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Rajasthan’s gig worker Bill: Bound for failure without corrections and clarifications

Rajasthan’s gig workers Bill, which is meant to be a first-of-its-kind reform, will be reduced to a well-intended but poorly drafted reform unless appropriate modifications are made to address all grey areas.

With the Congress-led Rajasthan becoming the vanguard for social security advancements in India, the latest move to extend social security benefits to gig workers holds the promise of a secure future for the gig economy. 

Welcomed and criticised in equal parts, the Rajasthan Platform Based Gig Workers (Registration and Welfare) Bill, 2023 (RGW Bill) is a first-of-its-kind reform, heralding a new era of protection for gig workers in India. 

Whether a political gimmick for the upcoming elections or a sincere endeavour to improve the lives of the gig workers (who also happen to constitute a significant vote bank), the government’s attempt to bring some semblance of structure and formalisation to an otherwise unregulated and under-protected industry warrants appreciation.

While there are some excellent proposals in the RGW Bill, there are also those that require further clarification and a more nuanced evaluation. 

Absence of definition of ‘social security’

Rather strangely, a Bill which confers social security benefits does not define what exactly constitutes ‘social security’.

Without a specific definition, gig workers may not fully understand the extent of the benefits to which they are entitled.

Gig workers Bill is an appreciable attempt to bring some semblance of structure and formalisation to an otherwise unregulated and under-protected industry.

Given that the RGW Bill is largely along the lines of the Code on Social Security, 2020 (CoSS 2020), it is reasonable to expect that the benefits provided to gig workers would be similar to those mentioned in the CoSS 2020. These benefits may include life and disability cover, health and maternity benefits, accident and insurance coverage, etc.

However, since the Bill does not explicitly list these benefits, the actual scope and extent of the benefits would depend on the specific schemes formulated by the ‘welfare board’ under the Act

This could potentially cause delays in receiving crucial benefits, leaving gig workers in a state of uncertainty and vulnerability.

For the successful implementation of the RGW Bill, it is crucial for the welfare board to promptly formulate and notify relevant schemes, clearly defining the social security benefits available to gig workers. It should also hold discussions with workers and unions to assess the effectiveness of the existing benefits and suggest schemes based on that.

Also read: The empty promise of social security to gig workers

The counterproductive nature of the “welfare cess” 

The provision of the ‘welfare cess’ under the Act has emerged as a controversial aspect of the RGW Bill, especially drawing pushback from aggregators and businesses operating in the gig economy. 

It requires aggregators or primary employers to contribute a certain percentage of the value of each transaction associated with a platform-based gig worker as the cess.

The gig economy’s attractiveness has largely been built on its low-cost model, facilitated by classifying gig workers as ‘independent contractors’ or ‘partners’ rather than the traditional classification of ‘employees’. 

This classification allows companies like Ola, Uber, Zomato, Urban Company and others to avoid bearing the costs associated with providing employee-specific benefits.

The introduction of the cess is seen as a potential threat to the gig economy’s cost-efficient model. It is argued that this cess could increase costs for companies in the gig economy, impacting their profitability and competitiveness.

The potential increase in costs, in turn, might incentivise companies to reconsider the employment model altogether. They may contemplate hiring gig workers as full-time employees instead of relying on the gig model since they anyway have to shoulder the cost of providing social security benefits to gig workers.

The platforms will be forced to pass on cess fees to customers, which might impact the growth of the industry.

Companies may be forced to pass on the burden of the cess to gig workers, which could result in a reduction in their take-home income. This, in turn, might lead to discontent among gig workers and could even affect worker retention and overall job satisfaction.

An anonymous senior official of a platform company has expressed the concern that “the platforms will be forced to pass on this fee to customers, which might impact the growth of the industry”.

The official suggests that the responsibility of providing social security should ideally be borne by the state government, which can fund and administer social security programmes more effectively without directly impacting the growth of the gig economy.

To address these concerns, the government should consider exploring alternative funding mechanisms for social security.

Also read: Post-pandemic exploitation of food delivery workers, and the legal reforms needed

Absence of definition of “value of each transaction

The exact pay components that will be factored in when calculating the “value of each transaction” upon which the cess will be charged is a question which remains unanswered. 

The absence of a clear definition for “value of each transaction” leaves room for ambiguity and raises questions about how the cess will be applied to the earnings of delivery partners in the gig economy.

Beyond their base earnings per delivery, gig workers receive various additional payments and incentives. These include effort-based payments for each kilometre they drive, bonus incentives during peak hours of demand, or rewards for meeting certain performance targets.

A critical issue with the RGW Bill is the absence of a mandate for authorities to generate awareness among gig workers about the newly introduced reform and its benefits. 

While the RGW Bill explicitly excludes “tax paid or payable” from the ambit of calculation, it fails to provide clarity on whether the cess will be calculated solely based on the base earnings i.e., the amount earned per delivery or trip completed by each delivery partner or will include the associated incentives and payments as well.

The lack of clarity on calculation can have significant implications for both the delivery partners and the businesses for which they work.

If the cess is only calculated on the base earnings per delivery, it might not fairly represent the actual income earned by delivery partners, as they heavily rely on these incentives to supplement their earnings. This can also reduce the contributions made towards their social security benefits by a significant margin.

Similarly, if the cess is applied to the total value of each transaction, including all incentives and additional payments, it could lead to increased costs for businesses and potentially affect their ability to provide such incentives in the future.

Integration with existing social security schemes

There is a lack of clarity in the RGW Bill regarding how it will complement or interact with the existing social security schemes. This could lead to complications and inefficiencies in the system.

For instance, the CoSS 2020 mandates that aggregators contribute 1–2 percent of their annual turnover towards social security benefits. So, clarity is needed on how the cess under the RGW Bill will interact with the contributions required from aggregators under the CoSS 2020. 

If both schemes are implemented independently, it could lead to aggregators facing financial burdens, multiplicity in compliance requirements and overlap in contributions. 

Moreover, food-tech companies like Swiggy and Zomato already provide certain benefits like loss of pay support, health insurance and accident insurance to their delivery partners. Clarity is needed so as to avoid duplication of benefits and prevent gig workers from being overburdened with contributions to multiple welfare schemes.

Also read: Gig workers should be included under the Industrial Disputes Act

Further, it will be interesting to see how the RGW Bill addresses individuals who work simultaneously as gig workers and as traditional employees because workers classified as “employees” already draw social security benefits from their employers.

Such hybrid work arrangements, also known as moonlighting, are becoming increasingly common, and gig workers who also hold formal employment should not be left to operate in a grey area.

Without a requirement for authorities to actively generate awareness about the scheme, gig workers may remain uninformed, hindering their ability to make claims.

Although the RGW Bill requires the committee set up for reviewing and implementing the scheme to ensure alignment with the existing social security schemes of the government, it is argued that it is merely cosmetic. It fails to outline the process of alignment and disregards the fact that there exist schemes apart from the ones provided by the government.

No provision for generating awareness about the reform

Another critical issue with the RGW Bill is the absence of a mandate for authorities to generate awareness among gig workers about the newly introduced reform and its benefits.

This reform aims to provide entitlements and benefits to gig workers of which they have been historically deprived. By not mandating awareness generation, the RGW Bill risks perpetuating this problem and potentially leaving a significant portion of gig workers without access to the benefits they should rightfully receive. 

This could lead to continued exploitation and insecurity for these workers— the very concern the RGW Bill aims to address.

Without a requirement for authorities to actively generate awareness about the scheme, gig workers may remain uninformed or unaware, despite the existence of the same.

This hinders their ability to make claims and sets up the entire reform for failure. Informing this group of workers becomes particularly relevant because unlike traditional employees they cannot unionise or collectivise against the platforms to make claims.

It is crucial for the authorities to take proactive measures in educating and informing gig workers about the new scheme. This could involve conducting awareness campaigns, providing information through digital platforms and urging unions to educate workers in their network.

Therefore, for this Bill to serve its purpose, prompt clarifications and suitable amendments are needed. If not, it will be reduced to one of those well intended but poorly drafted reforms.

The Leaflet