 2017, Instacart admitted to accidentally withholding tips from shoppers.

In late 2018, the company ended up adding the tip option back after outrage from some workers and customers, but the service fee is still the default option.

Founded in 2012, Instacart quickly became a popular way for young professionals in urban settings to get on-demand grocery delivery from name-brand grocers.

The startup operates a network of workers in at least 18 cities who pick up groceries from partner stores and deliver them to customers’ doors in as little as an hour. Some workers only pick groceries off shelves, while some only deliver. A third bucket of workers do both.

Apoorva Mehta photo University of Waterloo

UPDATE

In March 2021, Instacart reportedly raised $265 million at a valuation of $39 billion. This gives Apoorva Mehta, 34-years-old, a stake worth $3.5 billion, according to Forbes.

Mehta was born in India, lived in Libya and moved to Canada before coming to the United States to on a work visa. His parents live in India.

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