Gig and Platform Workers under Labour codes

The Formalisation of the Gig Economy: A Detailed Analysis of India's Code on Social Security, 2020, and the Mandate for Gig and Platform...

The Formalisation of the Gig Economy: A Detailed Analysis of India's Code on Social Security, 2020, and the Mandate for Gig and Platform Workers

1. Executive Summary and Foundational Context

1.1. Contextual Necessity of Labor Reform

India’s labor framework was modernized through the implementation of four new Labour Codes, rationalizing and repealing 29 existing central labour laws, many of which were outdated.

Key Drivers for Reform:

• Outdated Laws: Many previous laws dated back to the 1930s–1950s and could not address the modern digital and gig-driven economy.

• Excluded Workforce: Large segments of the workforce, particularly gig and informal labour, were left outside any social safety net.

• Goals: The reform aims to ensure better wages, occupational safety, gender equality, and simplified compliance.

• Implementation: The Codes were implemented with effect from November 21, 2025.

1.2. The Landmark Policy Shift

The Code on Social Security (CoSS), 2020, executes a landmark policy shift by formally recognizing and extending a social safety net to millions of Gig and Platform Workers, who were previously excluded from statutory frameworks.

Core Policy Components:

• Universal Coverage: The CoSS mandates universal social security coverage for all workers, including gig and platform workers.

• Benefits: Coverage encompasses provident fund (PF), Employee State Insurance Corporation (ESIC), and other insurance and welfare benefits.

• Financing: The Code establishes a unique financing structure that mandates specific financial contributions from ‘Aggregators’ (online platforms).

• Legal Status: This inclusion is achieved without reclassifying gig workers as full-time employees, preserving the flexibility model of the gig economy.

2. Statutory Status: Formal Recognition and Definitional Nuance

The CoSS, 2020, provides the first statutory definitions for the key entities within the digital economy, which is the prerequisite for extending social security coverage.

Category	Statutory Definition (CoSS, 2020)	Operational Focus
Gig Worker	A person who performs work or participates in a work arrangement and earns income from such activities outside of the traditional employer-employee relationship.	Defines work that is transactional, project-based, or intermittent.
Platform Worker	A person engaged in or undertaking "Platform Work."	Defined by the method of engagement: utilizes an online platform to access individuals to provide specific services in exchange for payment.
Aggregator	A legally defined entity (listed in Schedule 7 of the CoSS) that utilizes the services of gig and platform workers.	Includes companies in ride-sharing, food/grocery delivery, e-marketplaces, and content/media services.

2.1. The Explicit Exclusion from "Employee" Status

The Code maintains a clear legal distinction between these new classifications and a traditional ‘Employee.’

• Employee: Defined as someone employed on wages by an establishment, either directly or through a contractor, to perform any work, skilled or unskilled.

• Gig/Platform Worker: Explicitly acknowledged as working outside this traditional employment structure.

• Policy Rationale: This strategy avoids forcing platforms to provide comprehensive, retrospective financial liabilities (like mandatory gratuity or severance) associated with full employment status, offering collective welfare instead of individual rights.

2.2. Formalization of Employment

The overall labor reform promotes formalization across all categories, including:

• Mandatory Appointment Letters: All workers, including those on fixed-term contracts, must be provided with appointment letters to ensure transparency and formal employment history.

3. Mandated Social Security Coverage and Benefit Architecture

The Code mandates a defined social safety net, shifting the provision of welfare from a voluntary company decision to a mandatory, government-backed program.

3.1. Universal Inclusion and Scheme Mandate

• Statutory Requirement: Sections 113 and 114 empower the Central Government to frame specific, tailored social security schemes for unorganised, gig, and platform workers.

• Universal Coverage: Ensures access to core benefits for all workers.

3.2. Scope of Welfare Benefits

The mandated schemes are intended to cover essential benefits necessary for workers' dignity and security:

Category of Benefit	Details of Coverage
Insurance	Life and Disability Insurance, Accident Insurance.
Health & Medical	Health Insurance and Medical Protection.
Old-age Protection	Pension benefits.
Family Support	Maternity benefits (including 26 weeks of maternity leave), and access to crèche facilities.
Welfare Schemes	Access to general schemes related to housing, credit, and food security, often facilitated through the e-Shram portal.

3.3. Institutional and Delivery Mechanisms

The CoSS establishes a clear architecture for managing and disbursing benefits:

Mechanism	Function
Central Social Security Fund (Welfare Fund)	Pooled fund where aggregator contributions are directed; designated to finance nationwide worker-welfare schemes.
Aadhaar-linked Universal Account Number (UAN)	Mandatory registration tool ensuring seamless, portable access to benefits across different states, regardless of worker migration.
National Social Security Board	Expanded body responsible for designing, monitoring, and reviewing the schemes. Includes formal representation from both aggregators and workers.
Aggregator Responsibility	Mandated to electronically register every platform-based gig worker and educate them about the available social schemes.

4. The Aggregator's Obligation: The Unique Financing Mechanism

The most consequential feature is the imposition of a mandatory financial obligation on Aggregators to fund the social security apparatus.

4.1. Mandatory Financial Contribution Details

The core mechanism for financing the Central Social Security Fund relies on a mandatory levy on the online platforms.

Parameter	Central Code on Social Security (CoSS) Mandate
Contribution Rate	1% to 2% of the aggregator’s annual turnover (exact rate to be notified by the government).
Maximum Contribution Cap (Crucial Protection)	Cannot exceed 5% of the total amount paid or payable by the aggregator to gig and platform workers.
Responsible Entities	Aggregators listed in Schedule 7, including those in ride-sharing, food/grocery delivery, e-marketplaces, and content/media services.

4.2. Multi-Sourced Funding

The Social Security Fund is designed to be multi-sourced, receiving contributions from:

• Aggregators (the primary revenue stream via the turnover levy).

• Central Government grants and contributions.

• State Government grants and contributions.

• Potential future contributions from individual platform-based gig workers (as seen in some state models).

5. Critical Analysis: Formalization Without Employment Status (The Policy Trade-off)

The CoSS ensures a mandatory safety net through welfare schemes but deliberately avoids imposing statutory obligations associated with the employer-employee relationship. This maintains platform flexibility but creates structural vulnerabilities for workers.

5.1. The Missing Core Protections

The Code does not mandate the following critical statutory protections that traditional employees receive:

• Statutory Minimum Wages: Unlike formal workers, gig workers are not guaranteed a minimum wage payment.

• Paid Leave: No mandate for paid sick leave or annual leave entitlements.

• Job Security and Severance: Workers are not guaranteed protection from arbitrary termination or entitlement to severance pay.

• Gratuity: No prescribed entitlement to gratuity or other long-term benefits (in contrast to Fixed Term Employees, whose gratuity eligibility was reduced to one year).

5.2. Comparison of Core Labor Rights

Labor Right/Benefit	Traditional Employee (Statutory Right)	Gig/Platform Worker (CoSS 2020 Provisions)
Statutory Minimum Wages	Mandated entitlement	Not mandated
Paid Leave	Mandated entitlement	Not mandated
Gratuity/Severance	Legal entitlement upon service completion	Not mandated
Health Coverage	Robust ESIC/employer-funded contributory insurance	Coverage through specific welfare schemes financed by a non-wage levy
Formal Documentation	Mandatory appointment letters	Mandatory registration/Unique Identification (UAN)

6. Implementation Challenges and Regulatory Divergence

The effective integration of gig workers into the social security net faces hurdles relating to finalization of regulatory details and the emergence of state-level laws.

6.1. Status of Central Scheme Finalization

• Ongoing Process: The Central Government is still finalizing the operational contours and rules of the social security scheme.

• Need for Clarity: Complex administrative hurdles remain, such as defining terms like 'payout' and 'transaction' to ensure accurate contribution calculation by aggregators and prevent underreporting.

• Impact: Until specific schemes are notified, the mandated benefits remain aspirational.

6.2. Role of States and Emerging Fragmentation

The delay in central implementation has led to legislative action at the state level, creating regulatory fragmentation for national aggregators.

State Divergence Example: Karnataka Act, 2025

• Scope: Goes beyond mere welfare by regulating certain aspects of work conditions, requiring aggregators to inform workers about how automated systems impact their work.

• Institutional Structure: Establishes a dedicated Gig Workers Welfare Board and Fund.

6.3. Divergent Funding Models

National aggregators must navigate differing, complex contribution mechanisms across jurisdictions:

Contribution Mechanism	Central Code on Social Security (CoSS)	Karnataka Platform-Based Gig Workers Act
Metric Used	Percentage of the aggregator’s Annual Turnover.	Percentage of the Payout per Transaction (levy of 1% to 5%).
Complexity	Uses an aggregated, annual financial metric.	Requires implementation of different accounting systems based on each transaction.

7. Economic and Market Implications for the Gig Economy

The mandatory aggregator contribution constitutes a new, regulated cost of business for the online economy, leading to potential shifts in cost distribution.

7.1. Aggregator Financial Response

• Industry View: Major platform companies (e.g., Zomato's parent Eternal, Swiggy, Uber) have publicly welcomed the regulatory clarity and stated that they do not anticipate the rules will have a "detrimental" or "material impact" on their long-term financial health.

• Stabilization: The industry views the unified, pan-India framework as a positive step for stabilization and improving the ease of doing business.

7.2. Dynamics of Cost Shifting

While aggregators are mandated to contribute, the final economic burden may be shifted:

• To Consumers: Costs could be passed on via higher service charges if demand for platform services is inelastic.

• To Workers: Executives have expressed concerns that the social fund requirement may reduce the earnings or incentives of platform workers, effectively making workers finance their own security benefits.

• Trade-off: The guaranteed welfare benefits may unintentionally lead aggregators to restrict opportunities or lower take-home incomes to offset the regulated costs, impacting labor supply.

7.3. Sustainability of the Fund

• Growth Projections: The gig workforce is projected to increase substantially, reaching an estimated 2.35 crore workers by 2029–30.

• Adequacy Concern: The long-term financing of comprehensive, tenure-based benefits like old-age pensions based solely on a 1-2% levy on turnover will require continuous evaluation. Actuarial review will be necessary to ensure the fund’s solvency and adequacy.

8. Conclusion and Strategic Policy Outlook

8.1. Synthesis: A Transformation in Labor Governance

The Code on Social Security, 2020, successfully integrates the gig and platform workforce into the national social security framework by:

• Formalizing Status: Providing the first statutory definitions for gig workers, platform workers, and aggregators.

• Mandating Welfare: Requiring specific, government-backed schemes covering health, maternity, life insurance, and old-age protection.

• Establishing Financing: Imposing a mandatory 1-2% levy on aggregator turnover (capped at 5% of worker payouts).

The core policy trade-off is the preservation of operational flexibility (no minimum wage or paid leave) in exchange for mandatory collective social welfare.

8.2. Future Policy Recommendations

For effective implementation, the focus must shift to operational execution, regulatory harmonization, and monitoring:

• Expeditious Finalization of Schemes: Promptly notify the final Central schemes and create clear operational rules to define ambiguous terms like "payout" and "turnover," as benefit efficacy is contingent on these details.

• Harmonization of Regulatory Frameworks: Develop a clear strategy to reconcile the divergent funding models (turnover vs. transaction-based levies) implemented by proactive state governments to ensure regulatory uniformity for national aggregators.

• Preventing Cost-Shifting: Establish stringent enforcement and monitoring mechanisms to prevent aggregators from shifting the mandated contribution cost onto the workers through reduced incentives or lower pay, thereby undermining the reform's core objective.

• Assessing Fund Adequacy: Conduct continuous actuarial analysis to evaluate the long-term solvency of the 1-2% levy, given the projected exponential growth of the gig workforce and the expansive scope of long-duration benefits like pensions.