Navigating the gig economy: Legal implications for businesses and workers – Industry News

– By Sandeep Agrawal

Innovation in digital technology and the rapid promulgation of high-speed internet and smart devices have transformed the global economy. Entrepreneurs have cashed in on the opportunity to build an online digital ecosystem that delivers services at your fingertips. However, the rise of the digital economy has also resulted in a physical transformation of labour. While online businesses operate without a brick-and-mortar store, they need workers to deliver products and supply services in the physical world. From fulfilling online transportation services to delivering food items, medicines, and other goods, products, and services (pest control, sanitisation, repair, among others), ‘gig workers’ are everywhere. Aggregator businesses are the largest employers, along with ride-hailing services. Studies have found that over 1.5 million micro-entrepreneurs are involved in ride-hailing services, whereas more than 7 million are part of the ‘gig economy’.

In the pre-digital era, these services were provided by micro-entrepreneurs who set their own charges for their services/ products. While ‘gig workers’ have been defined under section 2(35) of the Code of Social Security, 2020 as a person who participates in a work arrangement and earns from such activities outside a traditional employer-employee relationship, the codes are yet to be notified. The business ecosystem consists of 63 million enterprises, of which a mere 1 million are formal and provide benefits stipulated under labour laws. Thus, 90% of the country’s workforce is employed in informal enterprises. This consists of home-based workers, contract workers, and informal workers who are excluded from the current labour law framework.

The gig economy allows flexibility for workers across cities, age groups, genders, and skill sets to pick up work without being tied down to any specific work profile. Furthermore, it is easier for individuals entering the labour market to find gig work than conventional jobs that require specialised skills and work experience. This workforce is set to cross 23 million individuals by the end of the decade compared to the current 7 million.  Gig workers can be further classified based on whether they use a digital app to find customers. Those who do are called platform workers, whereas those who are day-job and non-technology-based temporary workers are called non-platform workers. 

Under the present regime, workers are classified into employees, contract and migrant workers, and workers in the unorganised sector. Employees are subject to protection and benefits under various acts and schemes, including the Payment of Bonus Act, 1965, Maternity Benefit Act, 1961, EPF, and ESI, among others. Similarly, contract and migrant workers are protected under the Contract Labour (Regulation and Abolition) Act, 1970, and the Inter-State Migrant Workmen (Regulation of and Conditions for Service) Act, 1979. Workers in the unorganised sector are provided for under the Unorganised Workers’ Social Security Act, 2008. There is no provision for gig workers across all these laws, schemes, and regulations. Shortfalls in salary, lack of insurance, difficulties accessing credit, and income fluctuations are common challenges they face.

For businesses, gig workers represent a convenient workforce without any statutory obligations. Since these workers are neither treated as employees nor contract labour, businesses have the freedom to hire and let go of any number of workers, depending on demand. There is no provision for a set minimum wage, social security, or other benefits. In addition, it is also possible for businesses to reduce compensation or make it completely dependent on the end user to pay for their labour. Consequently, these workers are left vulnerable and at the mercy of market forces.

The passage of the labour codes was crucial as ‘gig workers’ are brought under the purview of social security. Moreover, integrating the gig economy and the unorganised sector with ESIC schemes and EPFO is also under consideration. The Code on Social Security, 2020 establishes the National Social Security Board, which oversees and recommends schemes for contract and platform workers. Fixed-term employees (FTAs) engaged in contractual employment for a specified duration are also eligible to receive benefits equivalent to regular employees. These workers will become eligible for gratuity even though they are fixed-term employees. Aggregator businesses will be required to contribute towards welfare schemes for gig workers. In addition, aggregators will also pay 1%-2% to 5% of the total turnover to the gig workers. Moreover, the Occupational, Safety, Health, and Working Conditions (OSH&WC) Code, 2020 recognises gig workers and brings them under the umbrella of social security schemes. This gives them access to insurance, provident and pension funds, health and maternity benefits, and schemes to upskill themselves.

Once implemented, the labour codes will prove pivotal in reducing income inequality and clearing away the potential roadblock of a burgeoning gig economy. The inherent social schemes will allow for rapid skill development, which will then increase the share of the formal economy in the labour market. This workforce will play a crucial role in India’s bid to become a $10 trillion economy by the end of the decade. An increasingly younger workforce is coming into the labour market every year. Policy interventions and technology will need to strike a balance to ensure that this workforce is able to contribute to the formal sector and not remain constrained in ‘gig projects’.

(Sandeep Agrawal is the Director and Co-founder at Teamlease Regtech.)

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