India's Gig Workers Finally Get A Safety Net, But Is The Net Strong Enough?

India has over 77 lakh gig workers and platform workers today. By 2030, that number is projected to cross 2.35 crore. These are the delivery riders navigating Mumbai traffic at midnight, the freelance coders building products they will never own, the cab drivers whose entire working life flows through an algorithm. For decades, Indian labour law had nothing to say to them. The new Labour Codes, effective 21 November 2025, finally do.

The question worth asking, however, is not just whether the law has arrived. It is whether the law that has arrived is equal to the problem it claims to solve.

What the Code Actually Does

The Code on Social Security, 2020 ("SS Code") introduces, for the first time in any central statute, a formal recognition of gig workers and platform workers as a distinct class deserving of social security protection. This is not a minor administrative tweak. It is a structural acknowledgment that the employment relationship — the bedrock on which Indian labour law has rested since Independence — no longer captures the reality of how a significant and growing portion of the Indian workforce earns its living.

Section 2(35) of the SS Code defines a gig worker as someone who performs work or participates in a work arrangement outside of a traditional employer-employee relationship. A platform worker, under section 2(60), is more specifically defined as someone engaged through an online intermediary to provide goods or services.

Section 114 of the SS Code empowers the Central Government to frame schemes for these workers covering life and disability insurance, accident insurance, health and maternity benefits, old age protection, and crèche facilities. Aggregators — the Swiggys, Olas, and Urban Companys of the world — are required under clause (4) of section 114 to contribute between 1% and 2% of their annual turnover toward funding these schemes, subject to a cap of 5% of the total amounts paid or payable to gig and platform workers. These contributions flow into a Social Security Fund created for this specific purpose, under Central Government administration.

The message is clear: if you build a business on flexible labour, you now have a statutory obligation toward that labour.

Why This Matters: The Architecture Shift

Under the old regime, gig and platform workers fell into a legal void. They were neither "employees" — lacking a formal contract of service — nor "workmen" under the Industrial Disputes Act, since there was no identifiable employer-employee relationship. This meant no PF, no ESI, no gratuity, no maternity benefit, no retrenchment compensation. Platforms benefited enormously from this ambiguity, scaling workforces without bearing the statutory cost of employment.

The SS Code cuts through that ambiguity by abandoning the employer-employee relationship as a prerequisite for social security coverage — genuinely progressive drafting that recognises dependence on a platform, even without formal employment, creates vulnerabilities the state has an interest in addressing.

Two Indian states had already moved in this direction: Karnataka and Rajasthan enacted standalone legislation for gig worker protection before the central codes came into force. The SS Code now creates a national floor, though these state frameworks will likely operate concurrently.

The Critique: Three Structural Problems

And yet. The framework, for all its novelty, has problems that practitioners and policymakers will need to confront honestly.

1. The Tax-Labour Characterisation Mismatch

Here is a fundamental inconsistency that the Code creates but does not resolve. For labour law purposes, gig and platform workers now have social security entitlements and are recognised as a protected class. But for income tax purposes, their income remains "income from business or profession" or "other income" under the Income-tax Act, 2025 — emphatically not salary income. The SS Code's recognition of their status does not change their tax characterisation.

This creates a practical absurdity: a platform worker is protected enough to receive social security, but not recognised enough to be treated as an employee for TDS. Platforms must deduct tax under Section 394 of the ITA 2025 (contractor payments), not Section 392 (salary TDS). The employer-employee relationship for TDS purposes continues to be governed by judicial principles based on control, economic dependence, and integration into the business — principles developed in an era before gig economy platforms existed. Until fresh guidance specifically addresses how these principles apply to aggregator-worker arrangements, tax practitioners will face a grey zone with each gig engagement they advise on.

2. The Contribution Structure Is Untested at Scale

The 1–2% of annual turnover formula sounds straightforward. It is not. Consider a large food delivery aggregator with annual gross merchandise value running into thousands of crores. A 2% levy on that turnover is a material number, but the cap at 5% of amounts paid to gig workers may significantly limit the actual contribution in practice. The interaction between these two caps has not been clarified, and the Central Government has not yet notified the actual contribution rates — meaning the obligation is live but the quantum is uncertain.

More fundamentally, the contribution formula ties the levy to turnover rather than to the number of workers or their earnings. A platform that pays its workers poorly but generates high transaction volumes could end up contributing more than a platform that pays well. Conversely, a platform with thin margins and modest turnover may contribute too little to make any meaningful difference to worker welfare. While the intentions are good, the bluntness of the math is a concern.

3. The Federalism Problem: Dual Burden or Coordination?

The FAQ issued by the Ministry of Labour clarifies that aggregator contributions will be credited to a Central Government Social Security Fund, and that Section 114(4) gives the Central Government authority to notify contribution rates for this purpose. However, Karnataka and Rajasthan already have their own gig worker welfare frameworks with their own contribution mechanisms. An aggregator operating nationally may face obligations under the Central SS Code and under these state frameworks simultaneously. The Ministry FAQ signals awareness of this issue but stops short of resolving it.

Until either the states align their frameworks with the central code or the Central Government issues guidance on pre-emption or coordination, multi-state aggregators face genuine compliance uncertainty — not merely a compliance nuisance, but potentially a constitutional question about the scope of concurrent list legislation in the labour field.

The Larger Point: Recognition Without Definition Is Incomplete

The SS Code's treatment of gig workers is best understood as a first step, not a destination. The Code breaks the conceptual barrier that kept these workers outside the law entirely. Nevertheless, recognition without definitional clarity creates its own problems. The blurry line between a genuine business-to-business engagement and a disguised employment relationship creates a lacuna of rights for almost one crore Indian gig workers. The current Code does not answer this; courts and tribunals may eventually have to. In the meantime, smart platforms have already begun restructuring their engagement models — moving gig and platform workers into alternate agreements and structures designed to stay on the right side of the definitional line. The law has given workers a door. Sophisticated intermediaries are already looking for ways to make sure that door doesn't open all the way.

What Practitioners Should Watch

For those advising aggregators and platform businesses, three immediate questions demand attention.

First, map your workforce: identify who qualifies as a "gig worker" or "platform worker" under the SS Code definition versus who falls under traditional contractor or employee categories. This distinction will determine your contribution obligations once rates are notified.

Second, review your state-level exposure: if you operate in Karnataka or Rajasthan, or any state currently drafting its own gig worker bill, understand the interaction between those frameworks and the incoming central code. Do not assume the Central Fund contribution will satisfy state-level obligations.

Third, document your characterisation methodology: given the tax-labour mismatch, the way you characterise a gig worker for TDS purposes must be defensible under both the CBDT's existing guidance and the new labour law framework. These cannot be treated as separate conversations.

Conclusion

India's gig economy workers have waited a long time for the law to see them. The Code on Social Security, 2020, finally does — and for that, it deserves genuine credit. The recognition of platform and gig workers in central statute is a milestone, not just a legislative detail. But recognition is only the beginning, and there are still many questions that require clear answers. A framework built on ambiguity will eventually produce litigation rather than welfare.

The workers delivering our groceries and driving us home deserve better than a safety net with holes in it.

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This article is intended for general informational purposes and does not constitute legal advice. Readers with specific queries are encouraged to seek professional legal counsel. © M&T Legal. All rights reserved.