Uber’s new pricing model to further cripple drivers amid cost-of-living crisis

Imagine earning just $5 for about 30 minutes of work — or just $10 an hour — compared with the current Australian minimum wage of $24.10.

That is an estimation of the reality many rideshare drivers now face, industry insiders tell 7NEWS.com.au.

After the service fee is removed from fares, then GST, drivers say they are left with little.

And this does not factor in superannuation and insurance costs, which drivers must manage themselves.

But far from taking action to increase wages during a cost-of-living crisis, Uber has just announced it will overhaul its pricing model to reduce fares by approximately 5 per cent nationwide while simultaneously increasing its service fee — or the portion of fares it takes from drivers — to almost 30 per cent.

Uber driver Adam Nelson was previously on the grandfathered service fee rate of 22.5 per cent.

But, like all drivers on this old rate, he will now have to hand over 27.5 per cent on all trips to Uber.

“It’s cheaper for passengers but at what cost?” Nelson told 7NEWS.com.au.

“Lower fares mean lower earnings.

“We’re dealing with skyrocketing cost-of-living and insurance ... it goes against what we need at the moment.”

Drivers have to pay for their own insurance, battling climbing costs and providers increasingly refusing to cover rideshare workers.

“People are paying $500 or $600 a month for car insurance,” Rideshare Drivers Network secretary Shane Millsom told 7NEWS.com.au.

“A lot of the (insurance) companies are just leaving the market entirely.

“NRMA only offers it for those who offer less than 10 hours.”

In other markets such as the United States, Uber covers auto liability insurance on all drivers’ behalf.

“Lower fares will force drivers to work more,” Nelson said.

“It’s an unsustainable business model, decreasing fares means we won’t be able to make a living.”

Millson agrees, saying: “At the end of the day, Uber has decided to reduce driver pay so they can give passengers a fee reduction.

“There’s no reason they couldn’t decide to reduce the fee and take slightly less money themselves.

“People are just desperately trying to make minimum wage (and) struggling to make ends meet.

“Drivers need to be paid for their time at work.”

‘Lucky to make minimum wage’

Uber maintains the reduced fares will result in more demand for rides on the platform, which in turn will create more earning opportunities for drivers.

However, Millsom said this was not the case when fares were reduced in the past.

The addition of the service fee being increased feels like salt in the wound, Millsom said.

“They could reduce the rates without reducing driver pay,” he said.

Millsom believes drivers will leave Uber as a result of the changes, and feels it’s a “deliberate move to stop long-term drivers” from staying with the platform.

“Uber definitely relies on ... drivers signing up, doing a few months of work, then leaving,” he said.

“(As a driver, you’re) lucky if you’re making minimum wage after costs.”

Uber now seems to rely on “a continual churn of drivers” who will move on after a few months of driving, Millsom said.

‘No care for drivers’ wants or needs’

The changes to the pricing model were announced in stages to different regions, which Millsom said feels like a deliberate move to stop drivers from coordinating action.

“They’ve done this deliberately so there’s no way drivers can protest,” Millsom said.

The removal of greenlight hubs, or physical centres where Uber drivers could talk to management, also feels deliberate.

While the hubs were shut down as a result of the pandemic, they have never been reopened.

Without them, drivers have no way of voicing concerns or protesting unfair changes peacefully.

“They have no care for drivers’ wants or needs,” Millsom said.

The new pricing model also coincides with Uber’s expected appearance before the Fair Work Commission, though Uber denies the changes are related to the orders they expect the Fair Work Commission to make.

However, Millsom said the service fee rise could be seen as an opportunistic way to save face by lowering this fee while still ensuring it stays above the previous amount.

The Transport Workers Union has also criticised the changes, saying: “The gig economy continues to spiral without the safety net of enforceable standards.”

The TWU praised the Closing Loopholes Bill, which was passed in February and will soon be enacted.

The legislation gives the Fair Work Commission the ability to set minimum standards for gig economy workers, such as rideshare drivers.

Drivers will now be considered “employee-like” if they meet certain criteria.

“The longer it takes for a minimum standards order to be determined, the lower pay and conditions will sink,” TWU national secretary Michael Kaine said.

“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.”

Submissions can be made to the Fair Work Commission from August 26.

Uber has boasted about its involvement with Closing Loopholes, though Millsom was critical of this.

The legislation has “actually legalised the loophole”, he said.

While Millsom “sincerely hopes” the legislation with make a difference, he feels Uber has played too large a role in its creation.

“I don’t have a lot of faith, unfortunately, that it will improve things.”

Uber responds

The new cheaper fares are set to come into effect from August 7, and the new service fee will be applied from September 1.

“As ever, our aim is to continue providing quality, safe and affordable rides for Aussie passengers while creating compelling earnings opportunities for drivers,” Uber told 7NEWS.com.au.

The company has “always sought to provide a fair and equitable experience for everyone who chooses to earn with Uber”, it said.

“We acknowledge the impact this will have for a small percentage of current drivers, and we are taking additional steps to ensure these individuals are supported through this transition, including granting them complimentary diamond status under our Uber Pro program,” it said.

“We’re committed to providing a great experience for drivers, from our industry-leading package of support for EV drivers to the discounts and exclusive offers available via Uber Pro.”

Under Uber Pro, drivers receive discounts including 12 cents off each litre of petrol at BP service stations, 8 cents per kilowatt off EV charging, 20 per cent off wiper and battery services at Supercheap Auto and 25 per cent off tyres at Bridgestone.