Introduction
The rapid proliferation of platform-based services has created a vast, albeit informal, workforce in India. The regulatory vacuum surrounding this sector has long been a point of contention, balancing the innovation and flexibility offered by the business model against the profound vulnerability of workers who lack access to traditional labor rights, such as minimum wage, paid leave, and social security.
While central Indian legislation, specifically the Code on Social Security, 2020, made preliminary definitions for “gig worker” and “platform worker,” it largely deferred implementation details to state-level discretion and voluntary aggregator contributions. This passive approach left millions in regulatory limbo.
The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 (the “Act”), mandates the statutory framework for gig workers. The “gig economy” is no longer a peripheral component of the Indian workforce; it is a foundational pillar of modern urban logistics and service delivery.
Key Definitions
Section 2(b) defines “Aggregator” which means a digital intermediary for a buyer of goods or user of a service to connect with the seller or the service provider, and includes any entity that coordinates with one or more aggregators for providing the services;
Section 2(e) defines “Gig worker” which means a person who performs work or participates in a work arrangement that results in a given rate of payment, based on terms and conditions laid down in such contract and includes all piece-rate work, and whose work is sourced through a platform, in the services specified in the Schedule.
Section 2 (f) defines “Payout” which means any final payments made by the aggregator or platform to the gig worker for any work performed or service rendered through a platform.
Section 2 (g) defines “Platform” which means any arrangement providing a service through electronic means, at the request of a recipient of the service, involving the organization of work performed by individuals at a certain location in return for payment, and involving the use of automated monitoring and decision-making systems or human decision making that relies on data.
Services provided by aggregator or platform
- Ride Sharing Services
- Food and Grocery Delivery
- Logistic Services
- e-Market place (both marketplace and inventory model) for wholesale/retail sale of goods and/or services Business to Business /Business to Consumer (B2B/B2C)
- Professional Activity Provider
- Health Care
- Travel and Hospitality
- Content & Media Service
The Regulatory Architecture
The architecture provided by the act is of a tripartite system for welfare of workers. The most crucial tripartite body is the welfare board which will have representation from government, aggregators and gig workers and shall be headquartered in Bengaluru. The board will oversee the functions and have the powers as may be specified in the act and shall be the primary administrative authority as per section 3 and 4. The financial engine of this framework is the Welfare Fund, constituted under Section 19. This fund is uniquely financed by imposing a mandatory “welfare fee” of 1% to 5% on the gross payout of every transaction executed by an aggregator platform, supplemented by potential government grants and worker contributions as per the provisions of section 20. To ensure accountability and transparent governance of these funds, Section 21(1) mandates the creation of a comprehensive digital system namely, Payment and Welfare Fee Verification System (PWFVS), specifically designed to track all payments made by aggregators and verify that the correct welfare fees are deposited into the fund, thereby creating a transparent and verifiable financial ecosystem for worker security.
Worker Rights and Aggregator Obligations
The Act significantly boosts worker rights by imposing several key obligations on aggregators. Under Section 10, platforms must facilitate mandatory worker registration within 30 days of onboarding with the Welfare Board to secure a unique identification number for accessing social security benefits. As per section 12, the aggregators are required to provide clear and written contracts and a notice at least 14 days prior to implementing any new thing or making any material changes in the working conditions or remuneration, this ensures that the worker is pre-informed of anything which is coming to his way and it does not come as a shocker to him. It also prevents arbitrary suspension from services. Discrimination on the basis of caste, creed, religion, race, color, disability or gender is also prohibited through the anti-discriminatory guidelines enshrined in section 13. Section 15 guarantees timely payments to the workers whereas section 16 requires the aggregators to ensures that there is compliance to the health and safety standards including but not limited to adequate rest periods, proper sanitation facilities etc. In case of any grievances, one can resort to section 22 whereby a clear two-tier grievance redressal system is to be established and accordingly an internal committee and a proper appeal mechanism whereby the appeals will lie to the welfare board for the unresolved disputes will be established. The welfare board will hold significant adjudicatory powers.
Importance, Connection with Central Code and Issues
This Act represents a highly significant moment in India’s labor law evolution, setting a progressive model for other states to potentially follow. By legally recognizing gig workers and creating a mandatory, self-sustaining financial mechanism for their welfare, the legislation addresses decades of exclusion from formal social security frameworks. It is the first state law to combine social security provisions with explicit mandates for aggregator regulation and algorithmic accountability, acknowledging the unique nature of modern digital work.
The legislation’s interplay with the Central Government’s Code on Social Security, 2020 is a critical legal aspect. The central code also acknowledges gig workers but leaves the specifics of implementation and funding to be determined by appropriate governments. The Karnataka Act attempts to preempt potential jurisdictional conflicts by introducing provisions suggesting that the state-level welfare fee contribution may be considered as satisfying the aggregator’s obligation under the central code, subject to future reconciliation and notification. This aims to provide regulatory certainty for platforms operating across state lines while ensuring the state’s welfare fund remains viable.
Despite its progressive intent, the Act faces several substantial challenges in terms of its implementation and scope. The most immediate hurdle is operationalizing the law. As of late 2025, the essential infrastructure—namely, a fully constituted Welfare Board, operational digital portals for registration, and the Payment and Welfare Fee Verification System (PWFVS)—is still pending, delaying the actual delivery of benefits to workers.
It has also been widely pointed out about the potential loopholes in the funding mechanism. The welfare fee is levied as a percentage of the “payout” to the worker. Certain business models, such as Namma Yatri, where payments are made directly from customer to driver, might technically result in a “zero payout” from the aggregator platform’s accounts, potentially allowing them to circumvent the contribution requirement, creating market distortion.
Another challenge which comes into the way is that the act does not grant the platform-based gig workers the employee status which means that it does not create a mandate on the Act to offer a minimum wage or regulated working hours.
Conclusion
The Karnataka Platform Based Gig Workers (Social Security and Welfare) Act, 2025 is undeniably a bold and necessary stride towards integrating this vital workforce into India’s formal social security framework. By legally recognizing gig workers and creating a dedicated financial mechanism for their welfare via the Welfare Fund, the legislation sets a crucial precedent for algorithmic accountability and basic labor protections. While immediate operational challenges remain regarding full implementation and potential funding loopholes, the Act offers a robust roadmap for other jurisdictions navigating the complexities of the gig economy. Its success will ultimately depend on effective enforcement, but it remains a pivotal model for a future where flexibility and essential worker security can coexist in the dynamic world of digital work.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.