Understanding The Gig Economy In India - Opportunities, Challenges And Need For A Legislation
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Category: General Law
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UNDERSTANDING THE GIG ECONOMY IN INDIA:
OPPORTUNITIES,
CHALLENGES
AND NEED FOR A LEGISLATION
Rashida Hussain1 & Akanksha Srivastava2
ABSTRACT
The rapidly burgeoning gig workforce is ushering in a global economic revolution. 3 The Gig Economy is defined as short-term and flexible work. In the past decade, gig work has seen tremendous growth globally. As per the Government of India’s report, (2020-21) about 77 lakh workers are engaged in gig work. This paper deals with the opportunities that gig work presents with the promise of employment to low-skilled workers, possibly contributing greatly to India's gross domestic product (GDP). However, gig work comes with its challenges which puts the workers in a vulnerable position where the benefits of such work are outweighed by the exploitative practices of the online platforms. The question arises whether these workers are employees or independent contractors. Should they not be subject to any benefits of employment?
The paper further discusses how other countries have adapted to gig work and what laws or codes have been passed to regulate the gig economy compared to India. The paper is focused on the challenges and opportunities of daily wage gig workers. It is limited to the literature already available and does not create any quantitative data. The paper is a theoretical take on the growth and evolution of the gig economy and the benefits and challenges it currently has/faces along with an understanding of whether there is a need for legislation to regulate the growing gig economy in India. Keywords: gig economy, regulation, gig workers, online platforms, independent contractors.
1 Rashida Husain, Student, B.B.A LLB (Hons), Christ (Deemed to be University), Lavasa Campus, Pune.
2 Akanksha Srivastava, Assistant Professor, Christ (Deemed to be University), Lavasa Campus, Pune.
3 NITI Aayog, India’s Booming Gig and Platform Economy
Perspectives and Recommendations on the Future of Work, POLICY BRIEF (June 2022).
1. Introduction
1.1 What is the Gig Economy?
The Gig Economy is a phenomenon that has grown almost globally in the last decade. This has been made possible by the rapid growth of internet connectivity in both rural and urban India. People have greater access to technology in terms of phones and the internet. The Gig Economy peaked especially in 2020 during the pandemic, COVID-19. The gig economy is defined as short-term and flexible work. “The gig economy is referred to as a labour market that is characterized by short-term contracts or freelance work, rather than permanent jobs. ”4 Although the Gig Economy has picked up pace in the last few years, it is not a recent phenomenon.
Gig work has existed since the 1940s, gig work was a term often associated with musicians particularly jazz musicians who would take up short-term work with a Restaurant or Hotel or they would be paid to perform for a certain number of hours at a particular event. Thus, gig work originated with the music industry. The gig economy is often associated with two words- ‘crowd work’ or ‘work on demand’. 5 Crowdwork is synonymous with freelance work where individuals through online platforms are connected to various companies or individual clients, they take up short-term work or work for a definite period of time. Work on demand refers to work like transportation, delivery, education, etc provided through online platforms. Eg: Uber.
The gig economy – which we define here as a market system using digital platforms that matches workers and customers for short-term work opportunities – can be categorised into two parts: the digital gig economy and the physical gig economy6 This paper will be focussed on Work on-demand gig work or the Physical gig economy which requires location-based service or delivery. 4 Souhitya Samanta & Tridib Sengupta, Analysing the Growth and Scope of GIG Economy in India: A Study on Freelancers and their Working Perspectives, Int'l J. Innovative Sci. & Res. Tech. , IJISRT24JUL825, 1455, 1455-65 (2024) 5 Valerio De Stefano, The Rise of the 'Just-in-Time Workforce': On-Demand Work, Crowd Work and Labour Protection in the 'Gig-Economy', 2015 SSRN Elec. J. , https://doi. org/10. 2139/ssrn. 2682602.
6 Hiroto Yanaka & Richard Heeks, Analysing the Development Impact of the Gig Economy using Sen’s
Capability Approach: A Case Study of the Physical Gig Economy in India, 2023 SSRN Elec. J. https://doi.org/10.2139/ssrn.4623506.
1.2 Growth of the Gig Economy?
The country of India has experienced a notable transition to a gig economy due to a combination of factors including employer preferences, worker demographic changes, and swift technological progress. 7 In today’s world gig economy is ever-growing and it has the potential to reshape traditional employment set-ups. In 2020-21, it was estimated that 77 lacs (7. 7 million) workers were engaged in the gig economy. These workers comprise a population of 2. 6% of the nonagricultural workforce which is 1. 5% of the total workforce in India. 8 The gig work is predicted to expand to almost 2. 35 crore people working in the gig economy by 2029-2030. 9 Currently 78% of the workforce that is engaged in gig work, does either medium-skilled or low-skilled jobs.
Gig work is fueled by freelance work, which demands alternative work arrangements, flexible hours of working as well as autonomy over the work chosen. However, freelance work is associated with high-skilled workers and online platforms like Upwork and Fiverr where skilled professionals in various eg; digital marketing, IT sector, etc can find short-term projects to work on for various companies. Out of the 77 lacs people engaged in gig work in India only 22% of people are engaged in high-skilled jobs.
2. Benefits and Opportunities
“One narrative holds that gig economy platforms that use digital technologies to match workers with clients on a per-task (“gig”) basis are a boon to productivity and provide much-needed flexibility to workers and businesses.”10 The booming gig work can be beneficial in many ways.
1 Employment
The gig economy if harnessed properly has the potential to generate employment for many, especially for the low-skilled workers who can work for the work on-demand online platforms where the consumer is connected with the service 7 Tanmay Sachdeva, The Gig Economy in India: Unpacking the Economic and Social Implications, 15 SHODH SAGAR INT'L J. FOR RES. PUB. & SEM. 166 (2024) 8 Souhitya Samanta & Tridib Sengupta, Analysing the Growth and Scope of GIG Economy in India: A Study on Freelancers and their Working Perspectives, Int'l J. Innovative Sci. & Res. Tech. , IJISRT24JUL825, 1455, 1455-65 (2024) 9 NITI Aayog, India’s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work, POLICY BRIEF (June 2022). 10 Cyrille Schwellnus et al. , Gig Economy Platforms: Boon or Bane? , OECD Econ. Dep't Working Paper No. 1550, at 1 (2019) provider.
However, such work must have proper and fair guidelines to ensure the growth of workers instead of merely facing ‘jobless growth’. Gig work is also part-time work for many and helps them earn extra income.
2 Flexibility
looking at both crowdwork and work on demand combined, gig work provides greater flexibility to workers in choosing the work they do and number of hours they would like to work for. This gives autonomy to their work.
3 Cost
looking at gig work from the perspective of the companies, this is an effective way to cut down costs of hiring and recruiting employees. Companies like Uber, Ola, Zomato, etc do not hire delivery executives rather they are viewed as self-employed. Thus, they don’t have to pay them remuneration or any compensation. This cuts down the cost of the company ensuring maximum profits. Employers from developed nations can have access to freelancers in low-income countries on digital platforms Hence, they play the “labour arbitrage” and hire the workers at the cheapest rate. 11
4 Convenience
with the boom in the use of the internet and mobiles, all gig services are just a click away for the consumers. This makes them prefer these services. Amartya Sen, an Indian Economist, as well as a Noble Prize winner, had given a Capability Approach to evaluate the quality of life of an individual based on their capabilities and functions. Eg: if a person is fasting he chooses to not eat thus not exercising his functioning even though he is capable. On the other hand if someone is starving they are incapable to get food. For determining the capabilities of a person Amartya Sen gave various freedoms to be tested one of them and of the freedoms was Security freedom. In India rural labourers migrating to urban areas in search of better life is quite common.
However, these workers face castediscrimination, but gig work has proved to be an inclusive workspace where such migrant workers can find reasonable employment opportunities. Thus, gig satisfies one aspect of the capability approach.
3. Challenges
“A competing narrative asserts that the rapid rise of gig economy platforms reflects the exploitation of regulatory and legal loopholes and the imposition of one-sided flexibility on
11 Roy, G. and Shrivastava, A.K., 2020. Future of gig economy
opportunities and challenges. Imi Konnect, 9(1), pp. 14-27. workers rather than superior business models. ” 12 Gig work may prove to be beneficial to companies in cutting down costs but at the same time, this means that companies completely shed their liability towards the gig workers. they are put in a vulnerable position as they are viewed as ‘independent contractors’ or ‘self-employed’. The companies are not responsible for the healthcare or security of such workers. Gig workers are not even covered under the ambit of traditional labour laws.
As per Section 9 of the Employees State Insurance Act, 1948 (9) "employee" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and-- (i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or (ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or (iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service;13 This Act covers all establishments where 10 or more people are employed; thus, it covers Companies like Ola, Uber, etc.
However, as per the contractual terms between these platforms and gig workers, the gig workers are deemed to be independent contractors for the perceived flexibility in the work. A huge factor in gig workers being viewed as independent contractors is that any employer of the Company does not supervise them. Gig workers have to use personal resources for their work like having their own vehicle as well as bearing their own costs of fuel. Gig workers are rather controlled by the platform algorithm. 12 Cyrille Schwellnus et al. , Gig Economy Platforms: Boon or Bane? , OECD Econ. Dep't Working Paper No. 1550, at 1 (2019)
13 Employees state insurance act § 9 (1948).
Algorithmic control further adds to the challenges of gig workers. Algorithmic management, and its associated system of control, relies on pre-programmed paths of action where unwanted alternatives are excluded from its design, and where workers are monitored and directed by algorithms rather than human agents of the organization.14 Thus, this negates the human element of analysing situations and the performance of the gig workers is reviewed completely based on the ratings they get. Any platform-based incentives are rewarded on the basis of the ratings and reviews of the consumers without checking or inquiring into the truth of the reviews or ratings. Taking into account Sen’s Capability Approach 15we can further understand the quality of life of a gig worker.
1 Political freedom
this can be understood in the context of freedom of forming associations, due to the dispersed nature of gig workers and an unconsolidated authority of control they are unable to form associations that represent physical gig workers.
2 Informational freedom
there is a lack of transparency in the payment structure, which acts as a barrier to entry for gig workers
3 Security freedom
the gig workers do not have any job security, they can be terminated by the platform.
4. Need for Legislation
Due to the current lack of social security gig workers are faced with exploitative working conditions. The Indian government passed the Social Security Code,2020 which takes into account the unorganised or gig workers into consideration for welfare schemes. However, this Code has not yet been enforced through the notification in the Official Gazette. Chapter 9 of the code Section 109-114 talks about schemes. Section 114- Schemes for gig workers and platform workers: (1) The Central Government may frame and notify, from time to time, suitable social security schemes for gig workers and platform workers on matters relating to (a) life and disability cover; 14 James Duggan et al., Algorithmic HRM control in the gig economy: The app‐worker perspective, 2023 Hum. Res. Mgmt. https://doi.org/10.10
15 Hiroto Yanaka & Richard Heeks, Analysing the Development Impact of the Gig Economy using Sen’s
Capability Approach: A Case Study of the Physical Gig Economy in India, 2023 SSRN Elec. J. https://doi.org/10.2139/ssrn.4623506.
(b) accident insurance; (c) health and maternity benefits; (d) old age protection; (e) creche; and (f) any other benefit as may be determined by the Central Government. 16 Many of the challenges faced by gig workers can tackled with legislation. It is critical to recognise such workers and include them in the labour laws or entitle them to benefits of the labour laws. While India has drafted the Code on Social Security,2020 it is still not comprehensive enough to protect the rights of gig workers but it is a start. In 2015 a driver from ride-hailing platform Lyft had alleged violation of The Fair Labour Standards Act, but what was critical was to determine whether he was an employee or an independent contractor because the Labour Standards Act, 1938 would only extend to employees.
17 In the case of Secretary of Labor vs Lauritzen18, a dispute arose about whether migrant workers who harvested the farms of the defendants were employees or independent contractors for the purpose of the Labour Standards Act, 1938, The court after doing a thorough analysis of the facts of the case came up with 6 criteria to determine whether such temporary workers would qualify as employees or not
1. Whether the employer has control of the work performed
2. Employees profit or loss depends on his skill
3. Employee has an investment in the equipment required for the work
4. The service rendered requires a special skill
5. How essential is the job performed to the employer’s business
6. Permanency or duration of the job
In the suit initiated by the Lyft driver in 2015, he stated that the platform he works for controls the hours he works for and also controls his pay based on the app’s discretion. However, the
16 Code on social security § 114 (2020).
17 Sarah A. Donovan, David H. Bradley & Jon O. Shimabukuro, What Does the Gig Economy Mean for
Workers?, Cong. Res. Serv. R44365 (2016).
18 Secretary of Labor v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987)
driver withdrew his case after entering into an agreement with Lyft. In the case of Berwick vs Uber Technologies, an Uber driver sought unpaid wage reimbursement because of failure to promptly pay her wages. Uber held that it was nothing more than an online platform to help consumers and service providers to connect. The case was filed before the California Labor Commissioner, the commissioner found that Uber was involved in almost every aspect of the operation and transaction between the the driver and the consumer. The commissioner awarded the driver amounts that were unpaid reflecting the mileage of her car and also interest on the unpaid expenses. Her claim for penalties and damages was dismissed. 19 Section 7 of the National Labor Relations Act of the United States20, states that the employees have the right to form their associations to represent themselves.
However, gig workers do not enjoy such benefits as they are dispersed labor but certain states in the USA like Seattle recognize the right of association of gig workers and subsequently allow them to form their association. This may not be recognized nationally but is a significant step towards the rights of the gig workers. In the United Kingdom the National Minimum Wage Act,1998 extends to the gig workers where the online platforms have to ensure the gig workers get minimum wages. Under the Working Time Regulations Act, 1998 the gig workers are also entitled to rest, breaks, and fair working hours. In the case of Uber BV vs Aslam21, the dispute arose as to the status of Uber drivers in London. The Supreme Court of the UK held that when drivers log in to their apps they're considered as workers.
And as per section 2(1) of WTRA 22which defines working hours, the workers' hours would start from the moment they log in till they logout. The following was stated by Lord Leggat in the case: “If the reality is that Uber’s market share in London is such that its drivers are, in practical terms, unable to hold themselves out as available to any other PHV operator, then, as a matter
19 Sarah A. Donovan, David H. Bradley & Jon O. Shimabukuro, What Does the Gig Economy Mean for
Workers?, Cong. Res. Serv. R44365 (2016).
20 National Labor Relations Act § 7 (1935).
21 Uber BV v. Aslam, 5 UKSC (Supreme Ct. 2021).
22 Working Time Regulations Act § 2 (1998).
of fact, [when they have the Uber app switched on] they are working at [Uber London’s] disposal as part of the pool of drivers it requires to be available within the territory at any one time. ... if, however, it is genuinely the case that drivers are able to also hold themselves out as at the disposal of other PHV operators when waiting for a trip, the same analysis would not apply. ” Further, it was held when the case was filed in 2016 before the Employment Tribunal that there was no evidence found that the workers were working on more than one app simultaneously. The Supreme Court was satisfied with the findings of the tribunal. In the case of Pimlico Plumber Ltd. vs Smith23, Mr. Smith was a plumber at Pimlico, he wore their uniform and worked for hours decided by the company. However, he wasn’t paid sick leaves or holidays and was considered self-employed. One day Mr.
Smith was unfairly dismissed from his job. The Supreme Court held that Mr. Smith would be considered a worker or employee for basic rights and protection of workers even though it appears he is selfemployed. IR35 of “off-payroll working rules” is a Tax legislation in the UK that determines the tax liabilities of gig workers. 24 If one falls within the ambit of the IR35(inside IR35) they are eligible to pay tax. The eligibility criteria are determined through Her/His Majesty’s Customs and Revenue (HMRC) Check Employment Status for Tax tool (CEST). This is done to differentiate genuine self-employment from working relations that resemble employment. The United Kingdom’s laws on gig economy are more comprehensive. They extend their traditional labor laws to gig workers in terms of minimum wage and working hours. The UK is also tackling the problem of tax compliance among gig workers.
In a study done in the United States, it was revealed that many gig workers refuse to pay their taxes as their income remains undeclared. 25 With the growth of the gig economy, such non-compliance with tax could lead to adverse impacts on the growth and economy of a nation.
5. Conclusion
India courts have not dealt with any disputes relating to gig workers to date. However, the Code
23 Pimlico Plumbers Ltd. v. Smith, 5 UKSC (Supreme Ct. 2018).
24 Relation of the UK's Gig Economy and Employment Law, Davenport Solicitors (Feb. 19, 2024),
https://davenportsolicitors.com/blogs/understanding-the-relation-of-the-uks-gig-economy-and-employment-lawa-practical-overview/.
25 Beatrice Oyinkansola Adelakun, Tax Compliance in the gig economy
the Need for Transparency and Accountability, 1 J. Knowledge Learning & Sci. Tech. 198 (2023). on Social Security and the NITI Ayog Report 2021 on platform workers, recognize the existence of gig workers and the fast growth of the gig economy. It is important to assess this growing workforce and pass a consolidated Legislation that governs the gig workers. Drawing inspiration from the UK, already existing labor codes in India can be extended to gig workers to prevent any unfair working conditions and ensure a minimum wage for them. This ensures that gig work does not become a rigid form of employment but rather merely protects their rights and entitles them to the benefits of working.
The gig economy holds the power to generate tremendous employment contributing to India's growth and also uplifting the conditions of low-skilled workers, thus it has to be regulated through proper legislation to prevent any exploitation.