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Why The Code On Social Security, 2020, Misses The Real Issues Gig Workers Face

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social security codeThe Code directs digital aggregator platforms, like food delivery services, to contribute 1 to 2 percent of their annual turnover towards social security provisions for their workers

When the going gets tough, Priyanka Thorat wonders what it would be like to have a job with a steady income and other monetary benefits. The 24-year-old has been working as a delivery executive with foodtech platform Swiggy for the past three years, but things have been difficult of late. Earlier, she used to complete between 20 and 25 deliveries daily, but since the lockdown in March, barely 10 orders come her way every day. This has resulted in her weekly income reducing from approximately ₹4,000-₹5,000 earlier to ₹2,000-₹3,000.
A resident of BDD Chawl in Mumbai’s Worli locality, she tried to take up other jobs to supplement her income, but either there were safety issues or the roles were not flexible enough for her to take them up along with domestic responsibilities. “It’s difficult to keep the house running,” says Thorat, whose parents passed away when she was a teenager, resulting in her quitting school to support herself and her three siblings.

She is unaware that just a week before our conversation in early October, the Parliament passed three Codes in an attempt to overhaul the complex labour laws of the country. This includes the Code on Social Security, which, among other provisions, directs aggregators like ride-sharing services, food and grocery delivery services and ecommerce platforms, to contribute 1 to 2 percent of their total annual turnover towards social security provisions for workers. This includes disability and life insurance benefits, accident cover, maternity coverage, creche services, old-age protection, gratuity and provident fund contributions.

Priyanka, however, worries this might hit her income further. “If you start deducting even ₹200 or ₹500 from our monthly income for these benefits, it will be a problem. If I earn only about ₹10,000 a month and have a hand-to-mouth existence, I need every penny in hand to make ends meet.”

Analysts and experts Forbes India spoke with highlighted similar concerns. “I think the Social Security Code misses the real problems gig workers face,” says Sahil Sharma, co-founder and chief executive officer of GigIndia, an on-demand marketplace for gig workers. He explains the legislation should have considered issues with regard to fluctuation of income [which depend on factors like number of rides or deliveries per month, among others] and continuity in getting work.

About 90 percent of gig workers lost their income since the Covid-19 lockdowns, according to an August survey by global fintech venture firm Flourish Ventures. Conducted among 770 ride-sharing drivers, delivery workers and house cleaners registered on digital platforms, it states that nine out of 10 gig workers with monthly income of ₹25,000 pre-pandemic were making less than ₹15,000 a month now. More than a third of gig workers were making about ₹168 per day or less. About 47 percent could not cover their expenses for a month without borrowing money, while 83 percent had to use up their savings to survive through the crisis.

ola and uberWhile there is no reliable data on the number of jobs created by the gig sector, one gets an idea through Niti Aayog’s statement that Uber and Ola created over 2 million jobs from 2014 to 2019

According to Sharma, while provisions like provident fund and gratuity might be beneficial to workers in the long run, there might be opposition or pushback because it will hurt their immediate income. “Cab aggregators, foodtech or ecommerce platforms whose unit economics is still negative—and they are nowhere close to profitability—will definitely push the cost on to the gig workers,” he says. “These companies are struggling with high attrition rates, and this might make it more difficult for them to engage gig workers.”

Implementation of the Code on Social Security would change how gig workers are hired and how their payouts are structured by organisations, says Pravin Agarwala, co-founder of BetterPlace, which connects blue-collar workers to companies. It works with Ola, Flipkart, Ecom Express, Swiggy, Zomato and Dunzo, among other organisations. “If I have to make a vague estimation, the costs for companies would go up by 10 to 15 percent. Some companies might pass on the cost to employees, while others might consider hiring these workers full-time since they anyway have to shoulder the security benefits.” He adds that the nuances will be clearer once the rules for implementation are framed.

consolidation

Overlapping Definitions
While there is no reliable public record or data on the exact number of jobs created by the gig sector or the strength of the workforce, one gets an idea about the estimated size of this economy through government think-tank Niti Aayog’s statement that just between cab aggregators Uber and Ola, more than 2 million jobs were created between 2014 and 2019. The Global Gig-Economy Index 2019 published by US-based financial services firm Payoneer indicates that around 1.3 million people joined the gig economy in the second half of 2019, a 30 percent growth from the first half of the year. Trade association Assocham, in a January 2020 report, stated that India’s gig economy will have a compound annual growth rate (CAGR) of 17 percent and will be valued at $455 billion by 2023.

In an attempt to streamline this economy, the Code on Social Security, for the first time, attempts to define who can be called a gig, platform or unorganised worker. A gig worker, it states, is someone “outside the traditional employer-employee relationship”, while a platform worker is someone who provides services through an online platform. An unorganised worker is someone who works in the unorganised sector, and is not already covered by the Industrial Disputes Act, 1947, or other provisions like provident fund and gratuity. This includes home-based and self-employed workers. The Code does not include agricultural wage workers, domestic workers, street vendors or bidi workers.

There are, however, various overlaps in these definitions. A document by non-profit PRS Legislative Research dated September 2020 gives the following example: In the absence of appointment letters and regulation of work timings by the employer, a driver working for one app-based cab aggregator might work for its competitor as well, thus falling under the gig worker definition. However, he would also qualify as a platform worker since he pursues his job through an online platform. This driver might also be categorised as an unorganised worker because he is self-employed. “With such overlaps across definitions, it is unclear how schemes specific to these categories of workers will apply,” the document states.

security code

Rosa Abraham, research fellow at the Centre for Sustainable Employment at Azim Premji University (APU), points out that many recommendations made by the Standing Committee on Labour have not been addressed in the Code. The committee, for instance, had suggested expanding the definition of unorganised workers to include gig and platform workers and making the definition of gig workers more specific to avoid misinterpretation.

“As it stands now, there is neither a legal mandate nor universal coverage. There is no time frame or accountability on how these provisions should be met,” she says. “If you look at the language, it is just recommendations: ‘As may be specified’, ‘as may be formulated’ etc with respect to contributions and benefits.”

The labour ministry, on its part, said the language was a “conscious decision” of the government as it “provides for dynamism and flexibility to those provisions which are amenable to change as per needs of time, without undermining the powers of Parliament”. Union labour minister Santosh Gangwar said the Code on Social Security will be implemented by December, along with the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Wage Code.

Abraham believes the Code fails to be a step up from The Unorganised Workers’ Social Security Act of 2008, which was the first of its kind to identify unorganised workers and then create a social security map for them. “But it collected these huge funds [through Budgetary allocations], that were left underutilised.” Annual CAG audit reports on the Union government for the years after this Act was announced indicate that only half or less than half of the budgetary allocations for social security benefits was actually spent.

“The Code is more like a political manifesto than a legal document. Most of it is vague and lofty promises without a roadmap to actualise them,” says Sanjoy Ghose, an advocate practising in Delhi. Agreeing with Abraham, he says many states had not implemented the 2008 Act over a decade after it came into force, rendering it largely ineffective.

Taking up one provision about the Central government setting up a fund for these workers and also calling for separate state-level funds, he says, “there is no clarity on how they will do it, what kind of money will be required, how those funds will be managed or processed, and who will be accountable”.

social security changes

Pro-Business?
The Code provides thresholds on the size of establishments (such as minimum 10 or 20 employees) that will be eligible for social security coverage. Moreover, only employees earning above a certain amount [to be notified by the government] in these establishments can avail of benefits. “So workers in many companies with less than 10 employees will not be included,” says Agarwala. “But from a strategy point of view, it might make sense for the government to start with larger organisations and then go down to smaller numbers so that implementing the process would be easier.”

Labour economist KR Shyam Sundar, who is a professor at the Xavier Labour Relations Institute in Jamshedpur, says even though the Code talks about registration of gig, platform and unorganised workers, provisions for portable smart identification cards have been “carelessly omitted”.

To which Abraham of APU adds that the process of registration itself has had a poor track record under the 2008 Act. “Consider how the registration of construction workers is less than 10 percent,” she says, explaining that registration must be incentivised with at least a one-time money transfer for it to work. “Instead, the Code adds another layer of documentation by making Aadhaar mandatory.” Abraham also points out that ASHA and anganwadi workers, who have been at the frontline of the fight against the Covid-19 pandemic, have been kept out of the ambit of the Code.

Advocate Ghose believes the approach taken to draft the Code is pro-industry instead of pro-worker. “Look at how the penal provisions have been changed and diluted,” he says. For example, there is no stringent penalty for non-contribution of provident fund dues by the employer. In case of gratuity, the principal employer is not liable if the contractor through which these workers are hired does not pay them.

“First of all, industries or businessmen are hardly prosecuted for labour law violations. Second, the narrative behind some of these changes is that provisions are often misused by government inspectors to extract money from the companies. There might be truth to that, but the government should have focussed on plugging those issues without diluting penal provisions,” Ghose says, adding that the law also does not obligate the government to disseminate information and create awareness among workers about their entitlements, which is necessary for regulations to have the intended impact.

Economist Sundar agrees that “the government seems to be largely influenced by the employer’s lobby, which might affect the quantum of social security contributions that reach the workers”. Referring to the inadequacies of the Code, he says, “We analysts can only hope that when the rules are framed and opened for public consultation, these difficulties would be ironed out.”

Abraham says, “The Code is disappointing, so one hopes that when they frame the rules, some kind of tweaks are put in place. Because as it stands now, it is likely to eventually die the death of the 2008 Act.”

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Real-time payments are changing gig-economy, real estate payments at small banks

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Two smaller banks with strikingly different roots — a startup financial institution in Irvine, Calif., and a century-old Missouri-based bank — are seeing similar trends emerge around demand for real-time payments.

Newer real estate and gig economy companies are most interested in real-time payments, while traditional corporations take a bit longer to explore use cases, according to two banks that were among the first to adopt RTP through FIS’ banking platform.

Data about faster payments demand and usage at small and midsize banks is trickling in as FIS completes the first phase of RTP implementations via The Clearing House (TCH) network, three years after the nation’s largest banks (which collectively own TCH) launched the service.

Smaller financial institutions uninterested in RTP may wait up to three or four years for the Federal Reserve’s proposed FedNow instant-payments solution to launch, and neither Nano Banc nor First Bank wanted to wait that long.

Jacksonville, Fla.-based FIS last year began exploring RTP rollouts with interested institutions, with implementations occurring over a couple of months during the pandemic, FIS said.

Nano Banc and First Bank recently went live with RTP for receiving payments, with plans to add sending capabilities in the next few months, as they explore marketing and pricing for the new payments services.

First Bank, based in the St. Louis, Mo., serves a lot of small businesses and family-owned firms in the Midwest and California. The bank launched RTP in July and saw immediate interest from its B2B customers looking to pay Grubhub drivers and other gig-economy workers, said Ajay Kothuri, First Bank’s assistant vice president.

“Most of our first RTP use cases are companies who want to get payments to workers and suppliers faster,” Kothuri said.

Several businesses that adopted RTP are pleased with its speed and the inclusion of pertinent remittance information for streamlined accounting, Kothuri said.

“We’re already seeing interest in RTP spread from B2B to B2C, and in coming months we’ll expand applications so end users can bring RTP to existing ACH and card payments,” Kothuri said.

First Bank has not changed its pricing for RTP payments.

“As we expand RTP and begin sending ACH and wire payments, we’ll look at products and pricing,” he said.

First Bank is unrelated to FirstBank, the Colorado institution that was the first non-founding member of the P2P network Zelle (formerly clearXchange) to sign on to that project.

California’s Nano Banc was the 44thbank out of 18,000 to launch RTP when the service went live in August, said Mark Troncale, the bank’s co-founder and president.

Real estate companies have been the most enthusiastic participants in RTP since the launch, with faster payments speeding up deals and payouts to real estate agents, according to Troncale.

“We see application in the real estate settlement industry, where agents like to get their commissions very fast and settlement and fiduciary companies like to go past the traditional transaction cutoff time if they can,” Troncale said.

Nano Banc’s current ceiling for receiving payments via RTP is $100,000, which restricts the network’s use for certain higher-ticket real estate deals, but Troncale sees that as a short-term obstacle.

“Eventually we’ll get to the place where we can do larger amounts, and in the real estate industry specifically we see great value with RTP,” he said.

Most of Nano Banc’s customers are local, but the bank also serves some national companies and Troncale expects RTP will help Nano Banc compete more effectively across the U.S.

“I think my competitors in the community bank space will start to adopt RTP very quickly, once they see its advantages,” he said.

Nano Bank is still contemplating how it will price RTP as it expands.

“There’s been lots of talk about how this will be a new, cheaper solution with payment gateways, but you get what you pay for,” he said. “I don’t know if our RTP will be cheaper than other options but it’s going to add so much more in terms of security and efficiencies … pricing will be competitive but we’re still exploring what that’s going to look like.”



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It is a ballot fight for survival for gig companies like Uber, DoorDash

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By Kate Conger

OAKLAND: By late August, the urgency was becoming clear. Top executives of Uber, Lyft and the delivery service DoorDash met to discuss a California ballot measure that would exempt them from a new state labor law and save their companies hundreds of millions of dollars.

The survival of their businesses was on the ballot.

Days later, political strategists responded to the executives’ concerns by telling the companies, which had already pledged $90 million to back the measure, that they needed to spend a lot more if they wanted to win, said three people familiar with the discussions, who were not allowed to talk about them publicly.

The fight over the ballot measure, Proposition 22, has become the most expensive in the state’s history since then, with its backers contributing nearly $200 million and 10 days still to go until the Nov. 3 election. Along the way, the companies have repeatedly been accused of heavy-handed tactics; a lawsuit filed Thursday claims Uber is coercing the support of its drivers.

Despite the big spending and a barrage of television advertising, only 39% of likely voters said they supported Uber and Lyft in a poll last month by the University of California, Berkeley, while 36% opposed their proposal and others were undecided. People close to the campaign said they would want to see close to 60% approval in polling before they could breathe a sigh of relief.

The ballot measure, which is also being backed by Instacart and a delivery company that Uber is acquiring, Postmates, could be a harbinger for gig companies in the rest of the country.

Prop 22 would exempt the companies from complying with a law that went into effect at the beginning of the year, while offering limited benefits to drivers. The law is intended to force them to treat gig workers as employees, but Uber and its peers have resisted, fearing that the cost of benefits like unemployment insurance and health care could tip them into a downward financial spiral.

Although Uber and Lyft, for example, are publicly traded companies with a combined worth of $70.5 billion, they have never been profitable. They lose billions of dollars each year, and the pandemic has made turning a profit even more difficult. DoorDash, which has filed to go public, has also struggled. Analysts estimate that complying with California’s gig worker law could cost Uber, which lost $1.8 billion in its most recent quarter, as much as $500 million a year.

Uber said it planned to cut off work for the approximately 158,000 California drivers who were active on the platform each quarter if its ballot measure failed. It would employ roughly 51,000 remaining drivers, it said, and raise fares to meet the higher business costs.

The ballot fight gained additional urgency Thursday when the California 1st District Court of Appeal ruled that Uber and Lyft must treat their California drivers as employees under the new labor law. The state attorney general and the city attorneys of San Francisco, Los Angeles and San Diego had sued the companies in May to enforce the law.

“If Prop 22 does not win, we will do our best to adjust,” said Dara Khosrowshahi, Uber’s chief executive, in a Wall Street Journal interview this week. “Where in California we can operate is a question mark, and the size and scale of the business will be substantially reduced.”

In past dust-ups with local regulators, Uber rallied its passengers for support. The pandemic has made that difficult, so it has urged its tech employees to get involved and used its app to reach out to drivers for support.

The Yes on 22 campaign also started an effort to organize drivers, a move copied from the labor groups that have long tried to organize drivers to fight for better working conditions. And it has forged relationships with high-profile advocacy groups, like Mothers Against Drunk Driving and the California chapter of the NAACP.

“Drivers want independence plus benefits by a 4-to-1 margin, and we’re going to fight for them,” said Julie Wood, a spokesperson for Lyft. “We believe California voters are on the side of drivers, too.”

A spokesperson for DoorDash, Taylor Bennett, said, “Our support for Prop 22 is part of our commitment to protecting the economic opportunity that tens of thousands of Californians value and the access to delivery that so many restaurants rely on, especially at such a critical time.”

A spokesperson for Instacart declined to comment. Postmates did not respond to a request for comment.

In an effort to gain support, the companies have bombarded riders and drivers with push notifications, campaign ads that appear in their apps and emails promoting Prop 22. Before logging on to start work, Uber drivers have been presented with a slideshow of warnings about how their lives could change if the proposition fails.

“A no vote would mean far fewer jobs,” one of the slides on the Uber app warned. “That’s why we’re fighting so hard to win.”

In the lawsuit filed against Uber on Thursday, drivers claim that the messages violated a state law that forbids employers to coerce their employees to participate in political activity.

“I can’t rule out that employers have engaged in coercive tactics like this in the past, but I have never heard of an employer engaging in this sort of barrage of coercive communications on such a broad level, ever,” said one of the attorneys for the drivers, David Lowe, a partner at Rudy, Exelrod, Zieff & Lowe. “It is such an extraordinary thing, from my perspective, for Uber to exploit this captive audience of workers.” Lowe said he opposed Prop 22.

Matt Kallman, an Uber spokesperson, said, “This is an absurd lawsuit, without merit, filed solely for press attention and without regard for the facts.” He added, “It can’t distract from the truth: that the vast majority of drivers support Prop 22.”

In early October, the Prop 22 campaign was denounced by Sen. Bernie Sanders after a fake progressive group calling itself Feel the Bern endorsed the proposition in a campaign flyer that implied Uber had the backing of progressive leaders. The mailers were, in fact, sent by a firm that creates political mailers representing different views.

“The Prop 22 campaign is working hard to reach voters across the state and the political spectrum to ensure they know that drivers overwhelmingly support Prop 22,” said Geoff Vetter, a spokesperson for the Yes on 22 campaign, which is funded by Uber, Lyft, DoorDash and other gig economy companies.

Questions have also been raised about the NAACP endorsement. A political consulting firm run by Alice Huffman, leader of the California NAACP., has received $85,000 from the gig companies’ campaign, public records show. The payment was reported earlier by the news site CalMatters.

Vetter said the payments were for “outreach.” The NAACP did not respond to a request for comment.

Uber held an all-hands meeting this month for employees to meet drivers who support the proposition, and sent several emails encouraging staff to lobby friends and family.

Although the internal messages were upbeat, the policy staff raised concerns with campaign consultants during the meetings in late August and early September, the people familiar with those meetings said. Among their worries: that the ballot language was unfavorable to the companies and that people were voting earlier than usual because of the pandemic, meaning advertising would need to be rapid and aggressive.

“We look at the data every day, and our metrics show a tight race,” Justin Kintz, Uber’s head of public policy, said in an early October email to Uber employees, obtained by The New York Times. “At the same time, with continued strong execution against our plan, we’re confident we can win.”

While the email noted that campaigning was optional, Kintz encouraged employees to participate in texting banks to contact voters and to promote the campaign in conversations with friends.

“The big reason that you’re seeing so much spending is because of the high stakes in this election,” said Vetter, the spokesperson for the campaign. “Hundreds of thousands of jobs are on the line. These are services that millions of Californians rely on.”

The opposition campaign, which is funded by labor unions, has raised about $15 million. Supporters of the No on 22 campaign have argued that voters should reject the push by tech companies and that the measure would harm workers already at a disadvantage during the pandemic.

“Proposition 22 will make racial inequality worse in California at the worst possible time,” said Rep. Barbara Lee, D-Calif. “You have very clearly crossed the line when you try to claim the equity mantle for a campaign that has always been about allowing multibillion-dollar app companies to write their own law so that they can keep exploiting the labor of drivers, 8 in 10 of whom are people of color.”

No matter the outcome of the vote, the gig companies and their opponents are likely to take their campaigns to Washington. Massachusetts has filed a lawsuit similar to the one that the California court decided Thursday, and Uber hopes to avoid continued state-by-state battles by pressing for federal legislation.



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In Gig-Dependent LA, Rent Payments Begin To Skid As Payday Loans Spike

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Reports of the Los Angeles County’s gig worker-dependent economy falling apart ring true, but rent collection numbers, while lower than those from last year across the board, don’t seem to paint Los Angeles as any worse off than other expensive, coastal cities, some experts say. But is paying the rent alone a good indicator of how hard the coronavirus pandemic has hit renters?

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Los Angeles County in August had the second-highest unemployment rate in the state: 16.6%, according to the state’s Employment Development Department.

According to data from RealPage, by the last week of August, 91.9% of LA renters had paid their rent, a 5.1% drop from 97% in 2019. By the last week of September, 93.4% of LA tenants had paid their rent compared to the 97.8% that had done so by the same time in 2019, or a difference of about 4.4%.

Stacking this year’s data up against 2019’s offers some necessary context to current numbers, said Adam Couch, a market analyst at RealPage, one of the companies whose data is used for the National Multifamily Housing Council’s nationwide rent payment tracker. The difference between the two years offers a good way to tell how much a metro has been impacted by the pandemic, Couch said.

Los Angeles saw a bigger year-over-year change in rent collection than New York in the last two months. 

By the last week of August, RealPage shows that 90.5% of New Yorkers had paid their rent, a 3.1% drop from the same time in 2019. By the last week of September, 93.3% of New Yorkers had paid their rent, a 2.9% difference over the previous year.

But Couch said that the two metros have regularly been jockeying for position toward the top of the list of biggest discrepancies between 2019 and 2020 rent collection. He highlighted New York, LA and the Bay Area as some of the standouts in terms of decline, with New York being impacted the most. 

Nothing in the data so far stands out about LA or indicates that it’s doing worse overall for rent collection than the Bay Area or New York, he said. “The rent payments in gateway markets have typically seen some of the largest annual declines,” Couch said. 

That’s not totally surprising considering those areas are among the most expensive places in the country to live. 

“It’s more difficult to make rent payments when rents are so expensive,” Couch said.

Additional federal unemployment benefits expiring and the smaller amounts that were being provided by states aren’t going to be as helpful toward paying for rent and other necessities in places where the rent is very high, Couch said. 

Though RealPage’s data doesn’t indicate that Los Angeles renters are particularly hard-hit by the pandemic compared to renters in other cities, a report published by UCLA’s Lewis Center for Regional Policy Studies suggests an additional layer to the story: that perhaps LA renters are going to unsustainable lengths to make their rent payments on time.

“Paying on time and in full, in other words, should not be mistaken for ‘having no problems’ paying rent,” the report said. 

The report COVID-19 and Renter Distress used data from two sources: the U.S. Census Bureau’s Household Pulse Survey, which the bureau undertook specifically to gather data on how American households have been affected by the pandemic. It includes questions about late rent payment and a more detailed survey of 1,000 LA County households conducted by a third party for UCLA.

The report was co-authored by USC Lusk Center for Real Estate Director Richard Green and UCLA Luskin School of Public Affairs associate professors Michael Lens, Michael Manville and Paavo Monkkonen.

Using information from the survey, the report found that “nontrivial proportions” of renter households that were paying their full rent on time between May and July were doing so by using their savings, asking friends and family for help, or by using credit cards or high-interest payday loans. The use of these methods is much higher among households that paid rent late at least once in that time period, or that only made a partial rent payment during that time, the report said. 

The UCLA survey found that just under 40% of renters who had paid rent late at least once and more than 40% of tenants who made a partial rent payment during those months had used a payday loan to help them pay rent during that time. Just under 40% of tenants who paid partial rent during the three-month span reported that they had used credit cards to help them pay rent.

“Looking at people and their ability to make rent, we should not mistake that for an absence of financial distress,” Manville said in a public discussion about the findings.

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