2 hrs ago
Analysts Favor Turnover-Linked Levy for Gig Worker Security
India wants gig workers, such as drivers and delivery workers, to receive social security benefits.
Companies that use these workers must help pay into a welfare fund.
The government is deciding how to calculate that payment.
One option uses a company’s total turnover, or overall business revenue.
Another option uses the money paid to workers for each trip or order.
Analysts say the second option could hurt ride-hailing companies because they handle many low-cost trips.
They believe a turnover-based payment would be more predictable and proportionate.
The final method is being considered as the 2026 Social Security Rules are developed.
India’s Social Security Code requires aggregators to contribute to a fund for gig and platform workers.
The law sets contributions at 1–2% of annual turnover, capped at 5% of worker payments.
The Labour Ministry is considering a separate payout-linked formula of up to 5% of worker payments.
Analysts say payout-linked contributions could disproportionately burden high-volume, low-ticket ride-hailing platforms.
They argue turnover-based contributions better reflect an aggregator’s business scale and ability to pay.
- Who
- The Ministry of Labour and Employment, platform aggregators, gig workers and analysts are involved.
- What
- India is deciding whether gig-worker social security contributions should be linked to aggregator turnover or worker payouts.
- Where
- New Delhi, India.
- When
- The report is dated September 6; the implementation framework for the 2026 Social Security Rules is being developed.
- Why
- The calculation method could significantly change the financial burden on platforms, workers and consumers.
Turnover-linked approach
Payout-linked approach
Proportionality
Turnover-linked approach
Analysts say turnover ties the contribution to an aggregator’s overall business scale and economic capacity.
Payout-linked approach
A uniform percentage of worker payouts applies the same rate across platforms, but the resulting liability varies with transaction volume, ticket size and worker earnings.
Effect on business models
Turnover-linked approach
A turnover-based formula would avoid disproportionately penalising high-frequency, low-ticket businesses such as ride-hailing platforms.
Payout-linked approach
A payout-linked formula is being considered by the Ministry of Labour and Employment as a standardised way to calculate contributions.
Impact on workers and customers
Turnover-linked approach
Supporters argue turnover-based payments could reduce the risk of costs being passed to workers or price-sensitive commuters.
Payout-linked approach
Critics of the transaction-based model say its costs could ultimately be absorbed by businesses, reflected in worker payouts or passed on to consumers.
Key facts
- Current statutory rate
- Aggregators must contribute 1–2% of annual turnover under Section 114(4) of the Code on Social Security, 2020.
- Contribution ceiling
- The turnover-linked contribution cannot exceed 5% of the amount paid or payable to gig and platform workers.
- Alternative under consideration
- The Ministry of Labour and Employment is separately considering a payout-linked contribution of up to 5% of worker payments.
- Worker eligibility
- Workers qualify after 90 days with one aggregator or 120 days across multiple aggregators in a financial year.
- Food-delivery example
- A platform with ₹20,000 crore turnover would incur an estimated ₹164.25 crore contribution under the article’s 5% payout-based example.
- Ride-hailing example
- A platform with ₹1,000 crore turnover would face an estimated ₹1,428.1 crore contribution under the same example, equal to about 142.8% of turnover.
- Turnover example
- At a 2% rate, platforms with ₹20,000 crore and ₹1,000 crore in turnover would contribute ₹400 crore and ₹20 crore, respectively.
Quotes
Another analyst
An analyst discussing proportionality and the sustainability of the proposed levy
“A contribution that can exceed an aggregator's entire annual turnover raises a basic question of proportionality. A levy intended to fund worker welfare becomes difficult to sustain if its calculated liability is disconnected from the economic capacity of the entity required to pay it.”
livemint.com
“That is the central weakness of a transaction-linked model: the contribution can become disconnected from the economic capacity of the entity that is required to pay it.”
livemint.com
Sources
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