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Homesingapore businessGrab tweaks driver commissions to be 'fairer' to those picking up distant...

Grab tweaks driver commissions to be 'fairer' to those picking up distant passengers; 'no change' to fares

SINGAPORE: Grab is making tweaks to how drivers are compensated in what the platform operator said will be a fairer system, adding that passenger fares will be unaffected.

The move, to take effect from Nov 14, is aimed at addressing one of the key areas of feedback from drivers over picking up passengers from distant locations.

In a statement on its website, Grab said it will be replacing its fixed commission approach for some of its transport services with a variable fee component.

The change will mean drivers are compensated based on the effort they put in to pick up their passengers, it said.

“The new driver fare structure is applicable to all services except for GrabShare, Hire, Standard Taxi, GrabHitch and GrabCoach services,” it added.

The new fare structure is being introduced amid a decline in overall customer satisfaction with taxi and private-hire services as the industry experienced a shortage of drivers.

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It also comes soon after one of Grab’s competitors, Gojek, announced that it will reduce the commission collected from its drivers to 10 per cent from 15 per cent, starting Nov 1 until “at least the end of 2024”.

Pilots that Grab conducted earlier this year with about 300 drivers found that the new fare structure had a “neutral to positive impact” on the earnings of 98 per cent of them, as compared to the old fare structure.

The tech company said on its website that there will be no change to how passenger fares are calculated.

HOW IT WORKS FOR DRIVERS

The existing fare structure is based on the time and distance travelled between a passenger’s pick-up and drop-off points – not taking into account the distance travelled by a driver from his current location to pick up the passenger.

However, drivers are currently awarded a flat S$3 (US$2.20) fee for certain pick-ups located further than 3km from his current location.

Grab also charges its drivers a fixed 20.18 per cent of the passenger fare including Goods and Services Tax as commission.

Under the new structure, Grab will charge a variable “service fee” in lieu of the fixed commission.

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The fee may be lower if a driver has to travel a long time or a long distance from his current location to pick up a passenger. On the other hand, Grab may charge a higher service fee if the driver is closer to the pick-up point.

This variable Grab service fee allows driver-partners to be fairly compensated for their effort to complete every booking without impacting passenger fares, it said. 

The service “fee” could also be negative in some cases, which means that the fare the driver gets is higher than that paid by the passenger. Grab will pay the difference.

“Higher service fees will be redistributed across the marketplace and be used to offset fares paid to driver-partners when they complete bookings with longer pick-up time and distance,” the company added.

TODAY understands that during the new driver fare structure pilots, the Grab service fee was observed to range between -10 per cent and 25 per cent.

The fixed S$3 far pick-up bonus will also no longer be available once the new fare structure kicks in.

HOW WILL PASSENGERS BE IMPACTED

There will be no change to how passenger fares are calculated, according to Grab.

“It would not be fair for passengers to pay for drivers’ pick-up effort as they have no control over the distance of their pick up location to the closest driver,” said the company.

Grab added that it observed an up to seven percentage point improvement in driver acceptance rate for trips involving pick-up points located further than 3km away from the driver.

This would have improved service reliability and better experience for passengers, it added further.  

Ms Leow San Nee, a Grab driver for about three years, said that some drivers may be unhappy with the new fare structure if they were to look at individual trip earnings.

“They should focus on the weekly or monthly earnings; I’ve not seen any negative impact on my earnings since I’ve been on this pilot,” said the 43-year-old.

She added that she sees better earnings for certain bookings involving further pick-up locations.

This article was originally published in TODAY.

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