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Uber, DoorDash Raise Prices in Calif. to Pay for Added Benefits

Customers will pay more for rides and deliveries as the two firms provide additional benefits to their drivers.

DoorDash  (DASH) - Get DoorDash, Inc. Class A Report and Uber  (UBER) - Get Uber Technologies, Inc. Report have raised prices for users in California in order to pay for additional benefits to their drivers.

Starting this week, Uber said it would add up to $1.50 to the cost of its rides and up to $2 on meal deliveries, the Financial Times reported

Meanwhile, DoorDash, which staged a very successful IPO last week, said it would increase the service fee it charges to customers starting on Wednesday, but did not share specific details, according to the FT.

Both Uber and DoorDash said they will use the additional money to pay for wage, healthcare and other benefits to its drivers as part of Proposition 22, a ballot initiative passed last month in Calif. that goes into effect today. The initiative allows "gig-economy" companies to treat their workers as independent contractors as opposed to employees and gives them a “minimum earnings guarantee” of 120% of the minimum wage, among other benefits.

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The cost to Uber to pay for the new benefits would be in the region of $400 million per year, according to analyst estimates cited by the FT.

Revenue at Uber Eats rose 53% from last year, the company said, as customers increasingly used the food delivery service amid the coronavirus lockdown. Uber closed its acquisition of food-delivery service Postmates on Dec. 1 and the two companies have begun integrating their U.S. operations.

For its part, DoorDash has benefitted from the ongoing pandemic and reported a 268% surge in third-quarter revenue year-over-year to $879 million, following second-quarter growth of 214%. 

Shares of Uber were down 0.42% to $51.24 while shares of DoorDash were down 2.28% to $156.36 on Tuesday afternoon.