Employment LawIndia’s Gig Economy: Trends and Insights

INTRODUCTION

The gig economy in India has experienced rapid growth, with millions of workers engaged in app-based services such as ride-hailing, food delivery, and freelance work. However, this growth has also brought to light significant concerns regarding workers’ rights, job security, and social protection. In response to these challenges, several state Governments are now introducing new laws and policies aimed at improving conditions for gig workers.

Notable developments include the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023 (“Rajasthan Act”), and the proposed Karnataka Platform-Based Gig Workers’ (Social Security and Welfare) Bill, 2024 (“Karnataka Bill”). Additionally, the Code of Social Security, 2020 (“COSS”), is also a significant step toward formalizing protections for gig workers. This code aims to extend social security benefits to gig and platform workers by integrating them into the broader framework of labor welfare. It includes provisions for health and maternity benefits, old age protection, and other social security measures.

These laws seek to provide social security benefits and enhance protections for gig workers, potentially setting a precedent for regulations in other states and at the national level.

KEY HIGHLIGHTS OF THE RAJASTHAN PLATFORM-BASED GIG WORKERS (REGISTRATION AND WELFARE) ACT, 2023

Rajasthan has become the first Indian state to pass a dedicated law for gig and platform-based workers, acknowledging their unique employment conditions and providing them with social security benefits. The Rajasthan Act introduces several key provisions aimed at improving the working conditions of gig workers and ensuring their welfare.

1. Creation of a Gig Worker Welfare Board

The Rajasthan Act mandates the establishment of a state-level Gig Worker Welfare Board responsible for:

• Regulating the working conditions of gig workers.
• Overseeing the implementation of welfare schemes.
• Ensuring compliance by digital platforms (such as ride-hailing, food delivery, and e-commerce companies).
• Maintaining a database of gig workers for better policy implementation.

This board will serve as a centralized body to coordinate benefits and act as an intermediary between gig workers and platform companies.

2. Mandatory Worker Registration

The law requires all gig workers operating in Rajasthan to register with the Gig Worker Welfare Board. Platforms such as Uber, Ola, Zomato, Swiggy, Amazon, and Flipkart must ensure that their workers are registered. Registration allows workers to access welfare benefits and social security schemes. This step ensures that gig workers, who often work without formal contracts, are recognized and brought under a structured welfare framework.

3. Social Security Fund

A Gig and Platform Workers’ Welfare Fund has been created to provide social security benefits, including health insurance, accident coverage, and pension schemes. This fund is financed through:

• A mandatory contribution from digital platforms, ranging between 1% and 2% of the total value of each transaction.
• Government support and other sources as prescribed by the Welfare Board.

This provision aims to reduce the financial vulnerability of gig workers, who often lack traditional employee benefits such as provident funds and gratuities.

4. Grievance Redressal System

To protect workers from exploitation, the Rajasthan Act establishes a formal grievance redressal mechanism that allows gig workers to:

• Raise complaints related to payment disputes, deactivations, unfair practices, or workplace issues.
• Seek legal recourse in case of violations by platform companies.

This system is crucial in addressing the power imbalance between workers and large digital platforms, ensuring fair treatment and protection from arbitrary actions by employers.

The Rajasthan Act sets a precedent for other states to introduce similar regulations. It acknowledges the growing gig economy and ensures that workers receive basic social security. By implementing this law, Rajasthan has taken a progressive step toward improving the working conditions of gig workers and balancing the interests of both workers and platform companies.

KARNATAKA’S PROPOSED GIG WORKER BILL: WHAT TO EXPECT?

The Karnataka Bill is aimed at protecting gig workers, particularly those employed by platforms like Ola, Uber, Zomato, and Swiggy. This Bill is expected to take inspiration from the Rajasthan Act, but will likely include modifications based on feedback from industry stakeholders and worker unions. Here’s what the proposed bill may cover:

1. Minimum Wages & Earnings Transparency

The Karnataka Bill might introduce a minimum earnings threshold to ensure that gig workers receive fair and consistent pay. Platforms could be required to disclose fare breakdowns to workers, ensuring they understand their earnings per ride or delivery after deductions, such as platform commissions and service charges. Additionally, the Government may implement regulations on surge pricing to prevent platforms from manipulating worker pay unfairly.

2. Insurance & Social Security

The legislation may mandate comprehensive insurance coverage that includes health insurance, accident coverage, and life insurance, funded either by the platforms or through a shared contribution model. It could also introduce pension schemes or contributions to the state’s social security fund to provide long-term financial stability for gig workers. Maternity benefits and paid sick leave could be included to ensure basic welfare standards.

3. Platform Accountability & Fair Work Practices

Companies may be required to register gig workers as beneficiaries under a Government-monitored welfare board. There could be strict penalties for unfair deactivations, ensuring that workers are not arbitrarily suspended or terminated without a proper grievance redressal process. The Karnataka Bill might also include provisions for fixed working hours and overtime pay to prevent worker exploitation due to excessive workloads.

4. Worker Data Protection & Algorithmic Transparency

The law may introduce safeguards against algorithmic bias, ensuring that rating and incentive systems are not unfairly designed to disadvantage certain workers. Platforms could be required to disclose how their rating and payment algorithms work to prevent arbitrary pay cuts or job restrictions. Moreover, the Karnataka Bill may grant workers the right to appeal terminations or negative ratings through a fair and transparent process.

Karnataka’s approach to gig worker welfare aims to strike a balance between protecting workers’ rights and ensuring the sustainability of the digital platforms operating in the state. While the specifics are still under discussion, this legislation could set a precedent for other Indian states looking to regulate the gig economy.

CHALLENGES FOR PLATFORMS AND BUSINESSES

Governments are increasingly introducing stricter labour laws to protect gig workers, creating significant challenges for platforms and businesses in this sector. While these regulations aim to enhance worker pay, benefits, and job security, they also lead to increased operational costs that companies must manage strategically. Here are some key challenges they face:

1. Passing Costs to Consumers

One immediate consequence of higher operational expenses is the potential for price increases for end-users. Gig platforms, such as ride-sharing and food delivery services, often operate on commission-based revenue models. If labour laws mandate that companies provide benefits like health insurance, retirement contributions, or minimum wages, businesses may respond by:

• Raising service fees or delivery charges, making services less affordable for consumers.
• Increasing commission rates for gig workers, possibly leading to dissatisfaction and decreased participation.
• Implementing surge pricing or membership models to counterbalance rising costs.

The risk here is that higher prices could drive consumers toward alternative options, such as public transportation, traditional restaurants, or competitors with lower costs.

2. Restructuring Business Models

With new labour laws advocating for greater worker protections, some gig platforms may need to re-evaluate the traditional gig work model and consider different employment structures. This might involve:

• Transitioning gig workers to part-time or full-time employees. Although this provides workers with more stability, it also escalates costs related to payroll taxes, insurance, and benefits.
• Adopting a hybrid model, offering both independent contractor roles and more stable employment options to balance costs and compliance.
• Exploring automation to reduce reliance on human workers. Businesses might invest in artificial intelligence, robotics, or self-driving technology in response to rising labour costs.

Such structural changes could significantly affect the flexibility that has historically attracted both workers and consumers to gig platforms.

3. Facing Compliance Issues

Ensuring compliance with evolving labour laws can be complex and resource-intensive, particularly for companies operating across regions with varying regulations. Key challenges include:

• Proper worker classification – Determining whether a worker qualifies as an independent contractor or an employee under new legal definitions can be legally challenging.
• Fund contributions and benefits management – Platforms may be required to contribute to social security, pension funds, or unemployment insurance, necessitating new financial and administrative systems.
• Legal risks and penalties – Non-compliance with labour laws could result in lawsuits, heavy penalties and fines, or bans from operating in certain regions, impacting profitability and market presence.

While labour laws aim to protect gig workers, they present significant financial and operational hurdles for businesses. Companies must carefully balance compliance, profitability, and customer satisfaction. Whether through price adjustments, structural changes, or legal adaptations, businesses will require innovative solutions to sustain operations in this evolving landscape.

AMLEGALS REMARKS

India’s gig economy is undergoing a significant transformation, largely due to the increasing push for regulations across various states. As more state governments introduce labour laws aimed at addressing worker rights and social security, the prospect of a national regulatory framework is becoming more likely. If implemented effectively, such a framework could establish a balanced gig economy; one that maintains the flexibility valued by workers while also providing businesses with a stable and predictable operational environment.

While these regulations have the potential to improve working conditions for millions of gig workers, they also come with risks. If the laws are overly restrictive or costly for platforms, companies may reduce gig opportunities, automate jobs, or pass additional costs onto consumers. This could lead to unintended consequences such as fewer job opportunities, decreased platform profitability, and slower growth within the gig economy. Ultimately, whether these regulations empower workers or create new obstacles will depend on how they are framed, implemented, and adapted over time. India is at a critical juncture, and the next few years will be crucial in determining the future of gig work in the country.

– Team AMLEGALS

For any queries or feedback, feel free to reach out to rohit.lalwani@amlegals.com or mridusha.guha@amlegals.com