Karnataka Issues Groundbreaking Ordinance to Protect Platform-Based Gig Workers in 2025

New Delhi: In a landmark move to safeguard the rights of platform-based gig workers, the Karnataka State Government promulgated the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Ordinance, 2025, on Tuesday, marking a significant step toward addressing the vulnerabilities faced by gig workers in the state. Approved by the Governor and published in the Karnataka Gazette Extraordinary, this ordinance introduces robust measures to ensure social security, occupational health, and safety for gig workers, while imposing clear obligations on aggregator platforms such as Zomato, Ola, Swiggy, Amazon, and others.

Understanding the Gig Economy in India

The gig economy has witnessed exponential growth in India, driven by the rise of digital platforms that connect service providers with consumers. According to NITI Aayog, approximately 7.7 million workers were engaged in the gig economy in 2020-21, constituting 1.5% of India’s total workforce. This number is projected to soar to 23.5 million by 2029-30, accounting for 4.1% of the workforce. Gig workers, as defined by the Code on Social Security, 2020, are individuals who work outside traditional employer-employee relationships, encompassing both platform-based workers (e.g., delivery personnel for Zomato or drivers for Ola) and non-platform-based workers.

The gig economy offers flexibility but comes with significant challenges, including lack of social protection, algorithmic management, job uncertainty, and unfair dismissal practices. Recognizing these issues, Karnataka’s ordinance aims to create a structured framework to support platform-based gig workers, ensuring they receive fair treatment and access to essential benefits.

Key Features of the Karnataka Ordinance 2025

The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Ordinance, 2025, introduces a range of measures to enhance the welfare of gig workers. Below are the key provisions:

1. Establishment of a Welfare Board

The ordinance mandates the creation of a state-level Welfare Board, chaired by the Labour Minister. This board will oversee the registration of gig workers and aggregators, formulate social security schemes, and monitor their implementation. The board will include:

• The state Labour Minister as chairperson.
• Secretaries from various government departments.
• A chief executive officer.
• Two representatives each from gig workers and aggregators.
• A representative from civil society.

The Welfare Board will also engage with gig worker unions, ensuring their voices are heard in policy discussions.

2. Welfare Fee and Social Security Fund

A cornerstone of the ordinance is the introduction of a platform-based gig workers welfare fee, ranging from 1% to 5% of the payout to gig workers per transaction. Aggregators such as Zomato, Ola, Swiggy, and Amazon will be required to deposit this fee quarterly into the Karnataka Gig Workers Social Security and Welfare Fund. The fund will also be supported by:

• Contributions from gig workers.
• Grants-in-aid from central and state governments.
• Grants, gifts, donations, or transfers from other sources.

The State Government will specify the exact percentage of the welfare fee within six months of the ordinance’s enforcement, with provisions for different rates for various categories of aggregators.

3. Payment and Welfare Fee Verification System (PWFVS)

To ensure transparency, the ordinance proposes a Payment and Welfare Fee Verification System (PWFVS), administered by the State Government and monitored by the Welfare Board. All payments to gig workers and the corresponding welfare fees deducted by platforms will be recorded in this system. The PWFVS will:

• Track every transaction involving gig workers.
• Disclose details of welfare fees collected and spent.
• Comply with applicable central and state data protection laws.

Until the PWFVS is operational, aggregators must self-report and submit quarterly details of payouts made to gig workers.

4. Safeguards Against Unfair Dismissals

The ordinance introduces protections against arbitrary terminations. Aggregators must:

• Provide valid reasons in writing for terminating or deactivating a gig worker.
• Issue a 14-day prior notice and adhere to principles of natural justice.

This measure addresses the common issue of unfair dismissals, ensuring gig workers are treated equitably.

5. Transparency in Algorithmic Systems

Aggregators are required to inform gig workers about key parameters affecting their work, including:

• Rating systems and worker categorization.
• Use of personal data.
• The impact of automated monitoring and decision-making systems on working conditions.

This provision aims to address the lack of transparency in algorithmic management, a significant challenge for gig workers.

6. Grievance Redressal Mechanism

The ordinance establishes a two-tier grievance redressal system:

• Gig workers can file complaints with a designated officer regarding entitlements or payments.
• Appeals can be filed within 90 days with the Appellate Authority, represented by the Member-Convener of the Welfare Board.

Additionally, aggregators with more than 50 gig workers must form an Internal Dispute Resolution Committee to address specific disputes, such as algorithm changes or occupational safety violations, within 30 days through arbitration.

7. Occupational Health and Safety

Aggregators are mandated to provide a safe working environment that minimizes health risks for gig workers, as far as is reasonably practicable.

8. Penalties for Non-Compliance

Non-compliance with the ordinance incurs penalties:

• A fine of up to Rs 5,000 for the first contravention.
• Up to Rs 1 lakh for subsequent contraventions.

9. Quarterly Reporting

Aggregators must submit electronic quarterly returns to the Welfare Board, detailing transactions and welfare fee contributions. The government may allow half-yearly or annual submissions via notification.

10. Unique ID for Gig Workers

Every gig worker will be registered with a unique ID, valid across all platforms, facilitating access to social security schemes and grievance redressal.

11. Scope of the Ordinance

The ordinance applies to platforms offering:

• Ride-sharing services (e.g., Ola, Uber).
• Food and grocery delivery (e.g., Swiggy, Zomato).
• Logistics services.
• E-marketplaces (B2B and B2C).
• Professional activity providers.
• Healthcare, travel, hospitality, and content and media services.

Comparison with Other State Initiatives

Karnataka’s ordinance builds on similar efforts in other states:

• Rajasthan: The Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023, provides for registration, a Welfare Board, and a welfare fund funded by a transaction-based fee, state grants, and other sources. Unlike Karnataka, it lacks provisions for algorithmic transparency or termination protocols.
• Jharkhand: The Draft Jharkhand Platform Based Gig Workers (Registration and Welfare) Bill, 2024, mirrors Karnataka’s framework, requiring registration, a welfare fee, and grievance redressal. It also emphasizes algorithmic transparency but does not specify termination procedures.

Nationally, the E-Shram portal, launched in 2021, creates a database of unorganized workers, including gig workers, to facilitate social security benefits. Karnataka’s existing State Unorganised Workers Social Security Board implements the Karnataka State Gig Workers Insurance Scheme, offering:

• Accidental death cover: Rs 4 lakh (Rs 2 lakh each for accidental and life insurance).
• Permanent disability: Up to Rs 2 lakh.
• Hospital expense reimbursement: Up to Rs 1 lakh.
• Life insurance: Rs 2 lakh.

As of January 2024, 1,778 beneficiaries were registered under this scheme, with a budget allocation of Rs 700 crore for 2024-25.

Challenges and Key Issues

The ordinance, while progressive, raises several issues that require further scrutiny:

1. Definition of Gig Work

The ordinance defines a gig worker as someone engaged in contractual, piece-rate work through a platform. However, this definition may inadvertently classify traditional employees as gig workers, as it does not account for conceptual features like worker flexibility or lack of employer control. The International Labour Organisation (2021) notes that the line between employment and self-employment is blurred in the gig economy, complicating regulation.

For instance, the Karnataka High Court ruled that Ola drivers are employees due to the company’s control over fares, routes, and devices. This highlights the challenge of distinguishing gig workers from employees, especially when platforms impose significant control.

2. Platform-Only Benefits

The ordinance limits benefits to gig workers sourcing work through platforms, potentially excluding those performing similar tasks (e.g., traditional taxi drivers). This raises questions about equity, as workers with similar conditions may not receive equal protections.

3. Funding Social Security

The welfare fund relies on contributions from aggregators, gig workers, and the government. The question of who should bear the cost remains contentious. Internationally, models vary:

• India: The Employees’ Provident Fund is funded by employer and employee contributions.
• UK: Self-employed gig workers pay national insurance contributions for limited benefits.
• USA: Self-employed workers contribute under the Self-Employment Contributions Act.
• Australia: Platforms may make superannuation payments for gig workers classified as employees.
• Sweden and Singapore: Combine employer, employee, and government contributions.

4. Excessive Delegation

Critical details, such as fund utilization, contribution percentages, and benefits, will be prescribed in Rules, raising concerns about excessive delegation by the legislature. The Code on Social Security, 2020, specifies benefits like maternity and old-age protection, but the ordinance leaves these to future regulations.

5. Lack of Clarity on Turnover

The welfare fee may be based on a percentage of an aggregator’s annual state-specific turnover, but the term “turnover” is undefined. This ambiguity could lead to disputes, similar to the National Telecom Policy, 1999, where telecom companies contested the definition of “gross revenue.”

6. Penalties and Arbitration

The ordinance’s penalty range (Rs 5,000 to Rs 1 lakh) lacks guidance on gradation, potentially leading to inconsistent enforcement. Additionally, disputes qualifying as offences (e.g., algorithm transparency violations) may not be suitable for arbitration, as per a 2011 Supreme Court ruling.

International Context

Globally, gig worker classification and social security are evolving:

• UK: The Supreme Court ruled Uber drivers as workers, not self-employed, due to platform control, while Deliveroo workers were not, due to substitution rights.
• California, USA: The ABC test presumes workers are employees unless proven otherwise.
• EU: A 2023 Bill presumes an employer-employee relationship if platforms exert control.
• Australia: Courts emphasize contract primacy, highlighting risks of misclassifying gig workers.

Conclusion

The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Ordinance, 2025, is a pioneering effort to address the vulnerabilities of gig workers in a rapidly growing digital economy. By establishing a Welfare Board, mandating a welfare fee, and ensuring transparency and protections, Karnataka sets a precedent for other states. However, challenges like defining gig work, funding models, and regulatory clarity must be addressed to ensure effective implementation. As the gig economy expands, this ordinance represents a critical step toward equitable treatment and social security for millions of platform-based gig workers in India.

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