How Uber Saved $730 Million

By: Daniel Steingold | May 10, 2016

Uber has saved $730 million since 2009 just by taking on one simple policy in two states: hiring its drivers as independent contractors.

This practice on the part of Uber is well-documented, but it usually hasn’t been broken down into tangible figures for public consumption. New court documents that went public on Monday help clarify how on-the-job expenses, paid for by the employer in a standard employee-employer relationship, amounted to such a lofty figure for Uber drivers in California and Massachusetts.

To break these numbers down, $700 million was said to be withheld from drivers for vehicle use, along with $30 million in phone reimbursement. Of course, the attorneys representing Uber used a more liberal calculation to arrive at this figure, assuming both fixed costs (i.e. vehicle depreciation) and variable ones (i.e. gas and maintenance.)

Uber, on the other hand, claims that only variable costs should be counted. This would cause their figure to drop to $307 million.

Nevertheless, these figures do not count other financial obligations that Uber would have to provide to employees, such as benefits, payroll taxes, and minimum wage.

Uber settled in court for $100 million with these drivers, an arrangement that will keep Uber’s drivers as independent contractors for a few additional small concessions.

Needless to say, Uber likes it this way. In fact, they have not only saved $600 million, but it will help ensure the continued profitability of their business.

The bigger issue is whether Uber drivers are actually satisfied. By settling in court as they did, are they jeopardizing their financial future? Did they bequeath the little legal power they had to Uber?

Whatever the case, expect to continue to hear about Uber and regulations or law in the news.

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