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Chinese ride-hailing companies ordered to improve drivers’ pay and labor conditions

Written by Mengyuan Ge Published on     2 mins read

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Ride providers must also disclose their commission caps.

Regulators in China on Tuesday unveiled new guidelines to protect gig drivers’ rights in the ride-hailing industry, ensuring drivers receive fair pay and adequate rest as authorities tighten scrutiny of China’s tech sector and gig economy.

The new rule, outlined by eight government departments, requires ride platforms to set “reasonable” commission fees taken from drivers after each trip. These amounts will have to be shown to drivers and passengers on the apps. Companies must also provide basic insurance and benefits to the drivers, who are usually gig workers rather than full-time employees.

On average, ride companies charge 25% commission from drivers, and this information is typically not shared with them. In 2020, Didi reported that its commission was 20.9%. These fees account for the lion’s share of its revenue, of which 3.1% is the company’s annual net profit. Didi admitted that there were orders with commission fees that were above 30%, but these accounted for less than 3% of the orders on its app.

The regulators said they are working with local ministries to set an upper limit on ride-hailing commission fees charged to drivers, although the exact figure or fee structure mandate is still under discussion.

There are 236 registered ride-hailing platforms in China, with millions of drivers who make their services available through these apps. Chinese authorities have expressed concern over the exploitation of these drivers, who often work overtime and lack basic insurance.

In September, Chinese antitrust officials called on firms that provide food delivery services to guarantee a base income and social welfare for their riders. Plus, the regulators ordered 11 ride-hailing companies, including Didi Chuxing, to safeguard their drivers’ labor rights. The companies were also told to halt all business actions that “disrupt market order.”

The latest guidelines will likely lead to fundamental changes in the ride-hailing market. If the platforms are obligated to provide insurance for their drivers, then companies like Didi and Meituan may add millions of full-time employees to their ranks and add significant overhead expenses to their budget.

In particular, Didi, which possesses nearly 90% of China’s ride-hailing market, has been a significant target in regulatory crackdowns. It is being asked by the Chinese government to delist from the New York Stock Exchange, according to Bloomberg.

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