The Social Security Code: A Boon or a Bane for Gig Workers?

THE SOCIAL SECURITY CODE: A BOON OR A BANE FOR GIG WORKERS? 

Simran Upadhyaya, Mitali Jain; 2nd and 1st Year, B.A. LL.B(Hons.), West Bengal National University of Juridical Sciences Kolkata 

I.               Introduction

With the emergence of enterprises such as Swiggy and Uber, there has been a colossal increase in 'gig workers' employment.[1] Presently, gig workers constitute 56% of all new employment.[2] It is predicted that the gig economy will grow up to $455 billion by the year 2023, which comes down to an annual growth rate of around 17%.[3] The draft Code on Social Security, released by the Ministry of Labour and Employment, defines the gig worker as "a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationships".[4] Thus, gig workers lie outside of the conventional employer-employee relationships and, consequently, remain devoid of the traditional employee benefits such as life and disability cover, health and maternity benefits, etc.

The recently enacted Social Security Code, 2020 (“The Code”) aims to bring the gig workers under its ambit. The benefits, which are usually restricted to traditional workers, will also be extended to the gig workers. This blog aims to explore how, despite harbouring good intentions, the Code fails to provide security to the gig workers, and may end up worsening the present situation of these workers.

Part II of this blog discusses the concept of a 'Gig Economy' and what it brings into the market. Part III points to the sufferings of those employed in gig jobs. In Part IV, we talk about the Social Security Code and what it brings to the table. Part V talks of the Code's shortcomings of the regulations and the ways to remedy it. Finally, Part VI serves as the concluding section.

II.            What Is A Gig Economy?

A person engaged in short-term contractual work, or freelance employment who may work on a project-by-project basis for which he is paid later, is said to be involved in a 'gig economy.'[5] The word "gig economy" comes from the fact that each work item is similar to a single "gig." It is described as an "economic activity in which temporary or independent employees are used to accomplish jobs in the service industry."[6] All organizations that recruit independent contractors, consultants, and employees in various industries, such as information technology, content production, online advertising and telecommunications, food and drinks, and creative professions such as art and design, are considered part of the gig economy. As a result, a gig economy refers to the existence of a transient or part-time workforce rather than a traditional workforce.

There has been a visible increase in both the workers willing to work in gigs and the employers willing to take in gig workers.[7] A recent study, conducted by ASSOCHAM, highlighted that about forty-five per cent of Human Resource Managers wished to hire gig workers to supplement existing skills, and thirty-nine per cent wished to hire for cost reduction.[8]

There are a variety of factors behind this spurt in the gig industry.[9] One of the fundamental causes for the rise of the gig economy is the advent of the digital era. Workers or independent contractors are compensated for each gig or assignment they complete, and this notion underpins all online applications involving this contingent workforce. A worker or independent contractor can choose his or her work hours and the method. Workers who are self-employed or autonomous contractors can work remotely as well. For employers, a gig economy is beneficial as they can hire workers during peak demand and let them go when the need is over.

Advantages of going gig-route for companies include access to highly specialised workforce on a freelance basis. The companies are saved the cost of providing trainings and are saved the wait of notice periods. The work provided through gigs is often task-based and thus, is efficient and productive.[10]

III.          The Sufferings Of Gig Workers

Though a gig economy offers the workers autonomy in deciding their work hours and the kind of work they wish to do, the same flexibility and independence become a reason for their exploitation. Since there is usually a high supply of labour than demand, employers' independence gives them an absolute power to shift the conditions of work in their favour.[11] Due to the absence of an employer-employee relationship, most of the gig workers are ineligible to access some of the basic social benefits such as gratuity, insurance, annual and sick leaves, besides a severance compensation.[12] Thus, the gig workers are always at a risk of losing their job due to instability. Their pay schedules are often uncertain, and regardless of the number of employments they pursue, most of the workers are devoid of any statutory protection usually granted to permanent employees.

There are almost negligible benefits (such as paid vacation, paid sick days, health insurance, and retirement benefits) available to these workers. Those working in the gig economy routinely face discrimination based on their caste, race, religion, or sexual orientation. The Corporate Moguls such as Ola and Uber, where gig remains the primary method of employment, repeatedly fail to respond to allegations of inherently discriminating incidences.[13] Moreover, they are devoid of paid family leaves and are ineligible for unemployment benefits.[14]

 

IV.          About The Code

The new Code on Social Security, 2020 will replace nine statutes to translate social benefits to the workers. These are the Employees’ Compensation Act, 1923; the Employees’ State Insurance (ESI) Act, 1948; the Employees Provident Fund and Miscellaneous Provisions Act, 1952; the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; the Maternity Benefit Act, 1961; the Payment of Gratuity Act, 1972; the Cine Workers Welfare Fund Act, 1981; the Building and Other Construction Workers Welfare Cess Act, 1996; and the Unorganised Workers’ Social Security Act, 2008.[15] This law recognises the temporary nature of employment, takes into its fold unorganised workers, gig workers, platform workers, and makes social security provisions for them. [16]

The Code is the first in India to introduce the definition of gig workers in some statute. It aims to bring around forty lakh workers under its ambit.[17] By doing this, the Code grants a legal identity to the workers to enjoy the benefits associated with social security. The Code intends to do this by providing for the creation of a fund exclusively for securing the gig workers under Section 114(3) of the act.[18]Thus, this Act has the potential to drastically alter the gig market in the country and change the lives of a majority of our working population by granting them both independence and security.

Even though the code looks hopeful on paper, it suffers from certain irregularities that make its implementation doubtful.

 

V.             The Inefficacious Code & Its Recommended Changes

Under the Code gig companies and the Centre or State Government are expected to contribute towards the social security fund.[19] The gig companies are expected to allot 1-2% of their annual turnover towards these funds and maintain a record of gig workers in their Company.[20]

There is a fear that the costs to be borne by the gig companies maybe inevitably passed on to the workers. [21]  This will gradually lead to a reduction in the amount of money received in hand. Considering that the gig workers rely on these platforms to supplement their main earnings, they would prefer income in-hand to mere promises of social security schemes. [22]

The regular maintenance of records create scope for lack of transparency as gig companies may show limited number of workers to contribute a meagre amount towards the social security schemes. Hence, it is necessary that the Code create provisions that stipulate the Central and State authorities to double-check the records to ensure proper contribution towards the funds.

 Companies paying for the social schemes will rely on changing hiring practices and pay-out structures to remain profitable. These companies might impose rigid working hour requirements, entry and exit barriers to reduce costs, or show preference towards permanent employees rather than gig workers. [23] This change in attitude brought about by the Code will jeopardise the very existence of a gig- economy that provides room for flexible work hours as per their income requirements. There are instances of college students working as gig workers to bear costs of college education,[24] so the moment companies impose rigid working requirements, many such workers will be forced to quit and that will eventually lead to the shrinking of the gig economy.

Gig workers have also the option to switch between platforms due to which they may be registered under multiple platforms.[25] However, the Code does not clarify the division of responsibility in fund distribution among multiple companies, having common gig workers.

Under Section 50(2)[26] and 113(1)[27] of the Code, gig workers are required to register themselves via Aadhaar Card and other documents to qualify for the social security benefits.[28] The process of self-registration and lack of awareness in this regard may make it easier for big companies to lure gig workers into not registering on the portal such that these Companies do not have to bear their social security expenses. Under Rule 50(2)(h), the workers are burdened with the onus of timely updating the records, which would otherwise deprive them of eligible benefits.[29] The process of self-registration and updating records ignores the fact that not every gig-worker is well versed with technology to aid them in the process. Hence, the Code intends to pass on benefits to an exclusive pool of technologically advanced gig workers.

Instead of making the registration process voluntary, various committees under the aegis of Government could be set up or government officials along with private sectors under their CSR project could work together for proper registration, enrolment and implementation of the social security schemes.

The Code also fails to mention how the collected funds will be managed, processed and which body will be held accountable.[30] In this regard, the Government must set up a vigilance committee for effective utilisation of social security funds.

Additionally, the absence of provisions for judicial intervention raises doubts on the limits of the executive powers under the Code. [31]  The workers do not have recourse to file grievances in case of discrepancy between the aggregators’ records and the self-declaration form on the portal.[32] The Code is also unclear whether beneficiaries already registered under State Portal need to re-register themselves on the Central portal to avail the benefits.[33]

Under S. 109(1) and 109(2) of the Code,[34] the Central Government and the State Government respectively have the power to frame suitable welfare schemes for unorganised workers.  Under S. 114(1), the Central Government may frame social security schemes for gig workers.[35] Also, the Code mandates the establishment of separate boards for unorganised and gig workers. [36]  This makes the entire system too complex since gig workers are considered to be sub-set of unorganised workers. Additionally, with both Centre and State formulating laws for the same set of unorganised workers (which includes gig workers), inter-state coordination will be a mess when workers shift from one state to another.

There is another fear that the definition of platform workers, gig workers, and unorganised workers are so similarly worded that it is unclear how different schemes would apply to a specific class of workers.[37] Additionally, the Code is an amalgamation of existing legislations on Maternity Benefit Act, Payment of Gratuity Act, Construction Workers Cess Act etc. [38]  In clubbing the provisions of existing Acts into a Code without making major changes, [39] the Government has failed to address the specific concerns faced by the gig workers. Few generic provisions formulated for the gig economy are not sufficient to help boost the gig economy.

 

Another driving factor behind why the gig economy has been more successful in the development sector is that women have a higher participation in this sector than other sectors due to flexible work hours. [40] To ensure the continued participation of women in this field, the Code must make it mandatory for the gig Companies under their CSR schemes or impose burden on the State government to grant better incentives, such as subsidies for equipment purchased, bearing medical expenses, post-retirement benefits etc. 

 

Despite increase participation by women workers, women are at greater risk of harassment and sexual exploitation.[41] However, the Code lacks provisions to deal with discrimination and harassment faced by the workers. Accordingly, certain anti-discriminatory policies should be introduced within the legal framework of the code along with the establishment of grievance redressal mechanism.

 

 

VI. Conclusion

 

The Social Security Code 2020 empowers the gig economy by not bringing them under the traditional definition of employer- employee but by extending the benefits of social security schemes to this newly emerging economy. However, there are many legal loopholes that still need to be addressed to ensure that social security code outlives its purpose.

The need of the hour is to simplify things and avoid giving the responsibility of social security to multiple authorities. State government predominantly manage the existing social security schemes, so the main aim of the Code should not be to tamper with this mechanism but to create an ecosystem for the Central Government to advise the state and ensure effective implementation of the schemes.

 

In doing so, the gig economy in India will become the top freelancing and crowdsourcing hub in Asian region and even globally. [42]

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[1] Assocham,  Gig Economy- Aligning Consumer Preferences: The Way Forward, available at https://www.assocham.org/userfiles/GIG%20REPORT_2020.pdf (Last visited on June 14, 2021).

[2] Swati Rao, How the Social Security Code 2020 fails gig workers, Spontaneous Order, available at https://spontaneousorder.in/how-the-social-security-code-2020-fails-gig-workers/ (Last visited on June 14, 2021).

[3] Id.

[4] Rudra Srivastava and Aman Gupta, Gig Wokers and Platform Wokers: The Code on Social Security Code 2020, Mondaq,  avilable at https://www.mondaq.com/india/employee-benefits-compensation/1035552/gig-workers-and-platform-workers-the-code-on-social-security-2020 (Last visited on June 14, 2021).

[5] J. Woodcock and M. Graham, The Gig Economy: A Critical Introduction, Cambridge: Polity (2019).

[6] Madhu Damodaran and Animay Singh, Code on Social Security 2020: Sailent Features and Compliance Changes, available at https://www.simpliance.in/blog/code-on-social-security-2020/ (Last visited on June 14, 2021).

[7] Assocham, supra note 1.

[8] Id.

[9] Id.

[10] Id.

[11] Potkin, Fanny, and Suroyo Gayatri, Fifty Drivers Fight for One Order: Southeast Asia Gig Economy Slammed by Virus, Reuters, available at https://uk.reuters.com/article/idUKKBN23I0H7 (Last visited on June 14, 2021).

[12] Assocham, supra note 1.

[13] Potkin, supra note 11.

[14] Assocham, supra note 1.

[15] Gautam Chikermane, Labour Reforms: Future- ready but devils of detail lie in states, ORF, available at https://www.orfonline.org/expert-speak/labour-reforms-future-ready-but-devils-of-detail-lie-in-states-74490 (Last visited on June 14, 2021).

[15] Assocham, supra note 1.

[16] Id.

[17] Mohit M Rai, The Gig Economy is creating lakh of jobs but workers don’t see a future, The Hindu, available at https://www.thehindu.com/business/Economy/the-gig-economy-is-creating-lakhs-of-jobs-but-workers-dont-see-a-future/article29299673.ece (Last visited on June 14, 2021).

[18] The Social Secuirty Code, 2020, S. 114(3)(c).

[19] The Social Secuirty Code, 2020, S. 110 ; Swati Rao, How the Social Security Code 2020 fails gig workers, Spontaneous Order, available at https://spontaneousorder.in/how-the-social-security-code-2020-fails-gig-workers/ (Last visited on June 14, 2021).

[20] Swati Rao, supra note 2.

[21] Id.

[22] Nishant Sharma, Gig Workers May End Up Paying for their own Social Security, Bloomberg quint,  avilable at https://www.bloombergquint.com/business/gig-workers-may-end-up-paying-for-their-own-social-security (Last visited on June 14, 2021).

[23] Id.

[24] Assocham,  Gig Economy- Aligning Consumer Preferences: The Way Forward, available at https://www.assocham.org/userfiles/GIG%20REPORT_2020.pdf (Last visited on June 14, 2021)  ; Nishant Sharma, Gig Workers May End Up Paying for their own Social Security, Bloomberg quint,  avilable at https://www.bloombergquint.com/business/gig-workers-may-end-up-paying-for-their-own-social-security (Last visited on June 14, 2021).

[25] Rudra Srivastava and Aman Gupta, Gig Wokers and Platform Wokers: The Code on Social Security Code 2020, Mondaq,  avilable at https://www.mondaq.com/india/employee-benefits-compensation/1035552/gig-workers-and-platform-workers-the-code-on-social-security-2020 (Last visited on June 14, 2021).

[26] The Social Secuirty Code, 2020,  S. 50(2).

[27] The Social Secuirty Code, 2020, S. 113(1).

[28] Santosh Mehrotra and Kingshuk Sarkar, Social Secuirty Code, 2020 and Rules: A Critique, 56(12) Economic and Political Weekly.  (2021).

[29] Code on Social Security (Central) Rules, 2020.

[30] The Social Secuirty Code, 2020, S. 110 ; Swati Rao, How the Social Security Code 2020 fails gig workers, Spontaneous Order, available at https://spontaneousorder.in/how-the-social-security-code-2020-fails-gig-workers/ (Last visited on June 14, 2021).

[31] Swati Rao, supra note 2.

[32] Nandini Chami and Sadhana Sanjay, A Data Rights Agenda for Platform and Gig Economy Workers, The Hindustan Times, available at https://www.hindustantimes.com/analysis/a-data-rights-agenda-for-platform-and-gig-economy-workers/story-9ZtpX9kavVSN5TNQcE289M.html (Last visited on June 14, 2021).

[33] Santosh Mehrotra and Kingshuk Sarkar, Rework Social Secuity Code for Informal Workers, The Hindustan Business Line, available at https://www.thehindubusinessline.com/opinion/rework-social-security-code-for-informal-workers/article34599616.ece (Last visited on June 14, 2021).

[34] The Social Secuirty Code, 2020,  S. 109(1) & 109(2).

[35] The Social Secuirty Code, 2020,  S. 114(1).

[36] Mehrotra and Sarkar, supra note 28.

[37] Id.

[38] Id.

[39] Id. 

[40] Assocham, supra note 1.

[41] Ria Kasal, Genger and the Gig Economy: A Qualitative Study of Gig Platforms for Women Workers, ORF, available at https://www.orfonline.org/research/gender-and-the-gig-economy-a-qualitative-study-of-gig-platforms-for-women-workers-65948/ (Last visited on June 14, 2021).

[42] Assocham, supra note 1.