Grab Introduces Variable Commission Rates: What It Means for Drivers and Riders
At the end of last year, Grab followed in Gojek’s footsteps by increasing its commission rates charged to drivers, adjusting it to 20.18% of each trip’s fare.
Although Grab attributed this hike to GST increases, the decision met with substantial public outcry.
Comments on Grab’s Glassdoor page went as far as saying that it wasn’t “worth gambling your life on the road for such a low commission.”
This discontent might have pushed many drivers to maximise their earnings by strategically selecting rides based on the proximity of pick-up points.
However, this strategy was only viable due to the fixed commission rate.
In a mere two weeks, this fee structure will undergo a significant change, ensuring less bias in pick-up choices.
Introducing the Variable Commission Rate: Proximity Matters
Under the new compensation structure, the fixed commission rate will be phased out in favour of a variable rate that fluctuates with each trip.
In essence, drivers closer to a pick-up point will be charged a higher commission.
In contrast, those farther away and having to travel more to reach customers will pay less.
This new approach aims to discourage drivers from consistently choosing customers in closer proximity just to complete more trips rapidly.
The prior system had drivers gravitating towards rides within 3km to avail a $3 cash bonus.
This could mean that drivers might find themselves benefiting more from the new fee structure—at least until the roads are crowded with drivers again.
Implications on Drivers’ Earnings
The revised fee structure hasn’t been rolled out haphazardly.
According to The Straits Times, trials involving 300 drivers demonstrated that for an overwhelming 98%, there was either no change or an increase in earnings.
In some instances, drivers even earned more than what the passenger was charged for the ride.
One significant outcome from these trials was a notable 7% uptick in trip acceptances involving pick-up distances beyond 3km.
For customers, this translates into a reduced chance of enduring back-to-back long waits when their drivers cancel.
As for concerns regarding fare changes, customers can rest easy knowing their fares, based on distance traveled, remain unaltered.
However, it’s essential for drivers to understand that this new fee structure won’t be applicable across the board.
Services like GrabShare, Hire, Standard Taxi, GrabHitch, and GrabCoach are exceptions.
Grab has assured that they’ll refine the new structure based on feedback before expanding its application. More specifics will be provided in due time.
Towards a More Equitable System
Under the previous system, the fairness was often in question.
Drivers narrowly missing out on the 3km bonus due to mere centimetres felt the pinch. But such grievances are set to be a thing of the past with the revamped structure.
Furthermore, during 2022’s commission rate hike, the ramifications of the nationwide GST increase were shouldered exclusively by drivers. After a long wait, the financial pressures on them are set to ease.
As reported by The Business Times, Grab commented on the new structure, stating it offers a “fairer solution” that compensates drivers for their entire journey. Moreover, the higher service fees from closer pick-ups will help counterbalance the increased fares given to drivers undertaking bookings with extended pick-up durations and distances.
And so, the competition intensifies.
In a competitive twist, Gojek has already responded by slashing its commission rates for drivers by 5% from 1 November.
Associate Professor Walter Theseira from the Singapore University of Social Sciences believes that other competitors might follow suit if Grab’s initiative bolsters driver engagement and loyalty.
Amidst these industry rivalries, one thing’s certain: loyal customers stand to gain the most.
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