Grab revamps driver compensation system for “fairer” pay, keeping passenger fares unchanged

SINGAPORE: Grab recently announced adjustments to its driver compensation system, aiming for a fairer and more responsive approach without impacting passenger fares.

Effective November 14, the changes seek to address concerns raised by drivers about lengthy pickups.

In a statement published on Grab’s official website, the company outlined its decision to replace the fixed commission model for certain transport services with a dynamic fee structure.

The updated driver fare calculation will now consider the entire journey, starting from the acceptance of the booking and continuing through to the passenger’s drop-off point.

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

Tackling dwindling customer satisfaction

This alteration arrives during a period of decreased customer satisfaction with taxi and private-hire services, stemming from a shortage of drivers within the industry.

The move follows a similar initiative by competitor Gojek, which announced a reduction in driver commissions from 15% to 10% effective from November 1 until at least the end of 2024.

In the recent updated announcement, Grab said Initial trials conducted earlier this year revealed that 98% of approximately 300 drivers experienced either a neutral or positive impact on their earnings with the new fare structure, compared to the previous model.

Importantly, Grab emphasized that passenger fares would remain unaffected by these changes.

Currently, the existing fare structure is based on the time and distance of the passenger’s journey, neglecting the distance a driver may travel from their current location to the pickup point.

Nonetheless, drivers are compensated with a fixed S$3 fee for certain pickups located more than 3 kilometers away.

In addition to these fees, Grab currently imposes a fixed commission of 20.18%, including Goods and Services Tax, on the passenger fare.

Dynamic ‘service fee’ to reflect driver proximity

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

The Grab service fee may be lower when driver-partners have to travel further and spend more time getting to the passenger’s pick-up point. Conversely, the Grab service fee may be higher if the driver-partner is closer to the pick-up point.

Grab emphasized that the newly introduced variable service fee aims to ensure equitable compensation for driver-partners, all the while maintaining the status quo for passenger fares.

“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.”

Grab said his service fee can occasionally manifest as a negative value, indicating that the driver is being paid more than what the passenger is paying for the trip.

According to Grab, the surplus generated from these higher service fees will be distributed across the platform.

Grab has assured that there will be no alterations to the way passenger fares are determined.

“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. ”

Grab added that they also observed up to 7 percentage point improvement in driver acceptance rate of trips with pick-up distances that exceed three kilometres, which would have contributed to a more reliable service and better experience for passengers.