Gig economy weighs impact of social security for workers
The government has proposed changes which would ensure gig workers get life and disability cover, health and maternity benefits, old age protection and any other benefit it may determine as helpful. The benefits have not been clearly defined yet, ...
August 2019: The company doubled down on grocery with AmazonFresh, offering two-hour grocery delivery.
September 2019: Swiggy rolled out pick-up and drop services, and also expanded Swiggy Stores.
The timeline is only a recent indicator of how internet companies are expanding their hyperlocal delivery services to reach customers faster, preferably in less than an hour. To make this happen, companies need more delivery and warehouse personnel, and they are adding hires to a pool of tens of thousands of blue-collar workers already toiling at small to large consumer-internet companies.
But while new hyperlocal services were being given final touches, discontent in the workforce was starting to boil over. The foot soldiers of the business hit the streets, protesting polices of their companies, which had revised incentive structures to bring down costs.
Prashanth, a delivery executive with food delivery platform Zomato in Bengaluru, explained why the agents are upset: firms have changed the payout level for every delivery. Prashanath must now deliver more orders to earn the same amount of incentives he did with a smaller set of orders a month ago.
“My friends and I are doing this because of our debts,” he said, as he received an alert for the next delivery from a restaurant on MG Road, Bengaluru’s Central Business District. He said he might end up working 10-12 hours a day to hit delivery targets that bring promised additional inducements.
Recently, the central government, sensing the disquiet, proposed additional benefits for gig or platform workers, putting the spotlight on the sector. The initiative has divided industry stakeholders who play a critical role in India’s nascent gig economy.
Currently, most online companies offer a basic accidental coverage to platform workers, but its details, including terms, are not disclosed. The government has proposed changes which would ensure gig workers get life and disability cover, health and maternity benefits, old age protection and any other benefit it may determine as helpful. The benefits have not been clearly defined yet, which is making companies anxious as they fear their operational costs will jump. It’s not just cost; multiple dynamics need to be examined, industry executives told STOI.
“I think it’s kind of premature for the government (here). While the definition (of platform worker) is fine, let us understand how the gig economy has evolved. It’s been in existence in the developed economy for over a decade and now, there are attempts to regulate it, for example in California,” said Rituparna Chakraborty, cofounder and executive vicepresident of TeamLease, one of the largest companies providing blue-collar staffing in the country. “Trying to push the gig economy into a structure is essentially killing it at its birthing.”
Chakraborty believes more formal employment would lead to better conditions. “This (gig work) has helped a lot of people. The better way to bring about fairness would be to create an environment where there are enough formal jobs. Fairness will automatically kick in,” she said, explaining that the change will offer people greater flexibility to choose a gig or a full-time job.
A senior executive at a leading food delivery company seemed to agree with her. “Even at a nascent stage, this industry is growing very fast. Any regulation without caveats would end up hurting workers instead of helping them,” said the executive, who has had a preliminary discussion on the issue with government.
The idea of a gig economy, staffing firms say, is based on the premise that workers get to choose the hours, a freedom which may not come with traditional employment. Companies pay as per services used by them, the hours or delivery volume. Flexibility will be hit if benefits proposals are not framed in a balanced way, industry experts said. But the changes might help companies arrest the high rate of attrition. Most delivery teams see 12-15% churn a month and additional benefits could help in retaining talent, according to Hari Menon, cofounder and CEO of online grocer Bigbasket.
“My belief is it will help workers in a big way. They will see more savings, though sometimes they feel more cash in hand is better than deductions. Finally, the money is theirs, but that’s the cost [deduction] of benefits,” he told STOI . Pricing, he added, would be a key factor if companies have to bear the extra cost. But overall, the gig economy would gain by retaining talent. “The cost of attrition is much higher than the cost of delivery,” Menon said. Bigbasket’s delivery team has about 15,000 people. The overall staff figure is 23,000, which includes warehouse workers and others in the supply chain.
“Regulations and benefits are definitely advantageous for employees, but what’s happening is that most companies are trying to avoid costs. If a rival company hires an employee with provident fund and other benefits, the cost goes up by 30% for that employee compared to when he is working on contract. In both scenarios, the person is working for eight hours,” said Anant Goel, co-founder and CEO of Milkbasket, which delivers milk and essentials every morning.
Milkbasket offers PF to its 1,500 delivery agents. “If government increases anything, it has an impact on everyone. So, a person getting food or grocery delivered may have to pay a little more. Customers who still find the service valuable will stay,” Goel said.
The co-founder of another micro-delivery grocery platform said costs would rise with extra employee benefits, but much would depend on the final law. “Startups or large companies are able to offer consumers hourly delivery because of the flexibility of the gig economy. If that’s taken away, it will impact the model,” he said.
This is an issue for even workers, especially cab drivers. Many driver partners take rides from both Uber and Ola customers. “That’s the beauty (of gig economy). It is the individual’s choice. These are the nuances we have to understand before rushing into regulation,” Chakraborty of TeamLease said.
Some other industry executives said gig workers won’t be able to optimise their earnings based on the demand they see on different platforms if a company offers social security benefits. “It’s a tricky area for workers,” one executive said.
A food delivery agent in Bengaluru said he would opt for more cash over indirect benefits. “The government’s idea is good, though I haven’t heard of any benefits as of now. I would prefer more cash in hand than benefits. Chances of accidents and claiming insurance are rare,” he said.
An executive of a food delivery firm said most members of its delivery team also liked a bigger cash payout.
Anshul Prakash, a partner at law firm Khaitan, who leads its labour and employment practices, said one would have to see how the industry reacted to the government’s measures. “Everybody wants more cash. The moment you put gig workers in the ambit of social security, they will run away again. This will put pressure on employers. So, all these things need to be looked at,” he said, adding the industry and firms, in their individual capacity, had shared feedback with the government.
Amazon India said it was studying the government draft, while Flipkart, Swiggy, Zomato, Uber and Ola did not respond to STOI’s queries.