What Does Karnataka’s New Bill For Platform-Based Gig Workers Entail?

The Union government rationalised multiple labour laws into four codes, viz. the Code on Wages, the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Code on Social Security during 2019–20.

One of the unique features of the Code on Social Security is that it includes “gig workers” for the first time in a labour law, though this inclusion comes with its own problems (which we shall see later). The government “may” (not ‘shall’, which is missing from the commentaries on the code) from time to time frame schemes relating to life and health, old age protection, etc. of gig workers, the code provides.

Apart from Union and state governments, aggregators are expected to pay 1–2 percent of their annual turnover with a cap of 5 percent for this purpose. It is not a social insurance project as the workers do not pay a penny towards the social security fund. Though laudable for some reasons, the code has not seen the light of the day even though five–six years have passed.

In the case of the other codes, several state governments have implemented some of the provisions such as extending the threshold from 100 to 300 workers for hire-and-fire (Industrial Relations Code); from 20 to 50 for applications relating to contract workers (Occupational Safety, Health and Working Conditions Code); from 10 with power to 20, and 20 without power to 40 under the Factories Act, 1948 (Occupational Safety, Health and Working Conditions Code).

One of the unique features of the Code on Social Security is that it includes “gig workers” for the first time in a labour law, though this inclusion comes with its own problems.

Thus, some of the major employers’ labour flexibility demands have been addressed even though the codes carrying these amendments remain in cold storage. It is only the Code on Social Security that remains unimplemented at any level save a few exceptions.

Another reason for the emergence of state-level laws on social security is the confusion the Union government causes. A recent news item in the Times of India reported that aggregator platforms will be asked to deduct a certain percentage of workers’ wages and deposit the same with the Employees’ Pension Scheme and the government would top it up with 3–4 percent contribution of the deposit made by the platforms.

This is completely beside and beyond the legal framework enacted in the Code on Social Security by the Parliament. There is no legal basis for this scheme at all. These do not help the cause of the gig workers and confuse the actors and academics in society.

The gig economy has the attention of the government and society as new technological waves have become the talking point for anticipating and shaping the future of the world of work. A Niti-Aayog Report in 2022 estimated that during 2020–21, around 7.7 million workers were engaged in the gig economy and by 2029–30, they would expand to 23.5 million and workers with high and low skills would expand. They may equal or even surpass the factory sector employment (18.49 million in 2022–23).

Criss-cross of laws

Therefore, it is natural that some state governments such as Rajasthan, Karnataka, Jharkhand and Haryana have sought to fill the void on social security cover for gig workers, the only labour protection on record for them.

While Rajasthan has enacted the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023, the Karnataka government has proposed a draft Bill, the Karnataka Platform Based Gig Workers (Social Security and Welfare) Bill, 2023, which we shall examine here. It is a longer and more detailed Bill than the Rajasthan Act.

One can anticipate that there will be the potential problem of two labour laws or provisions on the same subject.

One can anticipate that there will be the potential problem of two labour laws or provisions on the same subject.

More importantly, the question of levying from the aggregators at the national level for the social security fund will be problematic. It can be cured by the ‘sunset’ clause but doing so will defeat a huge amount of effort and investment in these worthy causes.

The Union government has been guilty of being silent on and even indifferent to this question. When such a situation arose in the 1920s on the issue of provincial governments framing trade union laws, the federal government persuaded them that the national Bill was in the offing and asked them to shelve their Bills. Some directive or even a strong suggestion was missing. 

At the outset, in a technical sense, should not the Bill drafters consider the possibility of linking the Bill with cousin laws such as the Shops and Establishments Act (a state law under which the aggregator companies might be registered) as well as the Motor Vehicles Act, 1988 for technical aspects such as registration, licence and claims tribunal process for accident compensation?

Procedures under some of them, for example, accidents under the Motor Vehicles Act, could impinge on the compensation processes under the Bill. Incidentally, the Bill concerns itself little with details of gig workers such as their age, technical competence and licences.

Central to the law on social security are a few issues, viz., what are the aspects of social security that are sought to be covered? What are the schemes that will be floated? Who will be the funding agencies? How much will each contribute to the funding? What are the issues involved in these aspects? These merit attention first before we address other technical issues later.

Social security

There are two basic aspects of a social security law. One, how social security is defined. Two, who will be contributors to the social security fund and how much each of them will contribute. Coming to the heart of the Bill— social security— there is no definition of ‘social security’ in it, unlike in the Code on Social Security.

It is instructive to mention the Code on Social Security’s definition of social security here. “Social security means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to healthcare and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed under this code,” reads Section 2(78).

Further Chapter IX of the Code on Social Security needs to be fittingly placed in this Bill. It is very important for the Bill to lay out the aspects of social security that it seeks to cover and define each component. Various schemes covering each of the components must be specified though the nuts and bolts of them can be left to the rule-making process.

Should it be a gross payout with its commission component? What components of pay need to be included? These and other issues need to be sorted out.

This will give the lawmakers an idea of what is offered on the plate and perform cost-mapping accordingly. Even though minimum wages do not strictly qualify as a component of social protection, a discussion on fair contracts will be meaningless unless a minimum wage or payout assured to each worker for a given period in an accounting year is specified in a narrow sense.

It can be broadened to specify the critical minimum earning to the worker should there be no business at all, as a fallback wage. This needs to be thought through seriously. All costs of providing social security, including the administrative costs, need to be roughly mapped to talk about the levies to the social security fund to which we turn next.

The social security fund is crucial to achieving the objectives of the law. There are basically three actors, viz., the companies, workers and the government. For companies’ contribution, there are three models, viz., the ‘cess model’ under the Building and Other Construction Workers Welfare Cess Act, 1996, under which construction companies provide between 1–2 percent of the cost of construction as cess; the ‘EPFO model’, where workers and employers make matching contributions of the individual’s salary; the ‘ESIC model’, where the employers and the workers make 3.25 percent and 0.75 percent of the total wages paid to all the employees of the company (aggregate wage cost).

The Code on Social Security has adopted the cess model [see Section 114(4) of the Code on Social Security] without any questions because there presumably seems to be no scientific study of levying 1–2 percent of the annual turnover subject to a cap of 5 percent. Why not 4–5 percent?

The Karnataka Bill stipulates the same 1–2 percent of the “payout to the platform-based gig worker in each transaction…” [Section 21(1)]. Then, given the vexatious and controversial nature of payments made for each transaction to the worker, it would be required to define clearly terms like ‘payout’ and ‘transaction’.

Should it be a gross payout with its commission component? What components of pay need to be included? These and other issues need to be sorted out.

The lawmakers must stick to the ESIC model for two reasons. In the case of levy on each transaction, there is every likelihood of passing on the payout share welfare fee to the worker or the customer, the latter depending on the nature of the elasticity of demand— the more inelastic the demand, the greater the probability of passing.

Given the controversies and the complex nature of the payout which the workers themselves do not understand, who is going to scrutinise the correctness of the contributions?

Given the controversies and the complex nature of the payout, the workers themselves do not understand, who is going to scrutinise the correctness of the contributions? As a customer, I may not even know whether I am bearing the cost partly or fully and whether I am contributing indirectly towards the social security fund.

Two, a percent of the total employees’ wage Bill at the aggregate level will be simple to identify and would also be authentic. This item will be available in the audited accounts of the companies. If the companies make any adjustments in the payout, they will be transparent in the accounts books. As the Bill makes clear, the ‘welfare fee’ in Section 21, following the “fund for gig workers” (Section 20), “contributions made by individual platform-based gig workers” are not defined.

It must be included in appropriate places and also the rate of contribution must be clearly defined. It can be a nominal percent of the total employees’ wage bill as we saw earlier. If workers have to contribute, then their share can be ‘x’ percent of the total employees’ wage bill of the company.

The contention is that unless the three actors contribute to the fund, it would be inadequate to meet the different aspects of social security. Even the National Commission on Enterprises in the Unorganised Sector envisaged contributions from the three actors, including a nominal one from the unorganised workers.

It is also important that the government makes a matching contribution to the fund which is easily calculable (government’s contribution = employer’s contribution + workers’ contribution). By the way, this cess model of 1–2 percent must be revised. That would depend on the conceptualisation of social security schemes to be framed, which do not find a mention in the Bill, which is a major lapse. It must be clear to one and all which aspects of social security the law wishes to provide.

Other technical issues

Now we turn to other technical issues. The code has sought to elaborately define ‘gig worker’. A gig worker is one who works according to the “terms and conditions laid in such contract”. What kind of a contract is the Bill talking about and under what contract registered with which law? The highlighted technical phrase is ambiguous and needs clarity.

The heart of this Bill remains the registration of the universe of the workers for which it rightly depends on the aggregator and platforms.

It is interesting that this definition differs glaringly and rightly so from the one given in the Code on Social Security: “Gig worker means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer–employee relationship.” [Section (2)(35)].

By the way, Schedule I must have an open clause— as given the rapid pace of technological development, new services may be added soon— or empower the government to add to the Schedule as it deems fit. The Bill must consistently use “platform-based gig worker” to minimise unnecessary legal hassles (e.g., see the title of Section 7 and its contents).

The payout must not mean “final” payment which will raise the question of “interim payment”; the right term to use is “total payment”.

Another issue is that of unique ID numbers. A unique ID number will be issued by whom? By which authority and under which Section? Section 10(4) empowers the board to generate a unique ID number for every registered gig worker, though this function or power is not mentioned under Section 6. This deformity needs to be cured.

The board is expected to perform institutional (social dialogue), technical (register and issue unique ID number) and implementation and monitoring functions. It is not clear who will provide “general and specific social security schemes”? It is not laid out in the law.

Under the Code on Social Security, the National Social Security Board is empowered to do so. The Board should be tasked only with recommending social security schemes, monitoring their implementations, holding social dialogue, etc. The technical and executive functions must be vested with technical officials with its own secretariat with an IT cell (which may need a mention in the law). Section 6 must be re-conceptualised to be more practical and elaborate.

It is very important that the Bill provides protection from “unfair termination”, i.e., termination without assigning valid reasons and without adhering to the principles of natural justice (see Section 15 of the Bill). It is akin to the well-known workers’ misconduct and the domestic inquiry over which huge jurisprudence has been built over the decades.

It may be worthwhile to borrow from the Industrial Employment (Standing Orders) Act, 1946 and the Central Rules framed thereunder in this regard. One could include employment or work security as one of the rights of platform-based workers. Section 7(b) provides that the minimum workload for the workers may be notified by the board.

One positive aspect of law-making in Karnataka’s case is the extensive social dialogue held by the state labour department.

The heart of this Bill remains the registration of the universe of the workers for which it rightly depends on the aggregator and platforms. The lawmakers could strengthen this provision by trying to link it with the Collection of Statistics Act, 2013. Companies are not giving aggregate statistics as is the case with most data (employment, turnover, raw material cost, etc.) but individual worker’s data.

Here the term ‘database’ needs to be clearly defined as to its components. How do we verify that it has given “information relating to all the workers” without eliminating that related to “predetermined exclusions based on some criteria or the other”? The Bill must contain some grievance redressal clause specifically addressing this point.

Perhaps the Bill can contemplate publicising the data in the government gazette for a certain period. The registration process is going to be a long and tiring one— 30 days will be hardly sufficient. The role of trade unions, community-based organisations (CBOs), non-governmental organisations (NGOs), etc. is crucial in this regard. A suitable mention may be made in the Bill or the Rules framed thereunder.

As mentioned above, the technical functions such as registering, maintaining the database, creating the unique ID, etc. must be vested with executive authorities created under the Bill. Section 10(1) speaks of the data received only from the companies. But proviso to Section 10(4) mentions data collected “of gig workers shall be used to achieve the object of this Act”. Firstly will the companies accept without complaint self-registration by the workers? Is there an enabling provision for the workers to provide information about the workers (themselves or others)?

Section 12 should define what is a fair contract. A fair contract is one that provides more than the minimum wage, industry competitive compensation, a transparent pay structure, penalties and their justification, the workload (time-based or piece-rated), reasonable notice for changes in them, etc.

Section 12 empowers the workers to walk out, refuse or reject without considering the possibility of raising a dispute or a grievance related to the terms. It is more important than the social security coverage of workers under the Industrial Disputes Act of 1947. Further, one may dispute the place of ‘fair contracts’ in a social security law.

Sections 12 to 17 are laudable, though requiring more careful thought. But the Bill-makers need to labour much to justify their presence in the social security law. Or change the nomenclature of the law and the objects of the law which will be a special law in its own right.

Social dialogue and a multi-stakeholder dialogue have played a very important role in this process which must be a model of law-making in other states and a telling lesson to the Union government.

One positive aspect of law-making in Karnataka’s case is the extensive social dialogue held by the state labour department under the leadership of the joint commissioner of labour, G. Manjunath. He organised a round-table conference on this Bill at the recently concluded annual conference of the Indian Society of Labour Economics at the Institute For Social And Economic Change in Bengaluru on January 10, 2025.

The aggregators’ representatives were generally positive about the extension of social security cover to platform-based gig workers but are in the process of seeking clarifications which is quite encouraging. The IFAT is participating in the law-making process and their contribution is evident. If the aforementioned issues and those highlighted by others are taken care of, this important law will soon see the light of the day.

Social dialogue and a multi-stakeholder dialogue have played a very important role in this process which must be a model of law-making in other states and a telling lesson to the Union government.

Introducing social security law is an easy way to introduce these workers to the world of labour law till the judiciary calls out the gig workers in general as ‘workers’ under the labour law as has been done in several countries and also to provide important social protection.

Social security contribution is a ‘soft’ matter for the cash-rich aggregator companies. The real hard legal matter pertains to the legal status of gig workers— whether they are partners, self-employed or independent contractors, etc., or workers. The larger and more significant battle covers the Industrial Relations Code.

Also, in an era where every corporate mogul throws in their fantastic suggestions exhorting workers to work for 70–90 hours in a week, the ride-hailing workers already reportedly work for more than 12 hours to achieve their objectives. So, it is a basic need to regulate their hours of work irrespective of whether they are piece-rated or time-based wage workers.

Law begins with regulating hours of pay. In a sense, they can sneak into the social security law (in this Bill) on the important argument that disability or health, etc., depends on decent hours of work. Social security law should eventually be the forerunner in the passage of complementary labour laws to satisfy the International Labour Organization (ILO)’s core labour rights, including health and safety.

Speaking of ILO, state governments can secure technical experience in drafting this important law given their exposure to laws in parts of the world and the European Directive.

Dr K.R. Shyam Sundar is professor of practice, HRM Area, MDI, Gurgaon.