According to an article by CNA, Grab, one of the industry giants, is making significant changes to its driver compensation system. The platform operator aims to implement a fairer system that will have a positive impact on drivers’ earnings.
These changes are set to take effect from November 14.
The Shift in Driver Compensation
Grab acknowledges that one of the key issues raised by its drivers is the challenge of picking up passengers from distant locations.
To tackle this problem, Grab has decided to replace its fixed commission approach with a variable fee component.
This means that drivers will now be compensated based on the effort they put into picking up passengers, which marks a significant shift in how drivers are paid.
Who Does It Affect?
The new driver fare structure applies to all services except for GrabShare, Hire, Standard Taxi, GrabHitch, and GrabCoach services. This change is being introduced as a response to the decline in overall customer satisfaction with taxi and private-hire services due to a shortage of drivers.
It is worth noting that Grab’s competitor, Gojek, has also decided to reduce the commission collected from its drivers, which adds more weight to the importance of this shift.
Positive Impact on Drivers
Grab conducted pilots with about 300 drivers earlier this year to gauge the impact of the new fare structure. The results were quite promising, as it had a “neutral to positive impact” on the earnings of 98 percent of the drivers, as compared to the old fare structure.
This finding suggests that the new system is not only fairer but also beneficial to the majority of Grab’s driver-partners.
A Closer Look at the New Structure
Under the existing fare structure, drivers are compensated based on the time and distance traveled between a passenger’s pick-up and drop-off points. This calculation doesn’t take into account the distance a driver must travel from their current location to pick up the passenger.
However, drivers currently receive a flat S$3 fee for certain pick-ups located further than 3 kilometers from their current location.
Variable Service Fee
With the new structure, Grab is replacing the fixed commission with a variable “service fee.” This fee will vary depending on factors such as the time and distance a driver has to travel to reach the passenger.
In cases where the driver needs to travel a longer distance or spend more time to pick up a passenger, the fee may be lower. Conversely, if the driver is closer to the pick-up point, the service fee may be higher.
This variable service fee aims to ensure that driver-partners are fairly compensated for their effort without affecting passenger fares.
In some instances, the service fee could be negative, meaning that the driver’s earnings exceed the amount paid by the passenger, in which case Grab will cover the difference.
Fare Bonuses and Changes
As part of these changes, the fixed S$3 pick-up bonus will no longer be available once the new fare structure is implemented.
Instead, the emphasis will be on the variable service fee, making it a more dynamic system that caters to the individual circumstances of each ride.
Impact on Passenger Fares
It’s important to note that these changes will not affect how passenger fares are calculated. Grab’s reasoning is that it wouldn’t be fair for passengers to pay for drivers’ pick-up efforts since they have no control over the distance of their pick-up location to the nearest driver.
Moreover, Grab observed an improvement of up to seven percentage points in driver acceptance rates for trips involving pick-up points located further than 3 kilometers away from the driver.
This is expected to enhance service reliability and provide a better experience for passengers.