Melbourne's commuters are bracing for another day of public transport chaos, as tram drivers walk off the job for the second time in a fortnight.

Key points: Tram disruptions set to last until mid-afternoon

Tram disruptions set to last until mid-afternoon Taxi, hire car drives call for regulation of UberX

Taxi, hire car drives call for regulation of UberX Businesses say strike affecting Melbourne's reputation

Businesses say strike affecting Melbourne's reputation Check PTV website for cancellations

Yarra Trams staff stopped work at 10:00am for a four-hour strike, as the industrial dispute between their union and the company rolled on.

At the same time, about 500 Melbourne taxi and hire car drivers rallied on the steps of State Parliament, urging the Government to better regulate ride-sharing service Uber X.

Services were disrupted from 9:00am as trams started returning to depots, and commuters were warned to expect more delays as trams get back on track after the strike ends.

Yarra Trams organised buses to replace trams on some routes, connecting with trains, running through the CBD and along St Kilda Road and servicing major hospitals and universities.

The company and the Rail, Tram and Bus Union (RTBU) failed to make a breakthrough in last-minute talks aimed at averting the strike and resolving their lengthy pay dispute.

Taxi drivers rally against Uber on the steps of Victoria's Parliament House. ( ABC News: Patrick Rocca )

At the protest against Uber X, organiser Sandy Spanos from the group Victorian Taxi Families said the company was not subjected to the same regulations as other taxis.

She said it was time it played by the rules.

"The taxi industry represents 150,000 full-time jobs across Australia, career jobs," she said.

"The taxi industry places around $1.4 billion into the state and federal coffers via tax and GST. What does UberX contribute? Nix.

"That's what they contribute. Nix."

David Singh, also from Victorian Taxi Families, said Melburnians could expect more action, including a 24-hour strike next week.

In response, Uber said the protests were being led by "taxi investors, not drivers".

"These same investors are the ones who have kept drivers' wages low and working conditions poor for decades before Uber arrived," the company said in a statement.

The company said "hundreds of taxi drivers" had switched to Uber since the ride-sharing company began operating in Australia.

They called on the Government to "implement sensible, safety-based ridesharing regulation as quickly as possible".

Victorian Premier Daniel Andrews said the Government was looking into the best way to regulate Uber but that a national approach may be required.

He said technology had moved faster than the law and they needed to "get the balance right with safety, security and standard".

'Good offer' on the table: Yarra Trams

The RTBU rejected Yarra Trams' offer of a 13 per cent pay rise over four years.

Assistant secretary Phil Altieri said members were "ropeable" that the company had twice broken a promise to submit an improved pay offer, so they felt they had been left with no option.

"Late in the piece when we've invoked some industrial action or threatened to invoke industrial action is when we've got some breakthroughs," he said.

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But Yarra Trams chief executive Clement Michel said the company could not afford the union's demand for 18 per cent.

"We believe that the offer on the table is a very good offer," he said.

"It's not only maintaining the conditions of all our employees, it's actually improving the conditions of all our employees."

Mr Altieri said tram drivers wanted predictable hours of work.

"We give up Christmas Day, we give up public holidays, we give up Easter, we give up school holidays and it's important we have some predictability," he said.

"The way it's been manipulated, it's just ridiculous, it's just not viable to work that way."

The Victorian Government has not ruled out taking the union to the Fair Work Commission in a bid to stop further strikes, but Mr Andrews encouraged both sides to continue negotiations.

"I'm not saying that there shouldn't be a pay rise for our public transport workforce, of course there should be," he said.

"But it needs to be responsible, and it needs to be sustainable, balanced and fair. And I think that the best outcome, that outcome will be achieved by talking."

Strikes 'causing damage' to city's reputation

Mark Stone from the Victorian Employers Chamber of Commerce and Industry said the recurring public transport strikes were causing untold damage to the city's reputation.

"I think it's a disgraceful attempt at a cash grab by a greedy union. It's more than money. It's the disruption it causes," he said.

"People starting and finishing work, dropping kids off at school, getting home earlier for the same reason, as well as the reputational damage.

"In the private sector for the last few years we've been seeing payrises in line with CPI, so it's been about 2 per cent per annum.

"What this particularly union is looking for is over double CPI, and they've got exceptionally generous conditions as well."