To tip or not to tip drivers, that is Uber's question

Brian Cole, who drives for the ride-hailing service Uber, got a call to pick up a young woman at 4 a.m. a couple of months ago. Based in Cincinnati, Cole drove about eight miles north to get the woman. When he arrived, she appeared to be sick.

"This girl was throwing up like crazy," Cole said. "She was hammered drunk."

Cole waited for her to feel better and then drove her across the Ohio River to where her boyfriend was anxiously waiting.

"He was so relieved, so happy to see his girlfriend that he handed me two $20 bills," Cole said. "I was really happy to get a cash tip. I thought, 'wow, they value me as a driver.'"

Tipping drivers is the norm for taxis, but it's unusual with Uber, a car-hailing service that lets passengers connect with drivers via a smartphone app. The service is completely cashless -- everything is automated through the app -- and the company touts itself as being hassle-free and hyper-convenient. One of the hallmarks of such convenience is letting customers have tip-free rides, says Uber. If a passenger wants to tip an Uber driver, they must do so in cash.

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While some passengers surely enjoy Uber's mantra that "there is no need to tip," most drivers feel differently. Not only do a few extra dollars help with wages, drivers say, but they also appreciate being rewarded when they provide good service. Uber's top competitor, Lyft, already has a tipping feature in its app, and now thousands of drivers are clamoring for Uber to do the same.

Earlier this month, Peter Faris, an Uber driver based in Washington, D.C., launched an online petition asking Uber to add a tipping feature to all of its rides. The petition, aimed at Uber CEO Travis Kalanick, said that drivers appreciate working for Uber and that adding a tipping feature would only boost their earnings and job satisfaction.

"Tipping is simply a gesture of appreciation for a job well done," the petition said, "and there's no reason to deny drivers and passengers this option."

Wait...tips aren't already included?
A scan through blogs, forums and social media sites reveals a common misconception that tips are already included in Uber's fares. A simple Google search for "do I need to tip Uber" produces millions of confused results.

One of the reasons for this mix-up is that when all new passengers register with Uber they're asked what percentage of "gratuity for Taxi" they'd like to include with every ride. From a drop-down menu, they can then select any amount between zero percent and 30 percent. Many people likely believe this choice applies to all rides they take with Uber, but a reading of the fine print says it's only for the company's UberTaxi service.

UberTaxi is a feature that lets passengers hail a traditional taxi with their Uber app. However, this service is only available in a few cities, like New York and San Francisco. Uber's most popular services are UberX, which lets people drive for Uber using their own cars, and UberBlack, which is similar to a black car or limo service. That initial tip amount that passengers set doesn't go to either UberX or UberBlack drivers.

"I cannot tell you how many times my passengers have told me, 'oh yeah, the tip is included in the fare,'" said Cole, who drives for UberX and also has a YouTube channel to give advice to ride-hailing drivers. "I have to kindly explain to them that it's not included and the fare is only calculated on time and distance."

The confusion over whether tips are included has gained such momentum that it became the subject of a class action lawsuit last year. Drivers are suing Uber for alleged deceptive marketing, claiming that the company led passengers to believe a tip was included in rides, while not giving drivers any extra income.

But why tip anyway?
When passengers take an Uber ride, it's meant to be a smooth experience. They hail the car with a smartphone, it usually arrives within minutes, and when they get to their destination, they just hop out of the car -- no credit cards, no signatures, no receipts. The only remnant of the ride is an email with the cost of the trip.

Uber says one of the things users like about the app is that they don't have to fumble with cash and worry about the tip. On top of that, Uber says drivers are making fair wages -- the company released a study (PDF) last month that said Uber drivers earn an average of $19 per hour.

"Uber is creating an unprecedented economic opportunity in the for-hire transportation ecosystem," said Uber spokeswoman Natalia Montalvo. "This is a fundamental and significant change from the status quo, where drivers are mandated to operate in shifts and often earn less than minimum wage per hour."

While Uber drivers can earn higher than minimum wage, economist Kenneth Zahringer said that misses the whole point of tipping. Zahringer, who works in the University of Missouri's applied social sciences division, said gratuity in the service industry is more about incentives than income.

"There's the simple fact of getting someone from here to there, but then there's a level of service on top of that, being polite, having a clean car, all of that," Zahringer said. "If the driver knows that this particular guy that's sitting in his car right now might give him more money if he's nicer, he's pretty likely to be nicer."

So when Cole patiently waited for his passenger to finish throwing up and then delivered her safely to her boyfriend, he was rewarded for doing a good job.

Part of Uber's business model is that it provides a service that goes above and beyond traditional taxis. The company encourages drivers to give passengers water and snacks, and to play riders' choice of music. Harry Campbell, who is a Los Angeles-based Uber and Lyft driver and runs a popular blog about his experience, said that as Uber continues to lower rates -- as it's habitually done -- drivers are less motivated to go above and beyond.

A year ago, Uber said drivers could make up to $36 per hour but now it's lowered that number to $22, while saying the average per hour is $19. Most drivers say they make quite a bit less per hour. One of the reasons for this wage drop, Campbell said, is a series of price cuts over the last several months. The most recent cut happened in January when Uber slashed fares in 48 cities across the US.

"When drivers were making more money it made sense to go above and beyond," Campbell said. "It really wasn't a big deal before, but now that rates are lower they're thinking is it worth it."

What would an in-app tipping feature look like?
While Uber's app is a largely seamless experience, the setup is also slick over at Lyft. The big difference between the two is that at the end of a Lyft ride, the app gives passengers an option to tip their driver.

Lyft's app has always let passengers add tips to their rides by adjusting their fare at the end of the trip. But last June the company added a specific in-app tipping feature that made the process easier. It added clickable boxes so riders could choose between certain dollar amounts, a custom amount and no tip.

"We've always had tipping as an option because we believe it's important for passengers to have the opportunity to give a little extra to drivers who go above and beyond to create a welcoming, enjoyable ride," said Lyft spokeswoman Paige Thelen. "It's also a huge win for drivers who see increased earnings through tips."

Thelen said that between January and September 2014, Lyft drivers earned a combined total of more than $6 million in tips. Not all Lyft passengers tip, however. Campbell said that only 20 percent to 40 percent of his Lyft passengers tip, but compared with Uber that's good. He said roughly 5 percent to 10 percent of Uber passengers give him a cash tip.

It's unclear whether Faris' online petition will have any effect on Uber's tipping policy, but it's apparent many people want an in-app gratuity feature. In the one week the petition was online, before it closed on Friday, it gathered 13,359 signatures. Zahringer said he believes it would benefit Uber to add the feature because it could give drivers more control.

"It makes the service provider, the individual, a little more of an entrepreneur," Zahringer said. "By improving quality, they can directly affect their income. And that's power."