Costlier Grab rides? Expect this trend to continue

New legislation provides CPF safety net for drivers, but it's the passengers who may have to bear the extra cost.

- Jianggan Li

I recently joined the popular local podcast The Daily Ketchup as a guest to discuss, among other things, the issue of costs of platform services many of us use on a daily basis: ride hailing and food delivery.

In 2025, getting a ride in Singapore will be more expensive. Grab, Gojek, Tada and CDG Zig had announced that they would be increasing their prices from Jan 1, 2025. One key driver of this shift is Singapore's upcoming Platform Workers Act.

Momentum Works expects the Act to add at least $493 million in Central Provident Fund (CPF) costs for ride-hailing and food delivery platforms over five years; and the platforms are likely going to pass these costs on to consumers.

THE ADDITIONAL COSTS TO RIDE-HAILING

Let's break down how the Platform Workers Act will exactly impact the economics of your typical ride-hailing trip by using an example.

Assume that an on-demand ride costs you $20, and the platform charges 20 per cent commission. This means the platform operator will get $4 in net revenue, while the driver takes home $16.

By 2029, when the Platform Workers Act is fully implemented, additional costs such as CPF contributions ($1.36 per ride) and insurance (20 cents per ride) will add approximately $1.60 per ride to the industry's cost structure.

While the Government has introduced a temporary support scheme from 2025 to 2029 to help offset drivers' CPF contributions during the transition, drivers' take-home pay will inevitably decrease as part of their income is allocated to CPF savings. At the same time, the industry's cost structure will rise due to these additional requirements.

Although drivers must adjust to a lower take-home pay, the bigger question remains: Who will absorb the increased cost to the industry?