The social security code passed by the Parliamnet this week, along with two other labour codes, is expected to revamp the growing gig economy, and will entail several changes for players such as Zomato, Swiggy, OLa, Uber and even ecommerce platforms such as Amazon and Flipkart, which employ temporary workers.
One of the key proposals in the code is that the central government as well as state governments create a Social Security Fund for the welfare of the unorganised workers, gig workers and platform workers.
The code proposes that aggregators’ contribute a minimum of 1 percent of their annual turnover, going up to 2 percent, as may be notified by the central government, to this social security fund. The code, however, does put a cap on this, stating that this amount should not exceed 5 percent of the amount paid or payable by an aggregator to gig workers and platform workers.
The code also adds that the annual turnover of an aggregator should not include any tax, levy and cess paid or payable to the central government.
The government has classified ride-sharing platforms, food-delivery and grocery services, logistics players, e-marketplaces (both B2B and B2C) as well as platforms in the travel, healthcare and media sectors as aggregators for this labour code.
Several gig economy players have welcomed the labour codes citing benefits for gig workers, but some have also pointed out the challenges of some of the requirements and the need for more clarity on many of the processes cited.
“We are pleased that the Code on Social Security (CoSS) has made India one of the first countries to establish nationwide benefits and protections for gig and platform workers, recognising that all workers deserve to have a basic safety net and work the way they want,” an Uber spokesperson said.
“Uber is confident this landmark legislation will build a better economic future for India and serve as a model for other countries,” the statement added.
Others such as Urban Company have also welcomed the move. “The labour reforms passed by the Parliament will have a positive impact on ease of doing business, providing a safety net for gig workers and act as a catalyst for employment generation. Urban Company welcomes the new social security code - the fund for gig workers will help provide them with health and life coverage benefits. We will await the specifics of the registration process to establish how it can facilitate this for gig workers on the platform,” Abhay Mathur, SVP Finance, Urban Company, said.
TN Hari, HR head at e-grocery platform BigBasket, welcomed all three labour codes passed by the Parliament this week, which revolve around industrial relations, social security and occupational safety and working conditions.
“The ease of doing business has been given a boost by allowing businesses that employ less than 300 people to shut down without government permission. Earlier the number was 100. One may wonder what the big deal is. It IS a big deal given the fact that 99% of all enterprises in India are micro enterprises and 99.5% are MSME. So, many more enterprises will have the leeway to hire and let go based on business imperatives without having to seek approvals which were impossible to come by,” Hari explained, while also highlighting the simplification in several other processes.
The BigBasket executive, however, also cautioned on over-regulating the gig economy.
“Anything that the government comes up with should not end up endangering the efficacy of this model,” Hari said.
“The contribution of 1%-2% of turnover by the aggregator is also subject to an upper limit of 5% of the cost of the gig workers. So, it is not particularly high. But then companies may end up paying the gig workers 5% lower and the gig workers may not see the value of the 5% provided in the form of benefits which may or may not reach them,” he added.
Others have also cautioned of increased costs to aggregator platforms under the new code.
“The 2% social security contribution towards the gig workforce will definitely be an upfront increase in costs,” said Rituparna Chakraborty, co-founder, TeamLease.
“However, one should take a long view of its potential to make gig work more attractive, which in turn benefits the future growth of tech-based aggregators in India,” she added.
Lohit Bhatia of the Indian Staffing Federation said the contribution requirement was fair, while also adding that the industry should wait for the fine print and a consultative process on the issue.
“The cap for contribution by aggregators towards the social security fund for gig workers is fair, because the degree of deductions in the organised sector, even for a factory worker, is much higher,” said BHatia, President of the Indian Staffing Federation.
Queries to players such as Swiggy, Zomato, Ola, Flipkart and Amazon did not elicit responses.
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