By Shivanand Pandit
According to a June 2022 estimate by NITI Aayog, India’s gig workforce is projected to grow significantly—from around 8 million workers in 2020–21 to nearly 24 million by 2029–30. Despite this rapid expansion, gig workers have remained largely unprotected, lacking access to basic entitlements such as social security, healthcare, and job security. This absence of safeguards has made them increasingly vulnerable, leading to a series of protests and demands over the years, as workers continue to push for formal recognition and access to essential rights and benefits.
The gig economy is a rapidly growing segment of the labour market, built around short-term, freelance, or task-based work, often facilitated by digital platforms. Companies like Uber, Ola, Swiggy, and Zomato have enabled millions to earn a living by linking them directly with customers. Despite their crucial role, most gig workers are not classified as formal employees. Consequently, they are excluded from key employment benefits such as health insurance, retirement savings, paid leave, and other social security measures, leaving them without the protections enjoyed by traditional full-time workers.
Labelled as independent contractors or self-employed, gig workers do not fall under the protection of traditional labour laws. This legal status exposes them to multiple vulnerabilities, including the absence of healthcare, income security during unemployment, and protections related to workplace safety. Despite their growing contribution to the economy, these workers continue to function without a structured safety net, leaving them particularly at risk in cases of illness, accidents, or sudden loss of income.
The Karnataka Model
On September 12, 2025, the Karnataka government notified the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025, establishing one of the most comprehensive regulatory frameworks for the gig economy in India. This pioneering law mandates that all aggregator platforms across various sectors, including ride-hailing, food delivery, e-commerce, healthcare, and digital media, contribute a welfare fee ranging from 1% to 5% of each transaction’s payout. The contributions will fund social security benefits for gig workers, providing them with financial protection, healthcare, and other crucial benefits that they have historically lacked. This step positions Karnataka as a leader in providing legal and social security protections for gig workers, offering a model that other states and the central government may look to replicate.
The Act introduces several provisions to ensure gig workers’ rights, welfare, and safety. Key features include the establishment of a Gig Workers Welfare Board, headquartered in Bengaluru, which will oversee the implementation of the law. The Board will be chaired by the state labour minister and consist of representatives from various departments like labour, IT, and commercial taxes, along with experts from civil society and technical fields. This governance body will play a critical role in managing the welfare fund and ensuring that platform-based workers are properly registered, assigned unique IDs, and granted access to a range of social security schemes. These schemes will ensure workers receive minimum payout cycles and protections against arbitrary termination.
A notable feature of the law is its emphasis on transparency and fairness in platform-worker relationships. Aggregator platforms are required to maintain transparency on issues such as payments, deductions, and incentives, ensuring that gig workers are fully informed of their earnings and the conditions under which they work. Platforms will also be required to provide a clear explanation of how their algorithmic systems operate, disclosing decisions made by automated processes, and offering a human point of contact for workers in case of issues. Furthermore, the Act stipulates basic working conditions, such as the provision of rest breaks and access to necessary facilities, safeguarding workers’ well-being and preventing exploitation.
The Act introduces a strong two-tier grievance redressal mechanism to ensure fair and accessible dispute resolution for gig workers. Initially, workers can raise complaints with the Internal Dispute Resolution Committee set up by each platform. If unresolved, these issues can be escalated to the Gig Workers Welfare Board, an independent authority established under the Act. This layered approach not only empowers workers with formal channels to voice grievances but also reinforces accountability among aggregator platforms by making such mechanisms a legal obligation. To enforce compliance, the Act imposes penalties of up to ₹1 lakh for repeated violations and mandates platforms to submit quarterly compliance reports, ensuring ongoing oversight of platform behaviour and worker welfare.
In addition to dispute resolution, the Act ensures financial transparency and efficiency in the administration of the Gig Workers Welfare Fund by capping administrative expenses at 5% of the total corpus. This ensures that the bulk of the funds—contributed by platforms through a welfare fee of 1–5% per transaction—go directly toward worker benefits such as social security schemes, health insurance, and accident compensation. By institutionalizing these protections and holding platforms legally accountable, Karnataka has set a national precedent for labour reform in the gig economy. The Act not only fills a critical policy gap but also lays the foundation for a fairer, safer, and more transparent digital labour market in India.
Obstacles and Possible Concerns
The Act represents an important step forward in labour reform, but it faces several challenges that need attention. One key issue is ensuring that all gig platforms, including smaller and informal ones, follow the rules and contribute to the welfare fund. Without full compliance, the system may not work as intended. Another concern is whether the welfare fund will have enough money over time, as its success depends on regular contributions from both workers and platforms. If contributions are insufficient, the fund may struggle to provide proper social security and support.
In addition to the challenges of implementation and funding, there is a significant risk of resistance from many gig platforms regarding the new regulatory requirements. These platforms may view the obligation to contribute financially to welfare schemes as an added burden, both in terms of cost and administrative complexity. Such opposition could manifest in reluctance to comply fully or delays in fulfilling their legal responsibilities, which in turn could hinder the smooth enforcement of the Act. Without cooperation from these platforms, the intended benefits for gig workers may not be realized effectively, undermining the overall objectives of the legislation.
The additional welfare fee imposed on delivery aggregators is likely to be passed on to customers, resulting in higher order costs for consumers. This increase in prices could potentially slow down order growth for these platforms. Given that Karnataka is the largest market for delivery companies, the impact could be significant. Moreover, there is a risk that other states may introduce similar fees, which would further raise costs across regions. If such extra charges continue to be applied, it could negatively affect overall order growth for delivery aggregators.
Furthermore, the Act’s scope may not fully extend to gig workers operating on informal or semi-formal platforms, which constitute a substantial portion of the gig workforce. These workers, often engaged through smaller, unregistered, or less regulated intermediaries, may remain outside the protective umbrella of the law, thereby missing out on crucial social security benefits and welfare support. This exclusion risks creating a two-tier system where only those affiliated with registered platforms gain protections, while others continue to face vulnerability and insecurity. To ensure the Act’s success and fairness, it will be essential to identify and close these gaps, expanding protections to include all categories of gig workers across Karnataka. This comprehensive approach will be key to truly safeguarding the welfare and rights of the entire gig workforce in the state.
Final Reflections
The Act is an important step forward in protecting gig workers by creating clear rules made just for their needs. A key part of the law is setting up a special welfare fund, paid for by contributions from gig companies, which will provide important benefits like healthcare, insurance, and financial help when workers face tough times. Besides this support, the law also asks gig companies to be more open and responsible by following fair work rules, paying workers on time, and having clear ways to solve any problems workers might have. These steps are meant to fix the long-standing issues where gig workers have not had the same protections as regular employees.
For this law to work well, a few things are very important. The law needs to be enforced fairly and steadily across all kinds of gig jobs, which change quickly. The welfare fund also needs enough money to keep helping workers as more people join the gig economy. It’s also important for gig workers and companies to work together because cooperation will help make sure the law is followed and that workers get the support they need. As gig work grows in India and around the world, Karnataka’s law could serve as a good example for other places to create similar rules. These efforts can help build a fairer and safer working environment that protects gig workers in today’s digital world.
