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Labour laws in the age of the gig economy

Labour laws in the age of the gig economy

By Priyambada Datta

The era of information technology has vastly transformed the ways in which we lead our lives. The recent past has most notably been witness to the rising phenomenon of a particular segment of the labour market, commonly referred to as the ‘gig economy’. Borrowed from the common parlance of musicians, a gig economy (also known as a sharing economy or a platform-based economy) consists of self-employed workers who choose to work on a flexible, piece-rate basis, and who are remunerated accordingly, akin to an individual ‘gig’.

Rise in popularity

Although traditional companies factor in to this segment, it also includes many Internet-based platforms. The rise in the number of individuals opting for such type of work is significant across the globe. There are 162 million independent workers in the US and the EU, which amounts to around 20-30% of the working population. Although the Internet-based platform does not cover a large share (around 15% as of now), it is nevertheless a growing trend. It is steadily making its way across India, with the advent of app-based services flooding the market, such as Uber, Ola and Freelance.

Employees and independent contractors

With rising popularity come complications, which, in this case, is in the form of social protection of workers. As per labour laws, an individual is classified as either an ‘employee’ or an ‘independent contractor’ as per the relationship it has with an organisation. The distinction between an employee and an independent contractor is done on the basis of control and supervision exercised by the organisation over the workers. Gig workers, however, cannot be neatly classified into any one of the categories. Although they have the flexibility to choose when and for how long they want to work, and are not tied down to just one organisation, there is a fair amount of control exercised over them by the organisations.

This can be seen in a company like Uber, where the workers are subject to a certain degree of control by the company regarding the setting of prices, providing passengers, destinations, etc. The UK employment tribunal recently declared Uber workers to be employees of the company, entitled to traditional employee-benefits like minimum wage and sick leave.

The problems of classification

This lack of a proper category poses several problems, as both working arrangements have their disadvantages. Calling such workers employees takes away the ownership rights of the work they do, ties them exclusively to one platform, and takes away their flexibility. On the other hand, classifying them as independent contractors strips them of the company benefits. Expanding any of these categories to include such a special brand of workers undermines the very characteristic of this segment of the economy. It also unnecessarily makes these categories wider than they ought to be for functional purposes, making it vulnerable to inaccurate classification. It is not feasibile to expand existing categories to accommodate a novel concept, while also acknowledging the uniqueness of the work provided. Hence, it is only fitting that a separate category should be carved out to meet the growing demands of the industry.

This is extremely relevant in the Indian context as India is already plagued with a sizeable population engaged in the informal sector. The numerical strength of the workforce in this sector has a lot to do with the existing categorisation of the employee and the independent contractor. Independent contractors do not fall under the formal sector and are thus, mostly unregulated. Sadly, this has led to several individuals within the informal sector being deprived of the protection that they need.

The question of benefits

Additionally, there is considerable confusion regarding the manner in which benefits can be provided to the gig workers. Owing to the flexible nature of their work, they work for several companies at the same time. As such, the question arises as to whether all the companies should provide them with benefits.

However, this would result in doubling of benefits for one worker, which would provide excessive benefits to the worker, while simultaneously increasing the costs of the company. This would then cause a reduction in demand for such workers due to the inefficiency of the method for providing benefits. It might penalise the workers for no fault of their own.

Solutions and the road ahead

One possible solution could be the division of the benefits provided by the companies to the workers on a portable basis. The portable benefits platform would allow for the companies hiring the workers to set aside some funds for benefits on a prorated basis, which would be portable from one job to another. This would provide workers with the requisite benefits while also ensuring their flexibility.

The gig economy is here to stay and it is in the economy’s interest to fulfil its requirements. The government should provide for such 21st-century workers in a manner that is tailored to their needs. Creating a separate category for these workers, and a portable form of benefits commensurate with their work, would recognise this burgeoning economy, and facilitate its effective functioning. This should be achieved sooner, as a prescient strategy, rather than later, as a mitigating measure.


Featured Image Source: Visual Hunt

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