A step ahead in Karnataka, however not far sufficient

While the Karnataka Platform Based Gig Workers (Social Security and Welfare) Ordinance, 2025, is a step ahead in the direction of fundamental social safety cowl, there are critical lacunae associated to calculation of the welfare cess.

The welfare ordinance specifies ‘payout’ as the premise parameter for calculation of the welfare cess. ‘Payout’ is outlined because the ‘closing fee made by the aggregator/platform to the gig employee…‘. It goes on to outline the ‘welfare payment’ as starting from 1% and 5% of the payout per transaction to the gig employee. This formulation raises a sequence of points. First, the vary of 1-5% is prone to have a tendency in the direction of the decrease certain of 1%. For occasion, whereas the Construction Workers Welfare Cess supplied for 1-2% cess, throughout States, the precise cess collected was 1% of development value.

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Second, on the decrease certain, it is a clear dilution of the provisions of cess below the Social Security Code of the Centre. The Code defines cess as 1-2% of turnover with a most cap of 5% of fee to employees. That implies that a cess of 1% on turnover is the minimal. The ‘payout’, as outlined within the Karnataka Bill, being the fee from the platform to the gig employee, is part of and due to this fact lower than the turnover of the platform. A cess of 1% on payout is due to this fact essentially lower than 1% cess on turnover of the platform and contravenes the Social Security Code.

We may take a look at this price of cess towards the monetary outcomes of Zomato. The firm had an Adjusted Revenue of ₹7,790 crore, whereas the ‘supply and associated fees’ was ₹3,900 crore (Annual Report 2024). Therefore, even a 2% cess on payout would barely equal 1% of firm turnover, the minimal provision for platform cess below the Code.

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The development amongst meals supply platforms is in the direction of diversification into merchandising and personal manufacturing. There is each chance that in such conditions, the payout as a ratio to turnover may decline additional, with even the cess price at 2% payout being lower than 1% cess on turnover. From Zomato’s instance, we are able to calculate that at 5% cess on the payout, the extra value to be borne by the shopper on a purchase order worth of ₹100 is barely round 50 paise. Surely the shopper wouldn’t grudge this extra value for social safety cowl to the platform employee. The employer contribution from Zomato at this cess price would nonetheless be lower than a 3rd of what garment producers within the State contribute in the direction of Employees’ State Insurance and Employees’ Provident Fund cowl per employee.

There is an additional problem associated 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 ‘fee’ mannequin to a ‘subscription’ mannequin. In essence, Namma Yatri doesn’t cost a fee on its rides, passing on the whole fee by prospects to the motive force. Instead, the motive force pays a set subscription to Namma Yatri that permits her/him to be onboarded with the platform for a set length. This advantages the motive force, because the per experience subscription value usually works out a lot lower than the per experience fee. Uber and Ola have adopted this mannequin launched by Namma Yatri, for autorickshaw operations in Bengaluru. The payout on this mannequin from the platform to the motive force is zero. How will the Bill account for this? Will this imply that platform-based autorickshaw drivers shall be excluded from it?

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A attainable workaround may very well be that for all platform operations following a subscription mannequin, the cess fee may very well be constructed into the shopper payment, charging, say, 2% of the total transaction quantity. The monetary portal for this mannequin of platform work may very well be designed to switch the cess quantity of every transaction to the Payment and Welfare Fee Verification System that varieties a part of the Bill. The quantum of fee at 2% just isn’t a lot as to inconvenience the purchasers taking a experience on these autorickshaws. The platforms on this case are unlikely to object, as they’re merely known as on to function intermediaries for the cess transaction.

The platform sector is advanced and a one-size-fits-all strategy will solely finish in chaos. Cess charges will must be calibrated to suit the common employment situations in every sector, making certain that some minimal requirements of social safety may be assured.

Mohan Mani, Visiting Fellow, National Law School of India University, Bengaluru