Source: Insurance Journal

Behind the success of the gig economy

The Peoples Union for Democratic Rights’ report on gig workers sheds light on the issues plaguing the gig economy and how its very backbone is the age-old formula of exploitation of labour, writes SHWETA VELAYUDHAN


THE basic premise of the business model of a gig economy is having a large pool of workers at all times. This large supply of workers is then matched with fluctuating demand for services. The ever-expanding supply of workers then leads to increased competition and willingness to work at a low remuneration. The platforms can then provide services at low prices, which helps them undercut their competitors and create its own monopoly in the market.

The mode of engagement being in the nature of “freelancing”, the workers are not considered employees of the company. Hence, they can be assigned a task as and when the demand arises. In situations of low demand, the workers can keep themselves logged in to the platform, which is virtually of no cost to the company.

Members of the civil society, who are generally unaware of how the gig economy operates, may now have the advantage of a report which explains this and makes other revelations as well. The report was released by The Peoples Union for Democratic Rights (PUDR) on Wednesday, titled “Behind the veil of algorithms: Invisible workers”. Prepared in view of the growth of the gig economy and gig workers engaged by companies such as Swiggy, Zomato, Ola, Uber, Urban Company and Amazon, the report is based on a fact-finding investigation conducted over September to November this year.

The report examines the business model of the gig economy and examines the issues that affect gig workers in Delhi NCR. The PUDR team spoke to workers in Ola, Uber, Swiggy, Zomato, and Urban Company; consulted technical experts and official company publications as well as independent academic studies and reports; examined judgments by courts in India and overseas; and spoke to organisations attempting to mobilise gig workers across the country.

Of late, demonstrations have been carried out by gig workers against their work conditions, such as the Swiggy workers’ strike in September 2020 and the Urban Company women workers’ strike in October. An anonymous Twitter account, @DeliveryBhoy, also interviewed by The Leaflet, was using the social media platform to highlight the plight of gig workers.

Also Read: Hands that deliver food are struggling to feed themselves

A public interest litigation (PIL) was filed before the Supreme Court in September, urging the Court to direct the Union Government to extend social security benefits to “gig workers” and “platform workers” engaged by Uber, Ola, Swiggy and Zomato. Filed by the Indian Federation of App-based Transport Workers (IFAT) along with a taxi-driver working for Ola and an unemployed former Ola and Uber worker, the petition was admitted by the Supreme Court on December 13.

The “gig economy”

The Merriam-Webster dictionary, in April 2019, officially included the phrase “gig economy” to define “economic activity that involves the use of temporary or freelance workers to perform jobs typically in the service sector”. Similarly, a “gig worker” is one who performs these kinds of temporary jobs.

Participation in the gig economy is more prevalent in developing countries (between 5% to 12%), compared to developed countries (between 1% and 4%). The most common jobs in the gig economy are lower-income job-types such as deliveries, ridesharing, microtasks, care, and wellness.

Companies provide considerable incentives initially to the customers and the workers, and once a large number of workers are on-boarded in the business, these incentives start being reduced. 

In the next three-four years, India’s gig economy is all set to triple and has the potential to touch up to 90 million jobs in the next eight to ten years, in the non-agriculture sector alone. In terms of volume, it could transact over USD 250 billion worth of work and hence, contribute at least 1.25% to India’s gross domestic product (GDP) in the long term. According to the trade association and advocacy group Associated Chambers of Commerce and Industry of India, India is expected to have 350 million gig jobs by 2025.

Also Read: Food for Thought: COVID-19 Makes Life Precarious for App-based Delivery Men

The business model

Further, the company is also not responsible for the number of hours of waiting time between orders. Additionally, the tools required for a task (such as vehicles, appliances, devices) as well as the skills (such as knowing how to ride a motorcycle or drive a car, or the skill set required for professional services from coding to cleaning and beauty services) is a prerequisite. This significantly reduces the costs incurred by the company.

The low wages, coupled with low costs, enable the company to offer services at attractive prices to the consumers. Consequently, more and more customers end up logging in to avail the “cheap” and “speedy” services, which makes it worthwhile for the large number of workers to on-board themselves on such platforms.

A well-known tactic employed by the companies is to provide considerable incentives initially – to the customers and the workers. Once a large number of workers are on-boarded in the business, these incentives, especially those extended to the workers, start being reduced. This was confirmed by almost all the gig workers interviewed by PUDR as well as media reports (on UberSwiggy, and others).

Another important component of the business model is the structuring of the contracts. First, although the company executives arm themselves with control similar to that of an employer, or a factory manager, they present themselves as “brokers” or “mediators”. This enables them to escape labour regulation and shirk responsibility and liability towards the workers.

Second, the narrative of the business model of a platform economy is to fix the “personal responsibility” on the gig worker. Even when the customer rejects the completed service, gives poor ratings or negative comments, or even cancels the booking, the burden may be borne by the worker.

Third, many of the companies incorporate clauses preventing the workers from contacting or servicing the customers directly. Fourth, a percentage of the workers’ earnings are deducted as “commission” by the company. This practice exists even though the company decides the charges for providing services to the customers, and most gig workers have no control over the pricing.

Fifth, there is extensive use of technology, algorithms and ratings used to monitor and control the performance of the gig workers. Such workers are constantly under continuous surveillance and control of the application, digital and physical. Non-compliance or even refusing tasks can often lead to deactivation from the application, akin to a “termination of employment” in the traditional sense.

Also Read: Spirit to ‘Fight’ for ‘What We Deserve’ Rises among Amazon India Workers

The legal classification

In the recent PIL filed by IFAT before the Supreme Court, the workers have claimed a violation of their fundamental rights to equality and life, and their right against forced labour. The PIL has also prayed for gig or platform workers to be considered as “unorganised/wage workers” under the existing labour laws, and seeks health insurance, pension, education and housing allowance and disability allowance, among other welfare and security benefits for the workers.

Also Read: As gig workers seek labour protections, Supreme Court must look at UK apex court’s verdict in Pimlico Plumbers case

The PIL follows on the heels of legal intervention in other countries, which have lately been successful for the workers. Several courts (such as ParisLondon and Amsterdam) have recently adjudicated claims of Uber workers or similar gig/platform workers, in favour of the workers. Delivering judgments against the companies, the courts have opined that these workers are in a relationship of “permanent subordination” to the companies.

This, as per the courts, is demonstrated by (a) their long working hours in order to sustain themselves, (b) deactivation of accounts upon frequent cancellations/refusals, (c) unilateral fixing of terms before acceptance of rides by drivers, (d) total control of clientele/business with the company and restricted communication between drivers and passengers, (e) unilateral determination of fares by the company’s algorithms and selection of routes, even if inefficient, (f) the disciplinary/penal effect imposed by the company through the rating system over these workers and the unilateral grievance redressal over complaints by passengers.

Also Read: The gig is up: international jurisprudence and the looming Supreme Court decision for Indian gig workers

With the introduction of the Code on Social Security, 2020 (the SS Code), the term “gig worker” has been defined, for the first time, in labour legislation intended to be implemented in India. It has been defined to mean “a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship”.

By way of implementing the SS Code, the government seeks to protect gig workers’ rights limited to some measures of social security extended to them along with other unorganised workers. Availing them would require registration by the workers independently with the

government. The benefits are to be provided through government schemes, to be supervised by a National Social Security Board.

Courts in Paris, London and Amsterdam have recently adjudicated claims of gig workers in their favour, holding that these workers are in a relationship of “permanent subordination” to the companies.

While the “aggregator” companies (i.e., the digital intermediary) would be required to make proportionate contributions to setting up the funds for welfare schemes, there is no accountability on behalf of the companies to the gig workers, under the SS Code.


The report concludes that the success of the gig economy is not based on the oft-claimed technological innovation, but on “age-old exploitation of labour”. The three key elements of the model can be summed up as (1) mis-definition of workers as freelancers to evade labour laws and shirk off responsibilities, (2) ensuring a large reserve of workers to enable competition and lower prices, and (3) charging of commissions for “matchmaking” services provided by the companies.

A large number of unemployed workers and the lack of regulatory institutional checks effectively enables them to carry this off. In light of the above, the following demands are put forth by PUDR:

  1. The state and the judiciary must take steps to recognise gig workers as “workers” and extend labour rights and protection to them. A starting point could be to extend the coverage of the Motor Vehicle Aggregators Guidelines 2020 to cover gig workers.

This kind of protection must be extended and implemented by all state governments for other gig workers as well.

  1. Immediate measures should be taken to fix the accountability of companies towards gig workers, and clearly establish mechanisms for ensuring this, including substantive penalties for violating the workers’ labour and democratic rights.

(Shweta Velayudhan is a labour and employment lawyer based in Delhi, and a part of the outreach team at The Leaflet.)

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