Could govt's social security measures lead to duplication of costs for aggregators? Here's what experts think

(Image: Zomato)

Finance Minister Nirmala Sitharaman in her Budget 2021 speech spoke about extending the social security benefits to gig and platform workers. "For the first time globally, social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation," she said.

The Code on Social Security 2020 which was passed by the Parliament in September 2020 has for the very first time extended the social security benefits like maternity leave, disability insurance, gratuity, health insurance. Old age protection to the workers in the country’s booming gig economy sector.

The contribution of gig economy workers during the COVID-19 pandemic has put forward a strong ground for the government and aggregator companies to recognise the importance of this fragmented and largely unorganised workforce.

The Code proposes the creation of a social security fund for extending these benefits to the workers in the unorganised sector. The scheme for the social security fund envisages that the platforms and aggregators like Swiggy, Zomato, Ola, Uber, Urbanclap and others will make contributions to the fund which would be either 1-2 percent of the turnover or 5 percent of the worker’s wages, whichever is lower.

Further, the Union Ministry of Road Transport and Highways had in November 2020 issued the Motor Vehicle Aggregator Guidelines 2020 under Motor Vehicles Act. It also mandates the cab aggregators to ensure health and term insurance for each driver of not less than Rs 5 lakh and Rs 10 lakh, respectively.

Both the Code on Social Security and Motor Vehicle Aggregator Guidelines aim to ensure that the gig and platform come within the safety net but at the same time entail a high compliance cost for the aggregators.

Commenting on the compliance costs for the aggregators, Neeraj Dubey, Partner, Corporate Law, Singh & Associates said, "The government had proposed to extend social security benefits to gig workers in the Code on Social Security 2020, which mandates aggregators engaging the services of gig workers, to dedicate 1-2 percent of their annual turnover or 5 percent of the wages paid to gig workers, whichever is lower, to social security benefits for these workers. However, there is lack of clarity on “turnover”, which could only be the revenue from the unit that hires gig workers and not the company’s overall turnover. Ministry is yet to clarify this."

"Additionally, under the Motor Vehicles Aggregator Guidelines, 2020, there is a mandate for the aggregators to contribute towards the social security of the workers by way of insurance of Rs 5 lakh. These two provisions would lead to duplication of costs for the aggregators and create unnecessary burden. The government would need to streamline the provisions of these legislations to give necessary respite to the aggregators," he noted.

India has 15 million freelancers with its gig economy workers increasingly gaining independent contracts in industries like IT and programming, finance, HR, and design, among others, as per a report by ASSOCHAM (Associated Chambers of Commerce and Industry of India)

Differing in opinion, Anshul Prakash, Partner, Employment Labour and Benefits, Khaitan & Co said, "Under the Code on Social Security 2020, gig workers will have a special social security scheme dedicated to them which may provide life and disability cover as well as health benefits. Whether this scheme would be integrated with the framework of Employees’ State Insurance Corporation or would operate independently is something on which we must await the notification from the government. However, there does not appear to be any duplication of compliances within the code as regards the aggregators."

As for the motor vehicle guidelines applicable to cab aggregators, it is true that the aggregators would be required to ensure a certain minimum health and term insurance cover for each driver. However, until we have clarity on the provisions of social security schemes for gig workers under the labour code, we should not conclude that there would be duplicity in terms of provision of benefits under the code and the motor vehicle guidelines. The scheme under the code may hypothetically speaking provide appropriate exemptions for aggregators who are already providing similar benefits outside of the scheme. Schemes under the Social Security Code are still fluid and clarification may come in against any overlaps, Prakash added.