Global tech

Uber cuts driver pay in fare drop plan

- July 8, 2024 2 MIN READ
Photo: AdobeStock
Ridesharing giant Uber will cut the pay of its contract drivers next month as it discounts fares.

Despite having the lion’s share of the market, Uber emailed drivers late last week flagging the cuts, arguing that it will lead to more demand. But the change will squeeze margins for drivers already struggling with rising fuel and insurance costs.

Uber, a software platform, takes a 27.5% slice of the total fare, regardless, while drivers face fixed costs from fuel to wear and tear on their vehicle amid increased operating costs.

“We anticipate that these changes will lead to an increase in rider demand and result in more trips for driver-partners,” the email sent to drivers on Thursday said, adding that from August 7, “in most cases, the rates will be lower than those currently used.”

Uber Eats deliveries are not part of the fare changes.

In recent years the company’s algorithm went from being a cheaper version of taxi fares based on time and distance at price-per-km to a more opaque cost that can vary depending on the exactly the same trip depending whether you’re booking it for business or personally. The company now haggles on how much it can get away with charging you.

A survey commissioned by the Transport Workers Union (TWU) last year found that two-thirds of full-time transport gig workers earn less than minimum wage.

TWU National Secretary Michael Kaine said the rideshare industry has lacked a safety net of regulation until now, with new legislation giving the Fair Work Commission the ability to set enforceable standards for transport gig economy workers from August 26.

“Some of the most vulnerable and underpaid workers in our economy are once again facing cuts to their earnings in a market that’s in freefall,” Kaine said.

“The longer it takes for a minimum standards order to be determined, the lower pay and conditions will sink. We need to see the industry come together with maximum support for early minimum standards orders so the process can move as efficiently as possible to stabilise the market.

“Stopping the freefall with a safety net of binding standards that can be built up over time is critically urgent for gig workers and companies alike.”

It’s believed fares could fall by around 5% at a time when inflation continues to rise at around 4%, with petrol prices among the key drivers.

Uber dominates the Australian market, representing 80% of all rides last year, generating $646 million in revenue in 2023.

Indian rival Ola suddenly bailed from Australia  after five years in April, also shutting down in New Zealand and the UK with just a few day’s warning.

Earlier this year, Uber settled a class action by the Australian taxi industry with a $272 million compensation deal.  In the decade since it began operating illegally in Australia, the company has faced the ire of regulators on several occasions, including a $21 million fine for four years of misleading users over cancellation fees and taxi prices in December 2022 – and a $412,500 fine for sending 2 million spam emails.

More recently, the defunct Australian startup and taxi app rival GoCatch has been seeking millions in damages from Uber in the Victorian Supreme Court case, accusing the US tech giant of using spyware to hack the GoCatch platform for driver details to poach them.

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