Gig Economy in India Introduction

• The Union Ministry of Labour and Employment is working on drafting a national law to integrate gig workers into social security schemes, aiming to provide benefits like health insurance and retirement savings. 
• The government plans to mandate aggregators to contribute 1%-2% of their revenue toward the creation of a social security fund, which will support these benefits. 
• Additionally, efforts are underway to revise the definitions of gig and migrant workers to make them more inclusive and better aligned with evolving employment trends.

Present Status of the Gig Economy in India

• India currently has around 7-8 million gig workers, and this number is rapidly growing.
• NITI Aayog estimates that the number of gig workers could expand to 23.5 million by 2029-30.
• The gig economy is expected to expand at a Compound Annual Growth Rate (CAGR) of 12%, potentially reaching 23-25 million workers by 2030. This would mean that gig workers could make up 4.1% of India’s total workforce by that time.
• A report by Boston Consulting Group (BCG) suggests that the gig economy could create 90 million non-farm jobs and contribute an additional 1.25% to India’s GDP, reflecting its potential as a significant economic driver.

Factors Behind Growth of the Gig Economy in India

• • The COVID-19 Pandemic: During the lockdowns, many traditional jobs were disrupted, prompting individuals to seek alternative employment opportunities. With companies moving toward remote work and freelancers providing essential services like food delivery, healthcare support, and logistics, the gig economy became a viable option for many.
  • Digital Revolution: India’s rapid digitalization has been a game changer. Increased access to smartphones, affordable internet, and the rise of platforms like Zomato, Uber, Swiggy, and Ola have provided gig workers with more opportunities.
  • Changing Workforce Preferences: A shift in mindset, particularly among millennials and Gen Z, has made gig work attractive. A survey by NITI Aayog found that more than 77% of young professionals are willing to pursue gig roles for flexibility. The launch of platforms like UrbanClap (now Urban Company), which allows skilled workers to offer services like home repairs or beauty services on-demand, has contributed to this shift.  
  • Additional Income: Rising inflation, which touched around 7.44% in July 2023 (as per Ministry of Statistics), has compelled many individuals to seek supplementary income through gig work. Delivery partners, for instance, can earn between ₹15,000 to ₹25,000 per month, depending on the platform and hours worked, providing significant financial relief in times of economic pressure. 

• Business Demand for Cost-Effective Solutions: Startups and SMEs have increasingly turned to gig workers to minimize expenses. The Indian Staffing Federation estimates that businesses can save up to 20-30% by employing gig workers instead of full-time staff. The rise of freelance marketplaces like Upwork and Fiverr has made it easier for companies to access on-demand talent, thus enhancing productivity while cutting costs. 

Definition of Gig Workers

• According to NITI Aayog, gig workers are those engaged in livelihoods outside the traditional employer-employee arrangement. They are classified into two categories:
  • Platform Workers: Individuals whose work is based on online software applications or digital platforms.
  • Non-Platform Workers: Generally casual wage workers in conventional sectors, working part-time or full-time.
• The Code on Social Security, 2020 also defines gig workers as those engaged in livelihoods outside the traditional employer-employee relationship.

Government Initiatives for Gig Workers in India

• Labour Jurisdiction: Labour falls under the Concurrent List of the Constitution, meaning both the Centre and states have jurisdiction over the sector.
• Code on Social Security, 2020: This code provides a framework for developing suitable social security measures for gig and platform workers. It addresses life and disability coverage, accident insurance, health and maternity benefits, and old-age protection. Additionally, it establishes a Social Security Fund to finance welfare schemes. Section 113 of the Code mandates the registration of unorganized workers, including gig and platform workers. However, the Social Security Code passed by Parliament in 2020 has not yet been implemented, as rules are still pending from all states.
• e-Shram Portal: The Government of India has launched the e-Shram online portal for the registration of all informal and gig workers.
• Rajasthan Act: Rajasthan became the first state to enact legislation for gig workers by introducing the Platform Based Gig Workers (Registration and Welfare) Act on July 24, 2023. This law established a welfare board, issued unique IDs for workers, and created a system to monitor payments through a Central Transaction Information and Management System (CTIMS).
• Karnataka Act: The Karnataka Platform-based Gig Workers (Social Security and Welfare) Bill-2024 includes provisions against unjust dismissal of gig workers and establishes a dispute resolution mechanism. The state’s labour department will create a welfare board and a welfare fund for these workers.

Downsides of Non-Recognition of Gig Workers as Traditional Formal Employees

• Current Classification: Indian labour and employment laws currently recognize three main categories of employees:
  • Government employees
  • Employees in government-controlled corporate bodies (Public Sector Undertakings – PSUs)
  • Private sector employees, including managerial staff and workmen
• Employee Benefits: Formal employees are guaranteed certain working conditions, such as minimum wages under the Minimum Wages Act, 1948, specified working hours, and compensation for termination.
• Lack of Employee Status: Gig workers in India do not have ‘employee’ status under the law, leading to several consequences:
  • Inability to form unions to represent their interests
  • Exposure to exploitative contracts
  • Absence of tripartite dialogue among the government, employer organizations, and gig workers’ unions.

Challenges in Government Initiatives 

• Absence of Traditional Employee Status: The recent Karnataka Bill and Rajasthan Act, akin to the Code on Social Security 2020, still fail to recognize gig workers as traditional employees by using terms like “aggregator” instead of “employer.” This limits gig workers’ access to comprehensive labor rights and protections. For instance, gig workers are excluded from entitlements such as paid leave, retirement benefits, or health insurance, which formal employees enjoy. The Gig and Platform Workers Act, introduced in Rajasthan in 2023, was criticized for not addressing this fundamental issue, leaving gig workers vulnerable to exploitation.
• Minimum Wages: One of the critical gaps in current regulations is the absence of minimum wage guarantees for gig workers. Unlike formal sector workers who are protected by the Minimum Wages Act, gig workers remain excluded. A 2023 report by the International Labour Organization (ILO) pointed out that many gig workers in India, particularly delivery personnel for platforms like Swiggy and Zomato, earned well below the minimum wage in urban centers like Delhi and Mumbai. Despite efforts, no regulatory framework mandates a minimum wage for gig workers at the national level.
• Welfare Board Shortcomings: The welfare board model for gig workers, similar to those introduced for construction and unorganized sector workers, has faced implementation challenges. For example, the Construction Workers Welfare Act (1996) and the Unorganized Workers Social Security Act (2008) have struggled with the underutilization of funds and bureaucratic delays. A 2022 Comptroller and Auditor General of India (CAG) report found that only 52% of the allocated funds for unorganized workers’ welfare were utilized, leaving significant gaps in the coverage of benefits.
• Exclusion from Industrial Relations Code: The exclusion of gig workers from the Industrial Relations Code (2020) leaves them without access to dispute resolution mechanisms available to formal workers. For example, gig workers cannot raise industrial disputes regarding wage cuts or poor working conditions under this code. This issue became evident during the 2022 protests by Zomato and Swiggy delivery workers in Bengaluru, who demanded better pay and working conditions but were left without a legal framework to escalate their grievances.
• Misuse of Power Balance by Employers: According to a 2023 ILO study, platform companies often misuse the power imbalance by altering payment structures and reducing incentives that initially attracted workers to gig jobs. The same study revealed that drivers for Uber in India saw a significant decline in earnings, with some reporting a drop of up to 40% in their monthly incomes due to frequent changes in commission structures. This trend continues as platform companies make unilateral decisions without any regulatory oversight.
• e-Shram Portal Registration: The government’s e-Shram portal, intended to register informal workers, including gig workers, has faced challenges in ensuring accuracy. A 2023 report by NITI Aayog showed that over 28% of the 28.5 million workers registered on the platform were from the gig economy, but issues in self-declaration led to the misclassification of many workers. The lack of verification mechanisms raised concerns about the effectiveness of the portal in providing accurate data on gig workers.
• Formal Companies with Informal Workers: Several prominent gig platforms, such as Ola and Uber, operate as formal companies but employ gig workers informally. This duality allows them to avoid providing benefits to workers, such as job security or health insurance. According to a 2023 report by the Centre for Internet and Society, the gig workers employed by these formal companies face high levels of job insecurity, as they lack any recourse to formal employee rights.
• Social Security Gap: The Social Security Code (2020) offers limited provisions for gig workers. For example, while maternity benefits are provided to formal sector employees under the Maternity Benefit Act (1961), which includes 26 weeks of paid leave, gig workers are only entitled to a small cash benefit ranging from ₹5,000 to ₹10,000, as seen in government data from 2023. This disparity in benefits has been a point of contention, particularly for women gig workers who lack comprehensive support during maternity.
• Low Compensation and Platform-Related Issues: Gig platforms have been criticized for inadequate compensation, frequent changes in commission structures, and delays in payments. For instance, a 2022 report by NITI Aayog, titled “India’s Booming Gig and Platform Economy,” highlighted that while platforms such as Swiggy, Zomato, and Urban Company have created employment opportunities, the income of gig workers remains inconsistent, and many earn below minimum wage standards in urban areas. The report noted that workers on these platforms earned between ₹15,000 to ₹18,000 per month on average, far below the promised earning potential.
  •  Furthermore, the Ministry of Labour and Employment pointed out in its 2022 annual report that gig workers face irregularities in payment schedules, with delays extending up to several weeks, which undermines their financial stability. 
• Gender Disparities: Women in the gig economy face numerous challenges, including lower pay and fewer opportunities for advancement. A 2023 study by SEWA Bharat revealed that women working for platforms like UrbanClap earn around 30% less than their male counterparts due to discrimination and a lack of bargaining power. Gender biases in gig work remain a significant barrier to economic equality in the platform economy.
• Poor Treatment: Gig workers, particularly those in delivery roles, face mistreatment from various stakeholders.Oxfam India’s “India Inequality Report 2023” emphasized how gig workers, particularly those from marginalized backgrounds, are often subjected to discriminatory behavior and harassment while delivering services, exacerbating their vulnerability due to the lack of formal labor protections. 

Way Forward

• Defining Employment Relations: To secure gig workers’ rights, it is essential to clearly define the employment relationship between aggregators and gig workers. A precedent set by the U.K. Supreme Court in the Uber case, where Uber drivers were classified as workers and Uber was deemed the employer, could serve as a model in India, helping to formalize gig work and extend necessary protections to workers.
• NITI Aayog’s Recommendations: RAISE Framework is proposed by NITI Aayog, outlining a five-pronged approach to ensure the realization of full access to social security for all gig and platform workers. The key components of the framework are:
  • Financial Inclusion: Enhance access to institutional credit through financial products specifically designed for platform workers and those interested in establishing their own platforms.
  • Skill Development: Promote platform-led models of skill development and job creation in the gig and platform sector to facilitate horizontal and vertical mobility for workers seeking opportunities in this field.
  • Enhancing Social Inclusion: Implement gender sensitization and accessibility awareness programs for workers and their families. Platform businesses should partner with Civil Society Organizations (CSOs) to support various worker demographics, including women workers and persons with disabilities (PwDs).