New cess for gig workers' welfare likely to raise costs for consumers

Time of India

28-05-2025

Bengaluru: While Karnataka has taken the lead in addressing the welfare of gig and platform-based workers, it is likely to come at a cost to consumers as they may have to shell out more for cab rides, food deliveries, and other app-based services.
The proposed Karnataka Platform-based Gig Workers' (Social Security and Welfare) Ordinance, 2025, will introduce a 1%-5% cess aimed at creating a welfare fund for an estimated 30,000 gig workers in the state. Officials say contribution will be split three ways — among consumers, digital platforms, and gig workers themselves — though they admit the heaviest burden may fall on the end user.
The state cabinet's decision to introduce an ordinance has been widely welcomed since it acknowledges rights of a workforce that is rapidly expanding.
The real test, though, lies in implementation. With the law yet to be formally notified, attention has now shifted to how the cess will be collected on the ground.
"The Act has been framed in such a manner that all three stakeholders can contribute to the welfare fund," said Dr Manjunath, additional labour commissioner. "Even gig workers themselves can top up on social security by paying extra to the board." He said rules are likely to be finalised within a week.
Despite the inclusive design, several experts are raising red flags over how the policy will play out. Balaji Parthasarathy, principal investigator, Fairwork India and professor at the International Institute of Information Technology, Bengaluru, said: "The legislation outlines the terrain, but implementation will hinge on rules, particularly how wage protection, dispute resolution, and algorithmic accountability are addressed.
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Parthasarathy expressed concern over the lack of guaranteed wages. "Transparency in deductions is a start, but without wage-floor guarantees or clear limits on unilateral payout cuts, platforms can still reduce per-task payments to offset the cess," he said.
He also criticised the imbalance in stakeholder engagement: "Platforms refuse to negotiate with worker collectives, but did not hesitate to make collective representations through bodies such as Nasscom and IAMAI, which opposed many sections of the June 2024 bill that was circulated."
From a legal lens, the ordinance marks a formal recognition of gig worker arrangements, potentially curbing the risk of misclassification. But Vikram Shroff, partner at AZB & Partners, said: "Termination provisions in the ordinance are likely to be legally tested, especially where they conflict with existing contracts between aggregators and workers."
Shroff also cautioned that with the eventual roll-out of the national social security code, platforms operating across states may have to navigate overlapping regulations.
"Two sets of laws may govern gig worker entitlements, potentially leading to regulatory confusion," he said.
Draft rules state platforms will be placed in cess slabs depending on the nature of business — delivery, transportation, or personal services. Officials estimate the annual corpus from the cess to be around Rs 150 crore.
Despite concerns, some platforms have responded positively. Athira, vice-president, public policy and govt relations at Porter, called the ordinance a progressive and much-needed step that "acknowledges the role of gig workers and the importance of social security". "We remain committed to working closely with both state and central govts to strengthen the welfare ecosystem for gig workers across the country," she said.