Thursday, September 3, 2009

The Meaning of Bonus

As I had said before, there are many taxi companies in Singapore. One of them is called Prime Car Rental & Taxis.

In Singapore, taxi-drivers need to sign an agreement with the taxi company for rental of the taxis as taxi-drivers are not allowed to own their own taxis. The taxi companies have various incentives to attract taxi-drivers to rent taxis from them. Prime has one which states that they will give a $11,000 bonus to their taxi-drivers if the taxi-drivers rent taxis from them for 5 straight years.

The taxi-drivers signed the agreement in good faith, fully expecting this bonus to be paid to them. However, there seems to be a catch the taxi-drivers do not know about. Taxi-drivers renting taxis from Prime Car Rental & Taxis have to pay a fee of $6.03 per day on the taxis. As the amount is small, the taxi-drivers paid it, thinking it was part of the rental.

However it now seems that Prime Car Rental & Taxis is using this $6.03 fee to pay for the bonus of the taxi-drivers. $6.03 per day over 5 years comes to slightly over $11,000 and Prime Car Rental & Taxis is using this to pay for the 5-year bonus.

Naturally the taxi-drivers are up in arms about this and I can understand why. When I hear the word ‘bonus’, it is something ‘extra’ that is given to you. Prime Car Rental & Taxis is taking a daily fee from the taxi-drivers, giving it back to them in a lump sum, and then calling it a bonus.

I’m no lawyer so maybe that’s why I don’t get this but how in the world can this be called a ‘bonus’? At best, it is a savings scheme; at worst, a well-worded contact by Prime to cheat their own taxi-drivers from the very start; but how can they called it a ‘bonus’?

Is there any readers out there who can explain this to me?


Anonymous said...

If the payment of the $11k is dependent on the rental of the cab for a fix period of time, and a premature termination of the rental will result in the daily contribution being forfeited by the company. In that sense, the $11k payment is indeed a bonus and not repayment of a saving scheme.

If the driver expects the daily contribution to be return regardless of the rental period, then the daily contribution is part of a saving plan, and the drive is mislead into by the concept of bonus.

The company should have the right decide how the daily rental plus other contributions is to be utilized which is in accordance to the terms of the contract.

sgcynic said...

If we can "accept" the "market subsidy" by HDB as subsidy, then anything goes. Uniquely Singapore

Ghost said...

To Annon 5.38pm;
But wouldn't that mean that the taxi-drivers are paying themselves the $11,000 because it is coming out of their own pockets?
If you pay yourself, can it still be called a bonus?

Anonymous said...

It's a bonus in the sense that if the driver survive the 5-year contract, that he can still be alive to claim it, and provided he did not get complained and have his contract prematurely terminated. Either way, Prime is the overall winner, while the poor driver has more odds stacked up against him.

Anonymous said...

If this is true, in doing this the company will have a cash flow advantage. The taxi company need not borrow money from the bank for new investment and save interest that can be incurred.

The drivers actually have to forgo the interest that should be paid to them. With inflation, these drivers will be forever losing out.

Ghost said...

True, there is no advantage to the drivers at all.

Anonymous said...

To Ghost,

To a very large extent, the Company who collect the rental can choose how the money collected is presented. The company can choose to 'hide' the 'bonus' contribution in the daily rental fee itself.

Money given back to the drive, term as a rebate or bonus will always come out from their own pocket since rental payment is still the main bulk of the Company income.

The final payout is an incentive for the driver to hang on for 5 years. Since its a term in the contract, discussion of advantages or disadvantages after it is sign is quite meaningless. Its more important to find out if the Company mislead or misinformed the driver into signing an unequal contract.

From my personal knowledge (dad actually drive of of those, and I did look through the contract prior to him signing it), the daily rental rate (including the rebate/bonus contribution) is still lower than the main taxi company in the market.

The downside is mainly limited access to the booking service market, and potential reduction is rental rate from other company (unlikely).

I do believe that the driver has weaker bargaining power, but from the perspective of the Company, they deed fork out capital to purchase the vehicle, and is driven to get the most return out of these investment. If the terms of the contract is present fairly and clearly to the drivers, I don't see how the drivers are being put in less advantage position now just because they know how the payout is being financed.

Annon 5.38pm

Ghost said...

The company can choose to 'hide' the 'bonus' in the daily rental fee itself but Prime didn’t. They specifically charge $6 for the $11,000 bonus…without telling the drivers what the $6 is for. From what I see, various taxi companies have various schemes and the daily rental is only one part of the cost of driving a taxi. Rebates on petrol etc might actually be more important than daily rental of the taxi.

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