Turnover-linked levy could be fairer for gig workers than payouts | Economy & Policy News

As India moves to operationalise social security contributions for gig and platform workers, a seemingly technical design choice could carry outsized consequences for different segments of the platform economy: whether aggregators should contribute based on annual turnover or on a percentage of individual worker payouts.

A contribution mechanism for gig-worker social security that is linked to individual transactions rather than an aggregator’s turnover could create a sharply uneven financial burden across the platform economy, hitting businesses built on high transaction volumes but low-ticket sizes especially hard, analysts and industry sources said.

The Code on Social Security, 2020 requires aggregators to contribute to a Social Security Fund for gig and platform workers. Under the rules, a gig worker becomes eligible for benefits after 90 days of engagement with a single aggregator, or 120 days across multiple aggregators, in a financial year. Aggregators are required to assess and deposit their contributions annually.

The Ministry of Labour and Employment is pushing to standardise contributions on a per-transaction or payout-linked basis. That choice of methodology matters because it can produce materially different outcomes across platform businesses, depending on their transaction volumes, ticket sizes, business models and overall turnover.

A comparison of the two approaches shows that a payout-linked mechanism can place a substantially heavier burden on high-frequency businesses such as ride-hailing, both at the aggregate platform level and in terms of the contribution generated from individual workers’ earnings, analysts said.

Under Section 114(4) of the Code, aggregators must contribute 1 per cent -2 per cent of their annual turnover, but this contribution cannot exceed 5 per cent of the amount paid or payable to gig and platform workers — a ceiling on the turnover-linked formula, not a separate scheme. The Ministry is separately weighing a payout-linked formula (up to 5 per cent of amounts paid to workers) as an alternative basis for the contribution.

The two models produce starkly different results. “That is the central weakness of a transaction-linked model: the contribution can become disconnected from the economic capacity of the entity that is required to pay it,” an analyst said.

TWO FORMULAS, TWO VERY DIFFERENT OUTCOMES The two formulas produce sharply different liabilities for businesses with dissimilar transaction economics. A payout-linked system may look neutral because it applies the same percentage across platforms, but the underlying burden can vary sharply depending on transaction volumes, ticket sizes and the relationship between worker payouts and aggregator revenue.

For high-frequency, low-ticket businesses such as ride-hailing, the difference can be particularly stark.

Analysts illustrated the divergence with examples from the food delivery and ride-hailing sectors.

A food-delivery platform processing 30 lakh orders a day at an average payout of Rs 30 per order, with annual turnover of Rs 20,000 crore, would incur an estimated annual contribution of about Rs 164.25 crore under a 5 per cent payout-based formula. That is about 0.82 per cent of turnover.

A ride-hailing platform processing 60 lakh trips a day across bikes, autos and cabs, with average ticket sizes of Rs 75, Rs 125 and Rs 300 respectively, would face an estimated contribution of about Rs 1,428.1 crore under the same formula. Against an annual turnover of Rs 1,000 crore, that contribution would amount to about 142.8 per cent of turnover.

The disparity is not the result of different contribution rates. It is a structural consequence of applying a percentage to transaction payouts across businesses with different transaction volumes and business models, they said.

Platforms like Rapido introduced the SaaS model in the ride-hailing industry, ensuring that gig workers receive all the payments directly, immediately and in full with 0 per cent commission on their earnings. This practice has been followed by the other aggregators in the industry to ensure they provide higher income for their gig workers despite making lower revenue.

Penalising companies for working on such a model would lead to this progressive and gig worker friendly model becoming endangered.

For ride-hailing, millions of daily trips can cause the payout-linked liability to accumulate rapidly, even when the aggregator’s overall turnover is relatively modest.

“A contribution that can exceed an aggregator’s entire annual turnover raises a basic question of proportionality. A levy intended to fund worker welfare becomes difficult to sustain if its calculated liability is disconnected from the economic capacity of the entity required to pay it,” another analyst said.

The resulting cost would ultimately have to be absorbed by the business, reflected in worker payouts or passed through to consumers.

VOLUME, FARE SIZE, AND WHO A PER-RIDE LEVY REALLY FALLS ON Ride-hailing is fundamentally a mass-market, affordability-driven business: the highest ride volumes come from the most price-sensitive commute options, used by customers who have no cheaper alternative. Delivery platforms, by contrast, largely serve a more affluent customer base and offer a luxury service – someone ordering a single meal for Rs 300+ is, by definition, not the price-constrained end of the market.

A flat per-transaction contribution doesn’t distinguish between these two realities. It would apply the same rupee burden to a Rs 50 ride taken out of necessity by a cost-sensitive commuter as it would to a Rs 300+ luxury service.

In effect, this shifts cost onto the transaction type with the least ability to absorb it: ride-hailing’s mass, low-fare volume. On the contrary, delivery’s higher-value, more affordable-to-absorb transactions bear proportionately less. A per ride/order model would therefore make the affordability of everyday commuting for lower-income users the primary funding base for the social security corpus, the opposite of what a welfare framework should target.

DISTORTION REPEATS AT WORKER LEVEL The same asymmetry is visible when the calculation is brought down to the individual worker. A delivery worker completing 20 orders a day at an average payout of Rs 30 per order, over 26 working days a month, would earn Rs 15,600 a month. At a 5 per cent contribution rate, the monthly contribution would be Rs 780.

Applying the same 5 per cent rate to monthly earnings of Rs 28,750 for bike-taxi drivers, Rs 40,250 for auto drivers and Rs 51,750 for cab drivers would result in monthly contributions of Rs 1,437.50, Rs 2,012.50 and Rs 2,587.50, respectively.

That means a bike-taxi driver would contribute about 1.84 times as much as the delivery worker, an auto driver about 2.58 times and a cab driver about 3.32 times.

In other words, the same percentage does not necessarily produce an equivalent burden.

Analysts said this was not because the contribution rate changes, but because the underlying earnings base does. The rate remains the same, but the amount contributed rises with the worker’s monthly earnings.

This highlights a broader problem with treating a uniform percentage as inherently equitable.

Applying the same rate across fundamentally different categories does not necessarily create the same economic burden. Where earnings, ticket sizes and transaction patterns differ materially, the absolute contribution can diverge substantially.

For ride-hailing workers, the result is a higher rupee contribution simply because their per-transaction and monthly earnings are higher than those of delivery workers. For aggregator platforms, the result is a higher contribution because the business model is built around higher gig worker earnings and worker welfare.

TURNOVER MORE COHERENT BASE Analysts said a turnover-based contribution avoids much of this distortion by tying the levy to the overall scale of the aggregator’s business. At a 2 per cent rate, an aggregator with annual turnover of Rs 20,000 crore would contribute Rs 400 crore, while an aggregator with turnover of Rs 1,000 crore would contribute Rs 20 crore.

The contribution therefore rises with the size of the business rather than with the mechanical frequency or ticket value of individual transactions.

That is important in platform businesses, where transaction volumes are not necessarily proportional to the revenue retained by the aggregator.

A high-frequency, low-ticket business can process millions more transactions than a lower-frequency, higher-ticket business without generating a correspondingly larger turnover. A transaction-linked formula can therefore make transaction structure – rather than economic scale – the principal determinant of the levy.

Turnover provides a more stable and auditable base. It reflects the overall scale of the enterprise and gives an aggregator greater predictability over its liability. It also avoids penalising one business model simply because its services involve higher gig worker earnings or more frequent transactions.

In that sense, the question is not whether one sector should contribute more or less than another. It is whether the contribution should be determined by the size and capacity of the business or by the mechanics of the transactions it processes.

A QUESTION OF PROPORTIONALITY The objective of extending social security coverage to gig and platform workers is distinct from the question of how that system should be funded, analysts said. Aggregators must contribute to worker welfare. But the contribution mechanism also needs to be financially sustainable and proportionate to the economic capacity of the entities being assessed.

The numbers show why the choice of formula matters.

Under the same 5 per cent payout-based rate, a delivery platform in the example would contribute about 0.82 per cent of turnover, while the ride-hailing platform would face a liability equivalent to about 142.8 per cent of turnover.

At the individual level, the same 5 per cent rate would result in a cab driver contributing roughly 3.32 times the amount contributed by the delivery worker in the example.

These outcomes are not caused by different rates. They arise because the formula is being applied to fundamentally different transaction and earnings structures.

That makes the turnover-based approach more consistent with the principle of proportionality. A contribution linked to turnover asks how large the business is and what its economic capacity is.

A transaction-linked contribution instead makes the number and value of individual payouts a central determinant of liability – variables that can differ substantially between sectors without reflecting a corresponding difference in the aggregator’s ability to contribute.

THE CASE FOR A TURNOVER-BASED FRAMEWORK Analysts said the choice of contribution mechanism will shape how the social security framework works across India’s increasingly diverse platform economy.

A formula that can produce a levy exceeding an aggregator’s total annual turnover risks becoming disconnected from the economics of the business. A formula that puts the burden of contribution on very cost-sensitive customers or causes workers in one category to contribute several times more in absolute terms than workers in another despite an identical percentage, can likewise create significant differences in burden without necessarily reflecting a deliberate policy choice.

A turnover-based contribution avoids both distortions by anchoring the levy to the economic scale of the aggregator.

It is therefore not simply an alternative method of calculation. It is a more predictable and proportionate basis for a national welfare mechanism that must operate across businesses with fundamentally different models, ticket sizes and transaction frequencies.

As the implementation framework for the 2026 Social Security Rules takes shape, the central policy question should be whether the contribution mechanism remains linked to the economic realities of the aggregators, gig workers and customers instead of a uniform percentage that is not equitable.

On that measure, turnover provides a considerably more coherent base than per-transaction payouts, they added.