A step forward, but not far enough

The Hindu

21 hours ago

While the Karnataka Platform Based Gig Workers (Social Security and Welfare) Ordinance, 2025, is a step forward towards basic social security cover, there are serious lacunae related to calculation of the welfare cess.
The welfare ordinance specifies 'payout' as the basis parameter for calculation of the welfare cess. 'Payout' is defined as the 'final payment made by the aggregator/platform to the gig worker…'. It goes on to define the 'welfare fee' as ranging from 1% and 5% of the payout per transaction to the gig worker. This formulation raises a series of issues. First, the range of 1-5% is likely to tend towards the lower bound of 1%. For instance, while the Construction Workers Welfare Cess provided for 1-2% cess, across States, the actual cess collected was 1% of construction cost.
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Second, at the lower bound, this is a clear dilution of the provisions of cess under the Social Security Code of the Centre. The Code defines cess as 1-2% of turnover with a maximum cap of 5% of payment to workers. That means that a cess of 1% on turnover is the minimum. The 'payout', as defined in the Karnataka Bill, being the payment from the platform to the gig worker, is a part of and therefore less than the turnover of the platform. A cess of 1% on payout is therefore necessarily less than 1% cess on turnover of the platform and contravenes the Social Security Code.
We could test this rate of cess against the financial results of Zomato. The company had an Adjusted Revenue of ₹7,790 crore, while the 'delivery and related charges' was ₹3,900 crore (Annual Report 2024). Therefore, even a 2% cess on payout would barely equal 1% of company turnover, the minimum provision for platform cess under the Code.
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The trend among food delivery platforms is towards diversification into merchandising and own production. There is every possibility that in such situations, the payout as a ratio to turnover might decline further, with even the cess rate at 2% payout being less than 1% cess on turnover. From Zomato's example, we can calculate that at 5% cess on the payout, the additional cost to be borne by the customer on a purchase value of ₹100 is barely around 50 paise. Surely the customer would not grudge this additional cost for social security cover to the platform worker. The employer contribution from Zomato at this cess rate would still be less than a third of what garment manufacturers in the State contribute towards Employees' State Insurance and Employees' Provident Fund cover per worker.
There is a further issue related to the ride-hail sector of platform work. With the entry of Namma Yatri in Bengaluru, the operations for the sector for autorickshaws has moved from a 'commission' model to a 'subscription' model. In essence, Namma Yatri does not charge a commission on its rides, passing on the entire payment by customers to the driver. Instead, the driver pays a fixed subscription to Namma Yatri that allows her/him to be onboarded with the platform for a fixed duration. This benefits the driver, as the per ride subscription cost generally works out much less than the per ride commission. Uber and Ola have followed this model introduced by Namma Yatri, for autorickshaw operations in Bengaluru. The payout in this model from the platform to the driver is zero. How will the Bill account for this? Will this mean that platform-based autorickshaw drivers will be excluded from it?
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A possible workaround could be that for all platform operations following a subscription model, the cess payment could be built into the customer fee, charging, say, 2% of the full transaction amount. The financial portal for this model of platform work could be designed to transfer the cess amount of each transaction to the Payment and Welfare Fee Verification System that forms part of the Bill. The quantum of payment at 2% is not so much as to inconvenience the customers taking a ride on these autorickshaws. The platforms in this case are unlikely to object, as they are merely called on to serve as intermediaries for the cess transaction.
The platform sector is complex and a one-size-fits-all approach will only end in chaos. Cess rates will need to be calibrated to fit the average employment conditions in each sector, ensuring that some minimum standards of social security can be guaranteed.
Mohan Mani, Visiting Fellow, National Law School of India University, Bengaluru