The Impact of the Code on Social Security, 2020 on Aggregators


Madhu Damodaran
Simpliance COE


Animay Singh
Simpliance COE






The advent of app-based services operating on an aggregator model has ushered in a new era of convenience and choice for the Indian consumer. Additionally, it has helped small and medium business owners compete with veterans of the industry on online platforms. A key characteristic of this business model is that the end consumer as well as the provider of the service act as customers of the brand, there is also the partnership model wherein the service providers are not the employees of the aggregator. This is where their legal status is that of an independent contractor and they are not bound by the ties of formal employment.

While this legal status is not formally altered by the Code on Social Security, 2020, the workers employed in non-traditional work arrangements by such aggregators have been recognized under it. The Central Government has been empowered to frame social security schemes for gig and platform workers. Gig workers are persons who perform work outside traditional employer-employee relationships. Platform workers are those who use an online platform to work by either providing services, solving specific problems or accessing other organizations, outside a traditional employer-employee relationship. Thus, this will entail changes for platform-based aggregators such Uber, Ola, Zomato, Swiggy and e-commerce giants like Amazon and Flipkart who employ workers on a temporary basis[s21].

Definition of Aggregator

Section-2(2) of the Code on Social Security, 2020 defines an aggregator as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider. This is a broad definition provided to the term which encompasses the various ways in which this business model is employed. In addition to this, the Seventh Schedule under the Code provides for a classification of aggregators as follows:-

1.     Ride sharing services

2.     Food and grocery delivery services

3.     Logistic services

4.    E-Market place (both marketplace and inventory model) for both wholesale/retail sale of goods and/or services (B2B/B2C)

5.     Professional services provider

6.     Healthcare

7.     Travel and hospitality

8.     Content and media services

9.     Any other goods and service provider platform

From the above we can see that a broad definition has been supplemented with an inexhaustive classification of aggregators under the schedule.

Schemes for gig and platform workers

Section-114 of the Code empowers the Central Government to formulate and notify social security schemes for gig and platform workers. These schemes may relate to the following:-

(a)  Life and disability cover

(b)  Accident Insurance

(c)   Health and maternity benefits

(d)  Old age protection

(e)  Creche

(f)   Any other benefit as may be determined by the Central Government

Clause-(3) under Section-114 relates to the funding of Central Government schemes and states that they may be:-

  • Wholly funded by the Central Government
  • Partly funded by the Central Government and partly by the State Government
  • Wholly funded by the contributions of the aggregators
  • Partly funded by the Central Government, partly funded by the State Government, and partly funded through contributions collected from the beneficiaries of the scheme or the aggregators
  • Funded from corporate social responsibility fund within the meaning of the Companies Act, 2013
  • Any other source

Clause-(4) under Section-114 expands on the nature of contribution payments in relation to the funding mentioned above and states that the same shall be at a rate not exceeding two per cent and not less than one percent of the annual turnover of every such aggregator who falls under a category thereof as specified under the Seventh Schedule. This is subject to a proviso that states that the contribution payable by an aggregator shall not exceed five per cent of the amount paid or payable by an aggregator to gig and platform workers.

If you are an aggregator at this point of time, you are likely to be worried that high rates of contribution might hinder your business operations. While there is room for concern it must be understood that the process of determination of contribution rates as well as the administration of the scheme is a consultative process. The following section sheds light on the same.

National Social Security Board

This body has been established under Section-6(1) of the Code and shall be the Board that carries out welfare functions for gig and platform workers. However, under Chapter-IX, Section-114(6), the composition of the Board is changed with respect to members dealing with matters relating to gig and platform workers. In this context, the composition of the board is as follows:

  1. Five representatives of the aggregators as the Central Government may nominate
  2. Five representatives of the gig workers and platform workers nominated by the Central Government
  3. Director General of the Employees’ State Insurance Corporation
  4. Central Provident Fund Commissioner of the Central Board
  5. Such expert members as the Central Government may consider appropriate
  6. Five representatives of the State Governments by such rotation as the Central Government may consider appropriate
  7. Joint Secretary to the Government of India in the Ministry of Labour and Employment who shall be the member secretary to the Board

Thus, from the above we can see that the formulation and administration of the scheme will be through a consultative process that involves stakeholders from both parties namely the aggregators as well as the workers. Now that this is clear, an aggregator may ask the question, what can I do as an employer in preparation for when these laws come into force?

At this point of time, the specifics of the scheme are still unclear, and it is likely that the rules under the Code will shed further light on the same. Therefore, at this point of time an aggregator’s primary focus should be on understanding the nature of the scheme under the Code and creating awareness amongst their operations/compliance team on the changes that are being brought in. Additionally, collecting the data of gig, platform and unorganized workers employed, shall be beneficial as Section-113 of the Code provides for a framework for registration of this class of workers.

While the responsibility for registration is on self-declaration basis, it is important for the aggregator to have requisite data to assist the gig/platform workers who are unable to complete the process on their own. Furthermore, the data will be beneficial at a later time when the scheme for payment of contributions comes into force.


The Central Government has taken a significant step by recognizing this class of workers outside the traditional employer-employee relationship, thereby avoiding years of legal tussles between workers and the organizations employing them. Moreover, the rights of these workers as well as the benefits they are entitled to have received statutory basis, creating a formal aspect to their employment. The scheme of funding and payment under the Code is equitable and gives an opportunity to all stakeholders to present their views. India has taken a big step by recognizing and affirming the legal status of such workers, and with crowdwork/gig and platform work estimated to increase in its popularity, the step has been taken at an appropriate juncture.

Do you believe the measures provided for gig and platform workers are sufficient? Should aggregators have more liability over their personnel? Can an aggregator’s business model survive with more regulatory control with respect to employment and related benefits?

Drop your thoughts in the comments below.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney.
Simpliance makes no representations or warranties in relation to the information on this article.

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