The Gig Economy and the Legal Status of Gig Workers

Introduction

In this digital age work is no longer confined to only office spaces or any traditional working set-up but has now transcended these boundaries. The rise of the Gig economy redefined the working conditions of labour. It has also transformed the traditional employment structure, offering flexibility to workers and scalability to businesses. This article will cover all the aspects related to the gig economy and its legal status from a global as well as Indian perspective.

Understanding what is Gig Economy

To begin with, let us first understand what is meant by the gig economy. The word “gig” literally means; a job, especially one that is temporary or freelance and performed on an informal or on-demand basis. The term gig economy means the economy that is characterized by flexible, short-term, and freelance work arrangements mostly facilitated by digital platforms. It consists of temporary workers, independent contractors, etc, and the people who work in this economy are known as “gig workers”. The term “gig work” has originally originated from the West wherein it referred to free and flexible jobs. But in the Indian context, it refers to app-based work.[1]

Examples

Now to get a better understanding of the terms let us understand this concept with the help of examples. There is a person named Suresh, a 24-year-old who lives in Pune, Maharashtra. Instead of working in a 9 to 5 job, he takes up freelance animation projects. So now his income depends on the number of projects he does and not a fixed income. Let us take another familiar example to understand the concept better, there is a person named Karan who works as a driver at Uber – a taxi service provider company. Now Karan would get paid based on trips he does on a daily basis and not a fixed income at the end of the month. Another example would be, a female working in a Yes Madam – which is a beauty and wellness company providing home salon services, gets paid based on the number of services she offers within a day. These were a few examples of gig workers.

Classification of gig workers

There is no specific way to classify gig workers, as they are varied. There is a wide spectrum of gig workers of all ages, genders, races, etc. They can be broadly classified into platform-based and non-platform-based gig workers and some other types too. Let us categorize them in the following manner:

• Platform-based gig workers: These, as the name suggests are workers using online platform services to perform work. Examples include Swiggy or Zomato delivery people; Uber or Ola taxi drivers, cleaning service providers at Urban Clap, etc.

• Independent contractor: This is the most commonly used term for gig workers. They are mostly freelancers or self-employed workers. These workers work on their own terms, like working schedules, choosing their own clients, deciding their own charges, etc. for example, a freelance graphic designer on Fiverr.

• Dependant contractors: These are those gig workers who are dependent on only a single platform for their work but are not officially the employees of the company they work at. For example, a Zomato food delivery partner works solely for the company and no other platform.

• Part-time gig workers: These are workers who have a primary job and work as gigs for part-time or secondary income. For example, a college student working part-time as an Uber driver or an engineer working as a tour guide on weekends.

These were some broad categorizations and classifications of gig workers and the type of work they perform.

Features of gig workers

Now, let’s understand some key features of the gig economy briefly.

• Flexibility: It is one of the most important features of the gig economy as the worker can himself/ herself decide how much work to do or when to do the work. It helps in maintaining the work-life balance. E.g. A freelancer decides when to take up a new project on his own as there is no compulsion.

• Task-based earnings: This a very good feature of the gig economy as the earnings are based on our performance and the number of tasks we do in a day or in a given time period. So, it’s a pretty much fair paying system as remuneration is based on our own performance.

• Low entry barriers:  It is often seen that there are no entry barriers for workers in the gig economy. There are no as such formal educational requirements to become a gig worker. But only for certain working sectors of the gig economy and not all. E.g. anyone with a bike can become a delivery boy for any food delivery company like Zomato or Swiggy.

• Multiple Income sources: It is a possibility that many gig workers work on multiple platforms or wot multiple clients simultaneously to get more earnings. E.g. A beautician may work on Yes Madam and also on Urban Clap.

These are some features of the gig workers.

Benefits of the gig economy:

There are some benefits of the gig economy which can be divided into three aspects, benefits to workers, to employers, and to customers. Let us understand this in short.

• To workers: The gig economy can provide some benefits to workers such as flexible working schedules, multiple income streams, no long-term commitment, easy entry in the workforce, skill development, skill development etc.

• To employers: It can help the employers in many ways such as it can increase access to a larger talent, high scalability, better customer satisfaction, cost saving on employee benefits, etc.

• To customers: The gig workers provide high convenience rates to customers, low costs as there is competition amongst the gig workers, wide range of service options are available to the consumers.

Challenges faced by Gig workers

While the gig economy has many advantages as mentioned above there are also some challenges in the gig economy that are being faced by gig workers, companies, and even the government. Some of the challenges are mentioned below. We would again divide the challenges faced by workers, employers, and consumers.

• Challenges faced by Gig Workers:

The primary issue that gig workers face is that of lack of job security as gig workers don’t have any permanent contract of work.

Secondly, gig workers do not have social security or any sort of employee benefits such as pensions, provident funds, or paid leaves.

Thirdly, it is often seen that workers are exploited and high commission fees and platform fee is charged to the workers.

Lastly, gig workers are not given workplace safety, unlike permanent employees. Gig workers are often seen working in unsafe places for example delivery partners might come across accidents.

These are some problems that gig workers face while working.

• Challenges faced by companies:

Companies or businesses in the gig economy also face certain issues such as,

First, legal and regulatory uncertainty is faced by many companies as there are no fixed laws governing gig workers.          

Secondly, it is seen that the disputes over workers’ rights are on the rise, many cases are being filed against the gig companies for unfair labour practices, classification of employees, minimum wages, etc.

 Thirdly, companies often face the issue of worker loyalty as gig workers can switch between platforms.

These are a few issues that are faced by the platforms/companies/businesses in the gig economy while maintaining the gig workers.

• Challenges faced by the customers:

Consumers too face certain problems when it comes to services from gig workers such as,

Firstly, since the gig workers are not given any proper training for the service that the company is hiring them to provide, it is quite often seen that there is inconsistency in the quality of service.

Secondly, some gig platforms increase prices during peak hours or during some unfavourable conditions which makes the services unaffordable for some customers.

So, these are overall some of the challenges that are faced by the entire gig economy.

Gig economy: Indian Context

Now that we have got a fair idea of what exactly the gig economy is its features, benefits, challenges, etc. Let us understand the gig economy in the Indian scenario.

The gig economy in India is growing significantly as there is an increase in the use of digital platforms and the overall use of the internet by citizens. It is seen that people are more focusing on convenience in today’s age therefore companies like Ola, Uber, Swiggy, Zomato, Urban Clap, etc are growing.[2] According to the NITI Ayog report, there are around 7.7 million gig workers (2020-2021) and it is also said that the number will go up to 23.5 million by 2029-2030 in India. It is projected that the gig workforce in India will comprise 4.1% of India’s total workforce by the year 2030.

Legal frameworks for gig workers in India

There are certain legal frameworks for the gig economy such as the [3]Code on Social Security, 2020 mentions the term gig economy in a separate section, and it also imposes an obligation on the employers to contribute to a social security fund that would be handled by a government-led board. Enables the creation of social security schemes for gig workers but does not mandate them.

Next is the Code of Wages, 2019 which provides for universal minimum wage and floor wage across all sectors including organized, unorganized, and gig workers. Prohibits gender discrimination which is an important protection for female gig workers.

[4]Occupational Safety, Health and Working Conditions Code, 2020 sets daily work hour limits and mandates safety measures. Includes women in night shifts with specific safeguards. Defines factories and contract labour laws but does not directly address platform-based gig work.

There is one state-level regulation named; the Rajasthan Gig Workers Act, 2023. This is the first state law recognizing gig workers and setting up of a welfare board. It mentions that the aggregators have to contribute 1-2% of their revenue to a gig worker welfare fund. The act also provides for registration, protection, and grievance redressal for the gig economy.

There was a writ petition filed by NHRC before the Honourable Supreme Court of India seeking good and better working conditions for the gig workers, so the Honourable Supreme Court of India directed the central and state governments to complete the registration of gig workers for social security benefits.

 [5]The 2025 Union Budget outlines significant measures for gig economy workers, emphasizing their official recognition, social welfare, and health coverage. The government intends to distribute identification cards and enroll gig workers in the e-Shram portal, granting them access to various welfare programs. Moreover, these workers will now be eligible for the PM-JAY scheme, which offers annual family health insurance up to ₹5 lakh. The budget allocation for labour welfare has been substantially increased to ₹32,646 crores, aimed at bolstering employment opportunities and social security initiatives. These policy changes seek to enhance economic stability and social safeguards for India’s expanding gig workforce.

Examining the Gig Economy: India vs. Global Perspective

The expansion of the gig economy worldwide has been fueled by digital platforms offering flexible employment options. However, the legal and economic circumstances of gig workers differ substantially among nations. In India, as in many emerging economies, the gig workforce is extensive but faces low pay, limited social protections, and unclear legal status. On the other hand, advanced economies like the US, UK, and EU have implemented more defined legal safeguards and broader social security coverage for gig workers.

India’s gig workforce comprises approximately 7.7 million individuals, with estimates suggesting this could increase to 23.5 million by 2029–30. Yet, most of these workers lack guaranteed minimum wages, health benefits, and insurance. While the Code on Social Security, 2020, introduced measures for gig workers, its enforcement remains inadequate. In contrast, nations such as the UK (Uber BV v. Aslam case) have granted gig workers “employee” or “worker” status. Spain’s “Rider’s Law, 2021” is a law that protects the rights of delivery workers who work for digital platforms.       

In the United States, gig workers are still categorized as independent contractors, although California’s AB5 law sought to reclassify them as employees, facing opposition from companies like Uber and Lyft. The European Union’s Platform Work Directive (2021) Under the newly implemented regulations, algorithms or automated systems cannot be used to terminate or dismiss individuals engaged in platform-based work. Digital labour platforms are now required to implement human supervision for crucial decisions that directly impact workers performing tasks on their platforms.

While India’s gig economy presents significant job opportunities, the absence of structured labour protections creates challenges. To ensure sustainable economic growth and improve gig workers’ conditions, India must develop stronger legal frameworks, social security programs, and wage regulations, drawing inspiration from global best practices.

Suggestions

Recommendations for Enhancing the Gig Economy Distinct Legal Status – Establish a separate category for gig workers in labour legislation to provide appropriate safeguards without compromising job flexibility.

• Welfare Benefits – Require platforms to contribute to healthcare, insurance, retirement plans, and maternity coverage for gig workers.
• Fair Compensation – Develop transparent pay structures and establish a base wage to prevent worker exploitation.
• Conflict Resolution Systems – Establish specialized tribunals or hotlines for gig workers to efficiently address disputes with platforms.
• Workplace Safety & Gender Safeguards – Apply POSH Act protections to female gig workers and improve overall safety measures.
• Transferable Benefits – Create portable social security accounts, enabling gig workers to maintain benefits across various platforms.
• Digital Rights & Algorithmic Transparency – Require platforms to reveal their methods for assigning work and calculating wages to prevent unfair practices.
• Worker Organization & Negotiation – Acknowledge gig worker unions and facilitate discussions for improved pay and working conditions.
• Public-Private Cooperation – Foster partnerships between government and platforms for gig worker welfare, skill development programs, and financial assistance.
• Tax Incentives for Compliance – Offer tax advantages to platforms that provide voluntary protections such as insurance, pensions, and worker support initiatives.

By implementing these strategies, India can cultivate a balanced and equitable gig economy that promotes growth while protecting worker rights.

Conclusion

The gig economy provides both flexibility and job prospects, but it also presents challenges such as employment instability and inadequate social protection. Independent contractors, platform workers, and freelancers, collectively known as gig workers, play a crucial role in the digital economy. While nations like the United States and Spain have enhanced worker safeguards, India’s developing legal structure still requires comprehensive modifications. It is crucial to guarantee fair compensation, improved social security, and precise worker categorization. A well-balanced strategy involving government, corporations, and employees will contribute to the development of a sustainable and fair gig economy that benefits all parties involved.

                    

References

[1] Radhika Dinesh & Tathya Sarkar, Workers’ rights in the gig economy- legal framework and challenges, Manupatra, ( Feb 18, 2025, 7.20 pm) https://articles.manupatra.com/article-details/WORKERS-RIGHTS-IN-GIG-ECONOMY-LEGAL-FRAMEWORK-AND-CHALLENGES .

[2]  Only IAS by Physics Wallah, https://pwonlyias.com/current-affairs/gig-economy-framework-in-india/#survey-on-the-gig-economy-in-india, ( last visited, Feb.18, 2025, 8.16 pm).

[3]  Drishti IAS, https://www.drishtiias.com/daily-updates/daily-news-analysis/challenges-faced-by-the-gig-workers, (last visited, Feb.18, 2025, 8.23 pm).

[4] Radhika Dinesh & Tathya Sarkar, Workers’ rights in the gig economy- legal framework and challenges, Manupatra, ( Feb 18, 2025, 8.30 pm) https://articles.manupatra.com/article-details/WORKERS-RIGHTS-IN-GIG-ECONOMY-LEGAL-FRAMEWORK-AND-CHALLENGES

[5] Himanshu Pathak, Union Minister Dr. Mansukh Mandaviya Lauds Historic Budgetary Allocation for Labour Welfare; Says Social Security for Gig Workers a Transformative Step, PIB Delhi, (Feb. 02, 2025, 2.44 pm) https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2098901#:~:text=This%20initiative%20will%20empower%20nearly,Mansukh%20Mandaviya.