July 18, 2024

Lukmaan IAS

A Blog for IAS Examination

Gig economy- Informalisation of labour or Freedom of work

THE CONTEXT: The concept and practice of gig economy has gained wide currency across the globe. In India, the entry of various food delivery apps, cab aggregators and others have revolutionized this segment of the economy. While they provide huge scope for freelance/part time jobs for India’s demographic dividend, the management practices of these platforms have raised concerns of labour exploitation. In this context, this write up examines how gig economy results in informalisation of labour on the one hand and provides freedom of work on the other.

Developing conceptual understanding


What is Gig economy?

  • The gig economy is a job market which consists of short-term or part-time work done by people who are self-employed or on temporary contracts.
  • Section 2(35) of the Code on Social Security 2020 defines a gig worker as a person who participates in a work arrangement and earns from such activities outside of a traditional employer-employee relationship
  • As per the World Economic Forum, gig economy is defined by its focus on workforce participation and income generation via “gigs”, single projects or tasks for which a worker is hired.
  • The term “gig” is a slang word for a job that lasts a specified period of time; it is typically used by musicians.
  • Examples of gig employees in the workforce could include work arrangements such as freelancers, independent contractors, project-based workers and temporary or part-time hires.
  • As there is no employer-employee relationship, the gig workers are not tied to any particular employer and therefore have greater flexibility in terms of the work they can choose and the hours they dedicate.
  • Businesses have flexibility when they are not dependent on a set of employees for executing tasks, and additionally benefit from avoiding the cost of social security and fixed remuneration provided to employees.

What is platform work?

  • Platform work means a work arrangement in which an organization or an individual uses online platforms to provide goods and services to consumers. For example, Uber, Ola, Zomato etc.
  • The Code on Social Security 2021 defines platform work as a work arrangement outside the traditional employer-employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services in exchange for payment.
  • Section 2(61) of the Code on Social Security defines a platform worker as someone engaged in or undertaking platform work.
  • In general, platform workers are the most visible and vulnerable faces of the gig economy. The gig work includes platform work also and often these terms are used interchangeably. For the purpose of our discussion, we also take a similar approach.

What is meant by informalisation of labour?

  • When the share of the informal workers in the total labour force increases, the situation is called informalisation of labour.
  • It is a process of consistent decline in the percentage of formal sector labour force and consistent increase in the percentage of informal sector labour force in the economy.
  • The Economic Survey of 2018-19, released in July 2019, said “almost 93%” of the total workforce is “informal”.

What is the meaning of formal and informal sector?

  • It must be made very clear that there is no universally accepted definition of formal and informal or organised and unorganised sector in India (http://iamrindia.gov.in/writereaddata/UploadFile/org_unorg.pdfread for further information)
  • In general, the informal sector of the economy is characterised by irregular and low income, precarious working conditions, no access to social safety nets, lack of legal safeguards etc.

Definition of labour force

  • Persons who are either ‘working’ (employed) or ‘seeking or available for work’ (unemployed) or both during a major part of the reference period, constitute the labour force. In simple words persons who are employed and unemployed are included in labour force (15-60 in general).

Definition of workforce

  • The Work force on the other hand includes only the employed and excludes the unemployed. People who are actually working are included in workforce. The difference between labour force and workforce is the total number of unemployed persons

How Gig Economy leads to informalisation?


Outside the purview of regulatory framework

  • The gig economy is outside the ambit of almost all the regulations applicable to the other sectors of the economy. The formal sector employment has been a tightly regulated one and even the informal sector faces some regulation. There is near absence of regulation in the area of gig economy especially in the context of labour rights.

Unclear employment relationship

  • In gig economy, the traditional employer and employee’s relationship is replaced by vague ideas of “partners, independent contractors and the like “. These companies call themselves as “aggregators and not employers” which provides escape route from the application of labour laws to them

Exploitative service conditions

  • The remuneration and working conditions are arbitrarily set by the companies and workers often complain unwarranted deduction from their salaries. There exists no grievance mechanism to raise the concerns of the workers. For instance, a Swiggy delivery boy earlier received 50 rupees for an order which has been progressively reduced to 20(10 in some cases) rupees on weekdays.

Subjugation to algorithms

  • The platform workers’ work life is controlled by the software application. It decides everything from when and where to onboard (log in), how much time is allowed for delivery, calculation of incentives and even imposition of penalty! The gig worker has no voice in deciding any of these aspects and the Application exerts total control over the workers.

Non existent social safety net

  • None of the social security benefits available to the traditional workers are available to gig workers. Even the adhoc group insurance is available only on “on duty days’.  The workers are vulnerable to risks of accidents and many have lost lives during the course of their duties. The companies don’t even have any data on how many of its partners have succumbed to Covid 19 or were infected by the virus.

Demand and supply mismatch:

  • when the labour supply is high and more disposable, the gig workers have no power to influence payment offerings, and freedom to choose becomes an illusion. In the interplay of demand and supply mechanisms, the gig workers always lose out. Thus, as platforms become more popular among gig workers, more of them join the pool, which leads to companies dictating the terms and conditions of work. The All India Gig Workers union has been protesting against the wage reduction by Swiggy but to no avail.

No scope for collective bargaining

  • The problem lack of a formal relationship within the gig economy landscape is accentuated by lack of effective unionization of the workers. The temporary nature of work, disaggregated location of workers etc do not make it feasible for a collective airing of grievances. Even the recently formed Indian federation of App based Transport workers’ protests did not change the status quo.

Exercising control without accountability

  • The companies claim that its workers are self-employed, and they can choose when and how long they wish to work. This is not true as for instance, Swiggy does not allow “home log in” and the worker has to reach a “hot zone” for log in. When a worker logs out or is irregular, then the frequency of the orders he receives is reduced. In other words, the companies exercise almost all the control of a traditional employer without commensurate responsibility to workers.


Gig Economy and the Freedom of work


Freedom of choice

  • The employees have the freedom to choose from a host of firms operating in the sector. For instance, a delivery executive can choose Swiggy, Zomato or any other food delivery app. This choice is also available in the case of e- commerce companies or cab aggregators and others. This freedom to choose can help the workers to look for greener pastures.

Flexible working hours

  • There are no mandatory working hours in these sectors and the worker is free to join in or out any time. This flexibility provides scope for control over one’s work which can be harnessed by those looking for part-time job like students, under employed etc.

No formal training required

  • The gig economy generally does not demand any formal education, skills or formal training for carrying out these jobs. For instance, a smart phone and a bike is enough for getting work in food delivery apps (of course subject to company policies). Thus it provides great livelihood opportunities for the unskilled and semi-skilled.

Incentivisation of hard work

  • The gig economy works on the principle of ‘the more you work, the more you earn’. This approach encourages those having the zeal for hard work by providing incentives on a par with the output of work. The scope for extra earning works as a great motivator.

Gender empowerment

  • The technology based platforms enable women to be a part of workforce by virtue of their openness.
  • Women could utilize the informal nature of the platforms especially factors like no restriction of time and place for their advantages. Studies indicate that women students and even housewives have been harnessing the opportunities for financial independence and supporting family during pandemic.


How to bring elements of formalization in Gig Economy?


Data on the size of the Gig workforce

  • Any step towards addressing the issue of informalisation in gig economy require proper data on the size of the workforce. The Parliamentary Standing Committee on Labour has criticized the labour ministry for its lackadaisical attitude relating to data collection. Data driven policy making and governance need to be the core of reforming the sector.

Legal interventions

  • Regulation by the State of this sector without undermining its animal spirit is the need of hour. The Code on Social Security although defines the gig and platform workers, is silent on the aspect of regulation. A separate regulatory regime for gig sector can be brought which must balance the interest of both the companies and workers.

Providing concrete social safety measures

  • The companies need to be persuaded to set up social security system for the workers. Alternatively, they can be legally mandated to contribute to the fund established by Centre or state governments.
  • For instance, the Code on Social Security, 2020, mandate companies employing gig or on-demand workers, to allocate 1-2% of their annual turnover or 5% of the wages paid to gig workers.

Clarifying the relationship between company and the workers

  • It is necessary to define clearly the nature of relation between these platform companies and the workers. Taking shelter under terms (partner etc) which have no legal basis will only lead to conflicts between workers and the companies and eventually impact the business prospects of the companies.

Learning from international judicial interventions

  • In 2021, the UK Supreme Court ruled that Uber’s drivers were entitled to employee benefits; in 2018, the California Supreme Court specified a test for determining an employer-employee relationship, which effectively designated gig workers are employees.  Indian courts must take a leaf out of these progressive judicial interventions.

Unionization of the workers

  • There is strength in numbers and the workers need to organize themselves to press for legitimate demands from the government and the companies. A federation of all gig workers must be established to work as a pressure group and a forum for constructive suggestions in improving the work culture and business practices.

Best practices of the state governments

  • Karnataka govt is in the process of drafting a law to provide minimum wages and social security benefits to the gig workers. It also formed a company, inter alia, to promote gig economy companies. The Karnataka Digital Economy Mission, a company with 51% stake for the Industries aim to promote the gig economy through various facilitative measures. These type of positive interventions can be replicated in other states also.




  • The gig economy rides on the innovative and entrepreneurial spirit of the business leaders. Light-touch regulation of the sector which focuses on enabling the companies to accommodate the concerns of the labour rather than coercing them need to be adopted.
  • The huge success of the Initial Public Offerings of Swiggy and Zomato in Bombay Stock Exchange point out to the enthusiasm and trust of investors in the growth prospects of the sector. The listing of these companies means they have to disclose details of business practices under SEBI’sbusiness responsibility and sustainability reporting (BRSR) requirements. This may nudge/force the companies to address the concerns of forced labour as the employees are paid below minimum wages in many cases.
  • Although the Social Security Code 2020 aims to provide social security benefits to the gig workers, these are not legally guaranteed. It means the benefits will be available to the workers as and when government formulates the schemes. It is high time the good intentions are translated into concrete actions. The Industry is also in line with this approach as in a recent report, ASSOCHAM had suggested that gig workers should be entitled to potable benefits.
  • Neoliberal policies adopted by governments world over have put capital in high pedestal over labour. In India also the condition is not different as the race to attract private capital and investment have led to dilution of workers’ rights and their progressive informalisation. This is clearly visible in the context of the criticism of the four labour codes brought in by the government and the data provided by Periodic Labour Force Survey 19-20. Therefore, a Welfare State and Compassionate Capitalism must work in tandem for equitable distribution of surplus among the management and labour.




The Economic Survey 2020 has appreciated the role played by gig economy in terms of service delivery and provision of employment to the labour force in the pandemic period. This sector holds out huge promise especially in the context of governments’ push towards digital economy through Digital India. It is true that the freelance nature of the work and other attributes may not strictly fit into the traditional employer-employee matrix. But that does not mean the labour should be left for exploitation and suffer from poor working conditions. It is in the interest of all stakeholders; the promoters, management, workers, the shareholders the consumers and others that adequate concreate measures be adopted for a win situation for all.

Spread the Word