Our expanding gig economy must treat workers fairly

Photo: iStock
Photo: iStock


Platform firms should assess the damage that unfair terms of employment may cause their own prospects

The gig economy and its growing fault lines between gig employees and platform companies are in the news again, with 50 women “partners" of Urban Company’s (UC) salon and spa vertical protesting against policy changes that will come into effect from January. These, they claim, will affect their ability to earn and are therefore “unfair labour practices". The company, India’s largest home-services provider, has filed a lawsuit in Gurugram’s district court against the protests. The judgement in this case could have a bearing on the future of employment in India’s gig economy.

The gig economy, which has grown in importance, especially in the aftermath of the pandemic, has been hailed for its ability to provide an alternate source of employment. At the same time, platform companies like Uber and Amazon have found, much to their chagrin, that countries and country-groups such as the UK and European Union have questioned their stance on treating such employees as “contractors". They have either ruled against this stance or questioned it, expecting companies to classify employees as “workers", with attendant benefits such as minimum wages, holidays and pensions.

The gig economy refers to “economic activity that involves the use of temporary or freelance workers to perform jobs typically in the service sector." It includes both temporary blue-collar workers in delivery and other services and white-collar ‘independent contractors’ and consultants in different sectors hired through digital platforms. While this business model looks promising, it is fraught with problems for platforms that may be more behavioural than legal.

Platform businesses have to manage a workforce that is seen as less committed, given its temporary engagement, and also considered “less productive". UC has sought to enhance productivity by introducing a ‘subscription system’, which comprises a minimum guarantee plan involving a minimum target of 40 jobs to be completed each month, with workers required to pay a deposit of 3,000 (for salon prime) and 2,000 (for salon classic) upfront to the company. Failure to meet this target, it is alleged, would result in forfeiture of the deposit. Workers do have the choice to opt out. But this would result in their being put in a “Flexi" category, where work would be allocated only on days of high demand (typically weekends), with preferences based on the speed of worker responses.

Raising productivity this way is questionable. With losses looming large, employees would probably opt for the Flexi scheme to avert them. This heightens the salience of the temporariness of such employment, with the flexibility afforded by the gig economy seen as a curse rather than a blessing.

Platform companies also appraise the performance of gig workers on a rating system based on customer feedback. While companies use this feedback to improve performance, gig employees often reject it. This is particularly true for service-dominated platform businesses where close engagement between a service-provider and the recipient results in a high possibility of negative feedback from the customer, and also such poor ratings being construed as personal and unfair. In all, rationality suffers, and employees demand fairness, since they see customer ratings as subjective and their use as exploitative.

A better way would be for UC, say, to take the onus for any poor performance and then work to improve ratings by training and motivating workers. This would also ensure the loyalty of the gig workforce. With UC operating across India, Dubai, Australia, Singapore and Saudi Arabia, and with plans to spread across 50 new cities, another challenge lies in the enculturation of geographically-dispersed temporary workers who lack anchors offered by the company’s values, traditions and culture that may be available to full-time workers. The company will need to ‘imprint’ its cultural norms, so that even temporary workers come to possess shared values and are animated by the same passion.

Images of women protesters at UC’s Gurugram headquarters would be vividly and easily available to other gig workers, both within and outside the company. Many would also be aware of bills such as the Code on Social Security presented in Parliament in September 2020, and also of the frequently raised demand for adequate safety nets for gig workers.

A joint report by the Boston Consulting Group and Michael & Susan Dell Foundation in March (on.bcg.com/3z19jpA) pointed to the potential of India’s gig economy, with its ability to sustain up to 90 million jobs in India’s non-farm economy alone, besides adding 1.25% to gross domestic product. However, the path to a new economy based on platform businesses can be thorny. The current business model, based on unequal relationships, may not only fail to deliver a sustainable competitive advantage, it may actually herald the doom of platform businesses. That is why such businesses in the US spend huge amounts of money on public-relations campaigns to influence outcomes over a law called AB5 that could affect their future prospects. Similarly, 25 gig drivers were enough to bring Uber to its knees some months ago in the UK.

To reap the real benefits of a gig economy, Indian companies like UC need to understand the long-run behavioural aspects of exploitative gig relationships, besides the potential legal ramifications of the same.

Tulsi Jayakumar is professor of economics at Bhavan’s SP Jain Institute of Management & Research. These are the author’s personal views

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