The gig economy is a burgeoning sector in India with estimates projecting that the number of gig workers will rise to a whopping 23.5 million by 2029-30 from 7.7 million at present. Another estimate has it that the gig economy alone will account for 30% of India’s non-farm workforce in the coming years.
The sector involves a wide range of industries – from ride-sharing and food delivery to freelance digital services. Unlike traditional employment models, a distinguishing feature of the gig industry is that it offers more flexibility and autonomy to workers. However, this same flexibility has turned into a double-edged sword, as the informal nature of gig work has prevented workers from securing basic rights.
The introduction of the Code on Social Security in 2020 marked a significant step towards recognising the need for social security in the gig economy. However, the Code does not provide clarity on the exact classification of gig workers. This legal ambiguity leaves them without essential labour protections including minimum wages, health insurance, and retirement benefits. Moreover, the government recently proposed a social security net which will require aggregators to contribute 1-2% of their revenue towards the welfare fund. Not only will this be inadequate, but it can also be counterproductive which will hurt both workers and the platform industry.
The legal ambiguity around gig workers
While the intent of the Code is in the right direction, legal ambiguity around the classification of gig workers can still deprive them of basic rights such as income security, access to health and accident insurance, retirement benefits, and better working conditions. Most platform companies categorise gig workers as ‘partners’ or ‘independent contractors’ primarily due to the flexible nature of recruitment. Unlike formal sector enterprises, these workers are not employed on a contractual basis. Since they are not considered ‘employees’, companies evade the responsibility of implementing basic worker rights typically associated with conventional employment.
This classification allows companies to deal with workers individually rather than as a group or as a union, which strips them of any collective bargaining rights. Therefore, companies end up holding significant leverage over the workers, which leaves the workers vulnerable to systemic exploitation without any legal consequences for the companies. Workers often complain of facing arbitrary terminations, wage theft, and lack of recourse in disputes.
The Code gives further impetus to this issue by defining ‘gig worker’ as “a person who performs work or participates in a work arrangement…outside of traditional employer-employee relationship”. It lends legal credence to the claim that gig workers must be seen as different from employees, which reinforces the asymmetrical power relationship.
What is important to note is the underlying principle of this clause: gig work is primarily viewed as a part-time activity or a supplemental source of income, distinct from traditional full- time employment. However, according to a survey, 78% – 83% of platform workers like cab drivers and grocery delivery personnel are working more than 10 hours a day, spending more time on gig work than an average office employee. Therefore, by defining gig workers strictly as individuals participating in non-traditional work arrangements, the Code inadvertently locks them out of protections and benefits that would otherwise be available to them under labor laws. It disincentivises companies to enforce labour regulations.
The flaws of the proposed welfare cess
Furthermore, government’s proposal to impose a 1-2% welfare cess on platform aggregators’ revenue for financing the social security fund will adversely affect the industries and the workers. Shifting the entire burden on the industries without any government stake could threaten the gig economy’s cost-efficient model. Companies may try to offload the burden on the customers, which will impact their competitiveness. This may eventually hurt the workers in the long run in terms of pay cuts, job satisfaction and low job retention.
Possible solutions to address these issues
Such legal ambiguities around the classification of platform workers can lead to implementation gaps and thus perpetuate income insecurity for workers with no fixed working hours, no minimum wage guarantee or welfare benefits. Hence, to address these issues and safeguard the rights of gig workers without undermining the gig economy’s viability, two key reforms are essential.
The first step should be amending the code and creating a distinct legal category for gig economy workers. This acknowledges their unique work arrangements (flexibility and worker autonomy) and at the same time guarantees them the much-needed employee like protections such as minimum wages, health insurance and other social security benefits. It will help address the existing legal ambiguities which platform aggregators exploit and instead enable gig workers to be able to collectively demand their basic rights. Since they no longer will have to engage with platform companies as ‘independent contractors’ or ‘partners’, it will help balance out the power dynamics. This also addresses the challenge of assigning benefits. The new category, while technically distinct from employees, will have similar traits and provide gig workers access to a separate set of social security benefits already outlined in the Code.
Secondly, the burden of levy must be shared between the government and the platform aggregators. We need a new financial arrangements which provide adequate social security benefits to the workers while also ensuring companies are not overburdened. Hence, an ideal scenario would be that the government creates a dedicated social security fund for gig workers which will be financed collaboratively by the Union government and platform companies. Additionally, to avoid burdening smaller companies, contributions from aggregators can be proportional to their revenues, with supplementary government support to ensure the welfare fund remains sustainable. This reform will encourage compliance among platform companies while making sure that there are adequate funds to provide the necessary protections and benefits to the workers
A balanced path forward
The gig economy represents a significant opportunity for economic growth and employment in India. However, its current form leaves millions of workers vulnerable to exploitation and insecurity. By creating a distinct legal category for gig workers and establishing a collaboratively financed social security fund, the government can address the sector’s inherent challenges without undermining its benefits.
These reforms are not just a moral imperative, they are also a pragmatic necessity. It is time for policymakers to recognise the unique needs of gig workers and ensure that their rights and protections keep pace with the gig economy’s rapid evolution.
Akshat Sogani is a former LAMP fellow and an Ashoka University alumnus. He is currently pursuing a Masters in Public Policy at the Lee Kuan Yew School of Public Policy, National University of Singapore.
