The gig economy in India is growing rapidly, offering flexibility but lacking traditional benefits. Policy changes are needed to protect and empower workers.
The gig economy is generally characterised by temporary, flexible freelancing jobs typically facilitated by an online platform that acts as a bridge between the service provider and consumers. This sector has seen exponential growth in the last few years, driven by the COVID-19 pandemic, digital revolution, favourable demographics, changing workforce preferences, economic necessity, and a demand for flexible, cost-effective employment solutions. Currently, there are 7-8 million gig workers in India and expected to grow at a CAGR of ~12% and reach 23-25 million by 2030, constituting 4.1% of the total workforce. Initially, gig work was seen as a lifestyle choice for high-income earners and consultants. Still, it has become a popular option for entry-level workers seeking diverse income sources and flexible timings, as well as for freshers looking to gain initial experience and develop skills.
Benefits of Gig work to stakeholders
Gig workers enjoy flexibility and diverse work opportunities, which enhance their skills and income. Educated workers can find flexible arrangements that help them balance personal and professional lives, thus also boosting female participation in the labour market.
Businesses benefit from the gig economy by accessing cost-efficient workers and easily scaling their workforce according to demand. They can select employees with the desired skill sets for specific projects, allowing for a flexible adjustment in the organisation’s size based on current needs.
The gig economy maximises the benefit of demographics and helps lower unemployment. A BCG report estimates that the gig economy in India could support up to 90 million non-farm jobs, transact over $250 billion in work volume, and add an extra 1.25% to GDP over time. These figures highlight the gig economy’s potential as a key driver of economic growth and job creation.
Roadblocks for Gig Workers
The gig sector faces challenges such as long working hours, lack of job security, and inconsistent income due to demand fluctuations. Social security schemes like pensions, health insurance, and unemployment benefits still do not cover gig workers. The unregulated nature of gig labour impacts earnings, misrepresentation of employees as “partners” to avoid accountability, and unfair business tactics such as high commission rates (31-40% each ride). Even with low entry barriers, gig work frequently offers inadequate compensation and benefits, preventing the unemployment rate from declining.
While projections suggest that gig work would lead to higher female participation and elevate India’s workforce participation rate, the reality is different. The gig economy’s growth in India has largely neglected women’s challenges, including limited access to social protection, opportunities for career advancement, and bargaining power. The expanding platform economy has introduced gender-specific roles, often channelling women into marginalised or traditionally undervalued sectors, thus amplifying disparities in pay based on gender.
Addressing Gig Workers’ Rights: Legal and Policy Challenges in India In December 2018, the Government of India began developing a Business and Human Rights National Action Plan (NAP) by releasing a zero draft, targeting finalisation by 2020. Led by the Ministry of Corporate Affairs with input from various ministries, the draft did not specifically address gig workers’ rights. The NAP should include measures to hold technology companies accountable for human rights, starting with gig workers. The NAP remains in the draft stage and has not yet been finalised or published.
While a positive step, the Code on Social Security 2020 raised some concerns. It lacks a legal mandate, universal coverage, and a timeframe or accountability mechanism for compliance. The Code fails to address critical issues for gig workers, such as income uncertainty and fluctuations. Additional problems arise from the omission of smart identification cards, algorithmic surveillance issues, and the dilution of penal provisions.
The breakthrough Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023 (RGW Act), aimed to establish a welfare board and a dedicated social security fund for platform-based gig workers in the state. It does not, however, contain comprehensive provisions on the operational details and the structure of the social security system, leaving these matters up to the bureaucracy. Concerns have also been raised about possible inefficiencies when welfare contributions are centralised into a single fund overseen by a board selected by the government. The Act, introduced during the previous government, has languished ever since there was a change in power in the state.
The recent bill by Karnataka is a positive move and builds on the efforts of Rajasthan. It mandates formal registration of gig workers, making tracking their rights and benefits easier. It includes grievance mechanisms, requires simple language in contracts, and mandates 14 days’ notice for changes. In addition, companies must also explain any pay deductions to the workers. It also proposes a Welfare Board with gig worker representatives and a welfare fund to support the workers and hear their concerns.
However, this bill also has issues, including ambiguity and classification of gig workers as independent contractors rather than employees, which excludes them from key labour protections like minimum wage, safety, and other benefits like insurance.
Empowering Gig Workers: Building a Fair and Inclusive Economy The transient nature of gig work often leaves workers without traditional benefits like health insurance or retirement plans. In the future, allocating funds to develop portable benefits systems and investing in educational and training programmes can help gig workers stay competitive and transition to better/permanent roles.
Gig companies could work with insurance companies or the government to establish policies that provide retirement plans and insurance for work-related accidents as envisaged under the Code on Social Security, 2020.
India could also take inspiration from countries like California, the UK, and the Netherlands, where the jurisdictions have recognised the misclassification of gig workers and have taken steps to reclassify them as employees. Judicial decisions in these regions have underscored the significant control platforms exercise over gig workers and that gig workers are entitled to the same protections as traditional employees.
Navigating complex regulations is challenging for gig companies. Still, a standard set of rules, funds for compliance, lobbying and policy advocacy will go a long way in creating a favourable regulatory environment.
To realise the full potential of the gig economy and build a strong and inclusive economic model, budget allocations focused on technology, employee support, and enforcement are critical. Integrating technology, processes and administration can simplify social security enrolment and benefits while addressing overcharging and discrimination through platforms such as CSC-VLE. Moreover, robust technology-based feedback mechanisms should be implemented to allow users to report overcharging or discrimination-related issues.
In India, gig platforms often act as the principal employer for many workers, making their classification as gig workers inadequate. Recognising them as full-time employees like California, UK & Netherlands have done is essential, ensuring they receive a social safety net, including minimum regular wages, regulated work hours, and access to healthcare resources. This shift is necessary to create a fairer and more equitable gig economy.
Author’s Bio: Priyansh Agarwal is pursuing PGP at the Indian School of Business. He is an alumnus of Hindu College, Delhi University. He has two years of work experience in analytics consulting, where he helped clients in the Banking, Financial Services and Insurance (BFSI) sector to streamline their processes and better target their customers. His areas of interest are emerging trends in the macroeconomic framework of society and their impact on economic policies, market dynamics, and sustainable growth.
DISCLAIMER : The views expressed in this blog/article are author’s personal.