Ola Limits Driver Incentives To 5% Of Total Earning; Commission Charged From Drivers Fixed At 20% Across India

According to reports, the ride-hailing company Ola has been under pressure for some time from investor SoftBank to turn profitable as soon as possible and to go public with its IPO. 

This is the reason that they have now embraced a standard commission from every driver, and a fixed incentive.

How Did This Happen?

The cab aggregator Ola is in the process of adopting standardized driver commissions.

The company is moving away from an incentive-driven model to give its drivers better visibility into their earnings in a bid to revive the supply of drivers that has taken a hit over the past year.

Since then, the company has been taking several steps in this direction.

As per the reports, the latest moves Ola has made is to standardize the payouts to drivers across the country in order to attract more drivers into its fold.

What Would Change With This Move?

The commissions and incentives paid by Ola had not been going down well with the driver community according to reports. 

Most of them would drop out or do more trips for rival Uber. These left Ola with fewer vehicles on the road and in turn a huge drop in business.

In response to this, the company is now switching to a fixed 20% commission from all drivers.

According to the company, this move will make sure that the drivers will know what to expect at the end of the month and encourage them to stay put with Ola and not think of migrating. 

What About The Incentives?

The company notes that the earlier system of calculating the variable incentives based on the number of trips made etc. was seen as highly arbitrary and not to the liking of the drivers.

Although, the policy to incentivize the drivers will still be in place but it will be limited to just 5% of the overall earnings being set aside.

Apart from this, the other positive outcome for Ola from this move is that its own internal cash flow will improve and will result in posting better results financially. 

What Does Ola Say About This Change?

According to the cab-hailing company, the only factor that must be worrying Ola and the other cab aggregators in the country is the proposed legislation the government is expected to bring to regulate the sector including the commissions retained from the drivers etc. 

the government may put the cap at just 10% of the fare collected from the riders but it is yet unconfirmed.

What Are The Future Plans For Ola?

Apart from the driver incentive standardization, the Ola has more plans up its sleeves. Out of them, one is to offer its cars on lease to corporates.

So far, Ola owns 10,000 cars and can turn into the largest operating lease company in the whole of Asia. 

Another one of its offerings would be self-driving cars to individuals. 

Usually, these streams of business may pose more challenges operationally, the rewards in terms of the returns are quite handsome and much less risky.

The company is already associated with Vogo, the two-wheeler renting business.

Soon the venture of theses companies jointly deploying more than 100,000 scooters on the roads.

However, carrying out all these activities, the company is constantly looking at cutting down on the losses figure in its balance sheet. 

As per the last report for the financial year 2018-19, it reflected the losses coming down to half the previous figure.