The Rise of Gig Economy from a global perspective – Impact and Related laws in India

Abstract

This article looks at the crucial role that stakeholders play in the gig economy and emphasizes the ways in which a number of factors influence the expansion and gig economy’s significance in India and in the worldwide context. India is a developing country . The gig economy is built on creative thinking and has recently shown to be a successful business strategy for many organizations across many sectors. The gig model’s primary advantage is that it gradually saves money, allowing businesses to devote more time and resources to technology advancement. Crucially, it enables recent startups to adjust their workforce base as needed to meet changing goals. Businesses that hire temporary staff on a commission basis, for instance, can quickly construct a new team to meet a need in marketing.

Keywords : gig economy, employer, employee, platform economy, employment, freelance, sharing economy.

Introduction

The emergence of the gig economy is indicative of a change in the way Generation Z and Millennials view the workplace. Because the gig economy offers flexibility, freedom, and personal fulfillment, the modern workforce prefers it to the more traditional paradigm of an employee working full-time for only one employer. Due to their propensity for multitasking, today’s youth choose smaller gig jobs that allow them greater control and autonomy over their career chances over being employed by one company. This is also leading to a redefining of the notion of success. The key to success for an independent gig worker is striking a balance between their personal and professional objectives and their dedication to gig work in the absence of a permanent position. Standard definitions of “employer” and “employee” are often muddled by the gig economy. Since the gig model benefits both businesses and employees, it is a win-win situation. It offers gig workers a flexible work schedule with less entrance barriers and considerably lower training expenses for employers. Workers no longer need to rely on traditional 9 to 5 occupations to support themselves financially. By taking on short-term assignments as needed, they are embracing a more flexible and productive work structure in place of the usual schedule-driven workday. Work has also become more dynamic because of emails and telephones which enable people to cooperate no matter where they are in the world.

What is a gig economy ?

Jazz performers first used the term “gig” in 1915 to describe live concerts and the temporary nature of their employment. The first significant gig economy enterprises emerged in the 1940s as a result of World War II, providing temporary labor to companies that were in need of staffing shortages. The gig economy has expanded rapidly since then. A gig economy may incorporate a number of workers apart from the usual definition of a worker. The definition of a gig economy is vague and not clearly defined. The phrase “Gig” refers to a task, alternative labor or a short-time work arrangement. A gig worker is an individual who makes money outside of the conventional employer-employee relationship. The Gig Economy acts as a link between unemployment and regular employment. It is frequently referred to as collaborative economy, sharing economy, platform economy, and open-talent economy. The phrase “gig economy” describes labor markets where independent contracting takes place on digital platforms and through digital channels. The type of job that is provided is contingent which means there is temporary employment. Workers engaged in a gig economy have little job security and have irregular working hours. Workers are paid according to the amount of work they perform. As a result, there are less chances of career development. 

Research Methodology

This is a detailed paper based upon secondary sources of research. The information is gathered from a number of articles , websites, government reports and journals. This paper presents a comprehensive view of the topic and is based on a qualitative line of action. The central idea of this paper is to analyse the rise of gig economy, its impact and laws related to it in India from a global perspective. 

Review of Literature

  1. India’s Booming Gig and Platform Economy, NITI Aayog, (2022)

The research provides a thorough, rigorous methodology in estimating the gig economy’s present size and employment generation potential. It looks at the advantages and difficulties of the gig and platform economies and provide examples of global best practices for social security plan. The goal of the study is to comprehend the importance, create jobs, and recommend actions to promote employment in the industry.

  • Unlocking the potential of the Gig Economy in India, Boston Consulting Group (BCG), (2021)

This report offers a comprehensive study of the gig economy in India. It concentrates on the potential that the gig economy holds in India and throw light on its progress, issues and the line of action. The main motive of this report is to provide the policymakers with the necessary data and information that could enable them to create job opportunities for low income workers. The main idea is to create and economy which is not rigid and incorporates all type of workers. 

Global Impact of the Rise of Gig Economy

Globally, the pace of digitalization has quickened, reshaping societies and bringing in a new economic paradigm that will have a big impact on employment and work in the future. The previous ten years have seen a significant change in how people live, work, and spend money, mostly due to technological advancements and the gig economy. The ability to work remotely from any location in the world and work flexibility are two of the main motivators of the gig economy. Additionally, gig workers operate under time and effort models, fixed-fee models (when performing contracts), and startup cultures which has encouraged contract and freelance work. The employment agreement is typically shorter and more focused on the duty or position allocated, and the payment for the work is more akin to a piece rate, which is flexible and negotiable.

The worldwide gig economy is predicted to earn $204 billion in gross volume and rise by 17% by 2023, according to a 2019 Mastercard report. According to predictions, the number of “giggers” in the US may surpass that of non-gig workers by 2027. A 2020 Intuit analysis estimates that 25–30% of American workers are contingent, and over 80 percent of major companies intend to significantly expand their use of flexible labor in the upcoming years. According to Intuit, small businesses will create their own networks of contingent workers who collaborate, reducing fixed labor expenses and increasing the talent pool that is available. The Mastercard survey states that while transportation accounts for 58% of the gig economy globally, gig workers are also beginning to appear in other industries, such as accounting and finance, legal services, IT, and other professional advice services. In India, there are 15 million gig workers working in sectors like software, shared services, and professional services on gig platforms, according to a Boston Consulting Group report. The India Staffing Federation reported in 2019 that India is the fifth largest country in the world for flexible staffing, following the US, China, Brazil, and Japan[1]. A 2020 study carried out by Boston Consulting Group and the Michael and Susan Foundation reveals that there are 8 million gig economy jobs in India. According to a collaborative study from the Michael & Susan Dell Foundation and the Boston Consulting Group, the gig economy can support up to 90 million employment in India’s non-farm economy alone. This equates to a work volume of over $250 billion and could raise India’s GDP by an additional 1.25 percent.

 Around the world, there has been a significant shift in the nature of work due to unemployment, growing desire for flexible work schedules, and technological advancements. The central government has made the decision to provide state and center officials with training on new job trends, technology advancements, labor laws, social security policies, rights, and international gig and platform worker practices. Although hiring gig workers has been on the rise for years, it appears that the pandemic has increased those numbers. The number of gig workers increased by 24% in the summer of 2020 compared to prior years, according to Forbes. More flexibility is something that many independent workers want, and it became even more important during the pandemic, especially for those workers who had elderly parents or little children at home who needed to be taken care of. Another major factor has been technology, which has led to the creation of new platforms that allow gig workers to work from almost anywhere and offer their services or bid on jobs globally.

Impact of the rise of Gig Economy on India

The gig economy in India has been expanding. Due to the pandemic, many businesses have implemented flexible work policies such as work from home (WFH) and others, and gig workers are now finding new opportunities in almost every sector of the economy. If industry data is to be relied upon, there are more than 15 million independent contractors working on technology projects in India. Indian gig economy is expanding at a 17 percent compound annual growth rate (CAGR), according to ASSOCHAM. Currently, about 60% of IT industry organizations are investing in gig workers, and 97% of these businesses wish to either maintain the present amount of gig workers or add more. The workforce in our gig economy also makes up a significant portion of the worldwide gig workforce. This clearly demonstrates the growing significance of platform/gig workers in India’s electoral politics and broader political economy.

In this sector, employment is increasing. By 2030, the Niti Aayog anticipates a 200 percent increase in gig jobs. Millions of unemployed young people use the gig economy as a safety net to enter this low-cost, low-investment labor market in the hopes of obtaining flexible work from companies like Ola, Uber, Swiggy, Zomato, Urban Company, Porter, Dunzo, BlinkIt, and so on. In order to avoid any kind of accountability or obligation, these platforms misclassify these workers as “partners” or “mini-entrepreneurs” and refer to themselves as “tech aggregators,” “mediators,” or “facilitators” rather than employers. The main factors driving an increasing number of workers into this highly informal sector—from which they subsequently want to withdraw—are high unemployment and the increase in the unemployed. Three factors are driving young people to platform-based gig work: the lack of comprehensive social security in our nation; the stagnation of real income and the rising cost of living in cities; and the scarcity of respectable, safe, and well-paying jobs in cities. Due to these interconnected weaknesses, many people—mostly young people—have been compelled to work extra hours and take on several jobs in order to make ends meet as they look for better, more stable employment.

It’s interesting to note that there is currently a greater need for gig workers in white-collar jobs. As per a research by talent solutions supplier CIEL group, 55% of the organization has used freelance workers for their tasks. Notably, in certain instances, the percentage of gig workers has increased to 20% of the whole workforce, indicating a sizable gig worker population within these organizations. Similar to India’s unorganised sector, the gig economy is expanding quickly, but for a sizable section of the workforce, it has emerged as a key source of work.

Related laws :

Workers may be generically categorized under the Indian labor law system as (i) employees; (ii) contractual workers, such as interstate migrant workers and contract labor; and (iii) workers working in the unorganized labor economy. Each of the ideas has been briefly discussed below. 

  • Employee:

A person who works for earning wages in a company is considered an employee. Laws such as the Minimum Wages Act of 1948[2], the Employees’ Provident Fund and Miscellaneous Provisions Act of 1952 (EPFA), the Payment of Bonus Act of 1965, and others grant employees benefits such as minimum wages, bonuses, provident funds, gratuities, equal remuneration, medical benefits, and maternity benefits.

  • Contract labor and migrant labor:

 A worker hired by an employer through a contractor to complete tasks is considered contract labor. A person is considered a migrant worker if they work for a contractor in another region of the nation. The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) governs the health and welfare of contract laborers. In accordance with the EPFA, they are also eligible for additional benefits like provident funds. The Inter-State Migrant Workmen (Regulation of And Conditions of Service) Act of 1979 governs migrant workers.

  • Employees in the unorganized economy:

These individuals carry out wage, self-employment, or home-based labor. Under the Unorganised Workers’ Social Security Act, 2008 (UWSSA), these workers are covered by a number of welfare schemes, including Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana, which provides health and maternity benefits, and Pradhan Mantri Jeevan Jyoti Yojana, which covers life and disability coverage.

Current Indian labor laws give limited recognition to gig workers. As previously noted, the CLRA, UWSSA, and Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 all contain some regulations pertaining to the welfare of migrant workers, building and construction workers, and unorganized workers. These laws, however, were not intended for platform workers or other contemporary gig workers. Platform employees are not entitled to any benefits under contract or other labor laws. Although the term “contract labor” might have allowed platform workers to also be covered by the CLRA, the platforms do not offer these benefits to these workers. Gig workers are therefore not entitled to any protection or benefits, particularly in tech-based platforms where the employee to gig worker ratio is roughly 1:20. These gig workers confront a variety of difficulties, such as inconsistent income, lack of insurance, difficulty obtaining credit, and pay gaps. In addition, platform workers encounter unique challenges such as limited availability of high-quality internet services, unstable employment, and a contractual arrangement that is not regarded as employment. Gig workers have petitioned Indian courts for social security benefits and staged protests.

Some Indian corporations, including BigBasket, Flipkart, and Urban Company, committed in 2021 to guarantee that all gig workers on their platforms receive at least the hourly local minimum salary after deducting their work-related costs, despite the fact that gig workers are not recognized by law.  Additionally, in order to maximize the employability of unorganized workers and to extend the benefits of social security schemes to migrant workers, construction workers, gig and platform workers, etc., the Indian government developed a web-based portal known as e-SHRAM.

Law proposed for the gig economy :

The Ministry of Labor and Employment introduced the Code on Social Security, 2020 (Code)[3], which recognizes workers such as building workers, contract labor, and unorganized workers, in response to the National Commission on Labour’s recommendation to consolidate central labor laws. The Code also defines and acknowledges platform workers and gig workers. Social security would be provided to all workers and employees, whether they are employed by an organization, are not, or in any other sector, as a result of the passage of this Code. The Code takes the place of a number of labor and employment laws that varied in their applicability and scope, including the Payment of Gratuity Act of 1972, the Employees’ Compensation Act of 1923, the Maternity Benefit Act of 1961, and the UWSSA. As the State Governments of every Indian state are still working to finalize the regulations for the Code’s purposes, it is not in effect at this time. The Indian Labor Minister recently stated that most states have prepared the regulations and the law will be implemented when it is appropriate. The Central Government must also create a social security fund (Fund) specifically for gig workers, as mandated by the Code. It requires gig employers, like ride-sharing services, grocery and food delivery services, and other platforms that offer goods and services, to pay one to two percent of their yearly revenue into a fund that will be used to implement the schemes. The amount that gig employers contribute will be limited to five percent of what they pay or are required to pay gig workers. In order to receive the benefits of the Schemes, all gig and platform workers must register, according to the Code.

Suggestions:

The government’s think tank, Niti Aayog, published a report that examined and offered suggestions for enhancing gig and platform work in India[4]. The report provides reference to several laws such as The Companies Act 2013, IT Act 2000 etc  that either already regulate platform businesses or are being developed to do so.

  • Apply the no commercial license requirement uniformly:

The report claims that although the federal government did away with the need for a commercial license, state governments did not implement the law consistently. It claims that the requirement’s removal shortens the former one-year license application process and facilitates the entry of women and people with disabilities into the platform economy. As a result, it suggests that State government apply the law consistently.

  • Permit passenger ferries in a range of vehicles:

 The report suggests allowing passenger ferrying in the following vehicle types: two-wheelers (such as bike taxis or bike pools), three-wheelers (rickshaws, auto-rickshaws), four-wheelers (taxi cabs and carpools), and mini-buses with ten to twelve seats.

  • Release regulations on shared mobility at the state and national levels:

 The central Ministry of Road, Transport and Highways (MoRTH) should issue guidelines to encourage shared mobility, while state governments should develop laws and regulations to legitimize and operationalize it. Bike sharing programs and carpooling are examples of shared mobility.

  • Reduced entry barriers for workers: According to the report, dismantling operational constraints like high permit fees, prior experience requirements, CCTV requirements in cars, conservative age limits for vehicles, etc. might help in guaranteeing that the mobility-based livelihoods are not unduly costly for India’s youth to access.
  • Equitable taxation of platform and gig workers:

The report suggests taxing platform workers more fairly. It states that because platform workers’ income tax return filing procedures are currently not streamlined, it is advised that income tax return forms treat them as a distinct class of workers.

  • Credit options for gig workers:

The report promotes services that evaluate employees’ creditworthiness and extend credit by using data on workers with platforms.

Finally, the report requests that in addition to easing rules and providing incentives, the government seeks to accelerate the process of “platformization,” or to encourage the emergence of additional platform companies, by launching a program known as “Platform India” that would be similar to the government’s previous Start Up India initiative. It further requests that platform businesses be given access to simple financing and loan options. It states that grants and funding for working capital without collateral can be obtained from State and Central government organizations such as the Small Industries Development Bank of India (SIDBI), Entrepreneurship Development Cells, Entrepreneurship Development Cells at academic institutions, etc.

Conclusion:

Employers are trying to adapt to these shifting needs and appetites because the majority of gig workers are millennials and Gen Z, who will always prefer gig work over a more traditional full-time office setting. For India, the gig economy has many benefits as well as drawbacks. In a positive way it can provide people greater independence and flexibility at work. Additionally, it can promote economic expansion and the creation of new jobs. On the other hand, workers in the gig economy may experience reduced pay, fewer benefits, and less job security. Furthermore, it may make it harder for employees to get government benefits like social security. In spite of the difficulties they might face, gig workers and platform workers will benefit from being recognised by Indian law. The Code has given distinct definitions while bringing project-based or short-term work under the purview of social security, taking into account the rise in employers’ use of these arrangements to evade employment laws. However, the expenses for gig employers might go up. Even though the Code does not give gig workers access to all employee benefits, such as gratuities and employee provident funds (traditional social security), once state-specific regulations and welfare programs are established, they may be able to receive additional benefits with the help of the judiciary and knowledge gained from the best practices in other jurisdictions. It’s presently too soon to tell how the sharing economy will affect India in the long run. Nonetheless, it’s evident that the gig economy is here for the long run and will have a major impact on the Indian economy.

Mrigha Mahajan

The Law School, University of Jammu


[1] Pushpa Suryavanshi, India’s Booming Gig Economy, Juni Khyat, Vol-12 Issue-11 No.01 November 2022 ISSN: 2278-4632, SSRN , 1, 5(2022),   https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4267040 .

[2] Minimum Wages Act, 1948, § 17, No. 11, Acts of Parliament, 1948 (India)

[3] The Code of Social Security , 2020, § 2(35), Acts of Parliament, 2020 (India)

[4] NITI Aayog, India’s Booming Gig and Platform Economy, 1 , 20-27 (2022), https://www.niti.gov.in/sites/default/files/2022-06/Policy_Brief_India%27s_Booming_Gig_and_Platform_Economy_27062022.pdf .