New dynamic structure aims to compensate drivers based on pick-up time and distance, addressing concerns over fairness in the current system.
A Fairer System for Drivers
Grab is set to implement a variable commission rate for drivers starting November 14, 2024, introducing a new fare structure that will take into account both distance traveled and time spent on passenger pick-ups. This shift comes in response to a growing driver shortage in Singapore’s ride-hailing sector and is aimed at improving driver compensation.
Under the new system, drivers will no longer face a fixed commission rate of 20.18% per trip. Instead, the commission will fluctuate based on the specifics of each trip. For example, the service fee will be lower for longer pick-ups where drivers spend more time traveling to reach passengers. Conversely, shorter trips with quicker pick-ups may incur a higher service fee.
Trial Results and Adjustments
Grab conducted trials earlier in 2023, with 98% of participating drivers reporting either no change or an improvement in their earnings. During these trials, the commission fee fluctuated between 25% and a negative 10%, with the latter meaning drivers earned more than the fare paid by passengers. The new system also demonstrated a 7 percentage point increase in the acceptance rate of longer pick-ups, especially those more than 3km away.
The new structure replaces the previous flat $3 bonus for trips requiring drivers to travel more than 3km to the pick-up point. This bonus, which some drivers previously missed out on due to minor discrepancies in distance, will no longer apply. Instead, drivers will be fairly compensated for the entire journey, including both the pick-up and drop-off phases.
Addressing Driver Concerns
Grab drivers who participated in the trial shared their positive feedback about the transparency of the new system. Kelvin Lam, a 48-year-old driver, initially questioned whether the change would result in the company taking more in commission. However, he noted that while some trips would see higher service fees, many others would benefit from a lower commission rate, making the system fairer overall. Raymond Wee, another driver, reported a 3%-5% increase in earnings, particularly on trips where the pick-up distance was between 2km to 3km.
In addition, the new system compensates drivers for delays caused by external factors such as traffic congestion or road closures, which were previously overlooked under the old model.
Industry Response
The National Private Hire Vehicles Association (NPHVA) has been working with Grab to ensure that drivers’ earnings are protected in the long term. While the new fare structure addresses some immediate concerns, NPHVA adviser Yeo Wan Ling emphasized the need for further consultations to safeguard drivers’ medium-term earnings amid rising operational costs.
Grab’s move comes just days after Gojek introduced a reduction in its commission rate from 15% to 10%, signaling increased competition in the ride-hailing industry. Experts predict that if Grab’s new system proves successful in improving driver engagement and satisfaction, other companies may follow suit, though smaller players may face challenges in implementing similar models due to resource constraints.
As Grab seeks to enhance driver satisfaction and efficiency, the company continues to adapt its policies to the evolving landscape of Singapore’s ride-hailing sector.
