Among the major inflictions rendered by the COVID-19 pandemic globally, changes in the nature of work and preference of work mode have been enormous. According to Statista, a German online platform that specializes in data gathering and visualization, gig work will generate $455 billion in 2023 globally, up 53% from 2020. Similarly, 53% of freelancers would not go back to a traditional job. Similarly, the gig economy in Nepal has seen remarkable growth over the past five years, increasing by about 67%, as indicated by the Online Labour Index. Local platforms like Pathao and Indrive offer unique services, with Pathao boasting 150,000 bike riders completing 150,000 daily trips or deliveries. The aforementioned illustration of Pathao represents only the workforce within a single gig economy platform and we do not possess an exact count of workers engaged in the gig economy.
The informal economy significantly shapes Nepal's economic landscape, encompassing more than 70% of the economically active population. However, during the fiscal year 2020-21, around 16.9 million working-age individuals lacked any form of social protection. In this context, it becomes indispensable to identify gig workers, monitor and regulate the sector with the aim of promoting the national economy and at the same time, protecting the rights and interests of the workers.
It is not that there are no provisions made or these workers are not being considered by the government. But there are lacunas in the existing legal provisions and procedures regarding the sustainable social security protection for gig workers even though laws have been placed and initiatives have been put forth. The major challenge remains as to how we can build an accessible and sustainable contribution based social security fund for the gig workers.
Policy Proposal
The article proposes a tripartite contribution-based Social Security Fund (SSF) that obliges the gig employers to participate and contribute. Here, tripartite arrangement is a precondition. The administration of the fund should be led by the government and involve the workers, the employers and the government itself — each party contributing to the SSF. Moving forward with changing trends in economies, the need to avail protection against exploitation of labor, recognize the need for security in the gig economy, governance mechanisms to be developed for their employment policies through extensive research, collaboration with the involved stakeholders and employees should be fundamental.
In keeping with the preamble and aspirations of the Constitution of Nepal, which is committed to socialism based on democratic norms and values, requires action from the state for the creation of a welfare state. The Directive Principles (Article 50(3)) enlists one of the economic objectives is to develop a socialism-oriented independent and prosperous economy while making the national economy independent, self-reliant and progressive in order to build an exploitation-free society by abolishing economic inequality through equitable distribution of the gains.
All-win Deal
For the efficacy and validity of the proposed SSF, an institutional set-up is required where each involved party participates and wins.
Even the odd jobs: On the Karnataka gig workers bill
(a) The workers (Employees): The workers are the primary beneficiaries within this setup where they should be the most participating parties for which it is also pertinent that they are equally aware of its benefits.
(b) Job Providers (Employers): The direct involvement and participation of the government can encourage the job providers to contribute to the SSF. The job providers can also be offered tax benefits, loans and subsidies for participating in the scheme. This shall further fortify the trust between the government and private sector.
(c) The government: The identification of gig workers and job providers within the national labor market, their registration into a national database and enrollment into the mandated scheme of SSF will at once widen the scope of government taxation and revenues. While on one hand, government contribution to the SSF will incentivize more gig workers to identify themselves, on the other hand, it will also cause the unregistered job providers to disclose themselves and abide by the national acts and procedures.
Strategy
The focus should be on gig economy workers and short-term employees, including those working on individual projects for registered entities. The policy will require amendment to the existing Labor Act, 2074 and the Contribution-based Social Security Act, 2074 within a span of 1 year for effective implementation otherwise the changing economy will be too difficult for the existing social security systems to handle.
Short-term Strategy
A clear definition of “gig-workers” should be ascertained to ensure comprehensive coverage within the “gig economy” framework, while avoiding any overlap with traditional job markets. Entities should be registered under the Social Security Fund (SSF) Act, solidifying their commitment to the proposed provisions.
Next, individuals who identify as gig workers and desire to enroll under SSF should undergo registration and receive permanent IDs. Under this proposal, gig workers shall be allocated unique and permanent IDs, differing from the current SSF IDs, that remain constant until their shift to permanent employment. This ID system shall resemble a bank account number, enabling various gig work providers to contribute to SSF on behalf of the worker.
Moreover, a separate department should be established within the Department of Labour and Occupational Safety. This department will be responsible for overseeing operations within the gig economy, catering to both employers and employees. Simultaneously, SSF’s capacity will be reinforced to effectively manage contributions specifically directed towards the gig economy. The contributed funds from individual participants will be accumulated for as long as they desire, with provisions for withdrawal upon necessity or retirement from active employment.
Lastly, public awareness campaigns should be launched through a public-private partnership, targeting the specific category of workers and employers. This collaboration should aim to ensure the effective implementation of the outlined schemes.
Long-term Strategy
To achieve both direct and indirect goals over an extended period, ensuring the complete implementation of proposed measures, a key component involves obligatory registration of all gig workers under the social security scheme, accompanied by the issuance of unique individual IDs.
To establish a fair and equitable framework, income taxes, social welfare, and benefits for gig workers shall be determined based on their respective income brackets. The strategy also entails the implementation of a modern tax enforcement system for both gig workers and online platform companies, bolstering the government's capacity to effectively collect tax revenues.
A key ambition of the strategy is to extend social protection to workers of all job types and income categories within the gig economy. This will be achieved by obliging employers in the gig economy to actively participate in the Social Security Fund (SSF), thereby ensuring the program's long-term sustainability.
The strategy also prioritizes the creation of a fair labor market and robust social protection through comprehensive recognition and registration of gig workers. Provisions that allow release of funds to individual SSF contributors during periods of unemployment shall serve as a social shock absorber, economic stabilizer and stimulator during an economic downturn.
Furthermore, the strategy intends to establish a legal and institutional framework that enables employers to qualify for subsidiary loans from the SSF. Tax incentives shall be provided to employers who hire gig workers, based on their contributions.
In alignment with promoting the expansion of the gig economy in the long run, the strategy aims to institute social security systems that encompass the informal economy. This initiative will run parallel to efforts to foster competition, flexibility, and high standards of occupational safety and health within the labor market. Through these multifaceted measures, the long-term strategy seeks to create a robust and inclusive ecosystem for gig workers, ensuring their well-being and prosperity.
Furthermore, the policy also introduces a subscription-based social security scheme for gig workers who contribute to the SSF, granting them the authority to customize their coverage to align with their individual requirements and preferences. This innovative approach provides a diverse selection of schemes to opt for, encompassing offerings like Medical Treatment and Health Benefit Scheme, Maternity Protection Scheme, Accident Protection Scheme, Incapacity Protection Scheme, Old Age Protection Scheme, Dependent Family Protection Scheme, and Unemployment Protection Scheme.
The proposed policy, after much deliberations on its implementation plan, must undergo regular and periodic reviews, evaluations, and amendments to align with the changing landscape of the gig economy.
Conclusion
A well-designed and effectively implemented Social Security Fund for gig workers will help consolidate a sense of social cohesion by highlighting that the government and society values and supports all categories of workers regardless of their work arrangements or job types.
It is imminent that we define the gig economy, identify and segregate the workers involved in this economy so that the identified working population does not remain deprived of the social security benefits. Ensuring this is a complex and tenacious task, it needs a balance between flexibility, comprehensiveness, and costs before intricate planning and execution. Therefore, a one-window policy for proper implementation of laws, procedures and the scheme needs to be weaved with caution, relying on extensive field research, established facts and with strategies that will bear desired results. Overall, as is the trend in Nepal, resources expended for developing such plans and policies should not go in vain due to lack of thorough study and feasibility analysis.
