Karnataka Enacts Ordinance for Gig Workers’ Welfare

On May 27, 2025, the Government of Karnataka promulgated the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Ordinance, 2025 (“Ordinance”), establishing a legal framework to provide social security and welfare benefits to platform-based gig workers. This move positions Karnataka as the second Indian state, following Rajasthan, to formalize protections for gig economy workers.

The Ordinance applies to aggregators (digital platforms connecting service providers with consumers) and platform-based gig workers engaged through these platforms. As per the schedule provided in the Ordinance, services covered are ride sharing, delivery, logistics, e-marketplaces, professional services, healthcare, travel, hospitality, and content/media sectors.

Aggregator: A digital intermediary enabling buyers/users to connect with sellers/service providers.

Gig Worker: A person who performs work based on contractually agreed payment terms, largely sourced through a platform.

Platform: Any electronic arrangement organizing work at a particular location in return for payment, involving (automatic or human) decision-making systems.

Welfare Fee: Statutory fee charged on platforms/aggregators to fund gig workers’ social security.

The Ordinance was promulgated by the Governor on May 27, 2025, during a period when the state legislature was not in session. This use of the ordinance route allows the government to enact urgent legislation temporarily, pending approval or replacement by the legislature once it reconvenes.

While the Ordinance is now officially notified, it must be tabled before the Karnataka Legislative Assembly and Council within six weeks of their reconvening. If not substituted by an Act during that period, the Ordinance will cease to operate. Meanwhile, the State Labour Department has announced that the draft rules required to operationalize the Ordinance will be published within the next two weeks. These rules are expected to specify crucial details such as the exact rate of the welfare fee, registration procedures, and the functioning of the welfare fund.

The government aims to fully operationalize the Karnataka Platform-Based Gig Workers Social Security and Welfare Fund by August 2025, setting up a sustainable mechanism for social security contributions from aggregators and gig workers alike.

Platform-based gig workers have express rights to:

• Be registered with the Board and receive a unique, cross-platform worker ID.
• Access general and specific social security schemes, contingent on defined levels of contribution and activity.
• Access robust grievance redressal mechanisms for disputes with platforms or the Board

The Ordinance mandates the establishment of the Karnataka Platform-Based Gig Workers Welfare Board (“Welfare Board” or “Board”). The Welfare Board’s responsibilities include:

• Registering gig workers and aggregators operating within the state;
• Implementing social security schemes for registered gig workers;
• Monitoring the collection and utilization of the welfare fee;
• Ensuring transparency in algorithmic decision-making affecting gig workers;
• Facilitating grievance redressal mechanisms.

The Welfare Board will comprise representatives from the government, aggregators, gig workers, and public interest groups.

Aggregators are required to register with the Welfare Board within 45 days from the date of the Ordinance’s notification. They must also provide the Welfare Board with data on all gig workers engaged through their platforms. Each registered gig worker will be assigned a Unique ID, which remains valid irrespective of the duration or nature of engagement.

To finance the welfare measures, the Ordinance introduces a welfare fee ranging from 1% to 5% to be levied on the aggregators/platforms (exact rate to be notified). The collected fees will be deposited into the Karnataka Platform-Based Gig Workers Social Security and Welfare Fund, which will also receive contributions from gig workers, grants from the state government, and other sources. A Payment and Welfare Fee Verification System (“PWFVS”) will coordinate payment tracking, fee deduction, and disclosure, complying with applicable data protection laws.

The Ordinance stipulates that aggregators must:

• Provide clear and transparent contracts to gig workers, outlining payment terms, incentives, and conditions;
• Ensure that algorithmic systems used for task allocation and performance evaluation are transparent and do not discriminate based on gender, caste, religion, or other factors;
• Offer protections against arbitrary termination, requiring a written explanation and a 14-day notice period, except in cases involving violence or harm.

The Ordinance also introduces key transparency measures for aggregators. Each platform must ensure that details regarding the grievance redressal and dispute resolution mechanisms are prominently and easily accessible on their platform in English, Hindi and Kannada language. The manner of such disclosures is to be prescribed under the rules to be notified by the State Government.

Importantly, the Ordinance mandates that every platform must provide a human point of contact for gig workers to seek clarifications and assistance under the provisions of the Ordinance.

The Ordinance establishes a two-tier grievance redressal framework. Initially, workers can raise complaints before an Internal Dispute Resolution Committee (“IDRC”) constituted by the aggregator or via an official portal. The IDRC must resolve the matter within 14 days and issue a written action taken report (“Action Taken Report”). If unresolved or unsatisfactory, the grievance is escalated to the Welfare Board for a final decision. Separately, for issues concerning entitlements or benefits provided by the Board itself, a designated grievance redressal officer will conduct an inquiry. Appeals against the officer’s decision may be filed before a State-notified appellate authority within 90 days.

Non-compliance with the provisions of the Ordinance may result in penalties, including fines up to ₹5,000 (Indian National Rupees Five Thousand) for the first offence and ₹1 lakh (Indian National Rupees One Lakh) for subsequent violations. Delayed payments of the welfare fee will attract 12% simple interest per annum from the due date until payment.

Karnataka’s ordinance directly addresses the evolving nature of gig work by positioning aggregators and platforms as principal actors in workers’ social security, despite not being traditional employers. The legal framework imposes a clear set of obligations on platforms: mandatory registration with a state welfare board, payment of a statutory welfare fee, transparent contract terms, and explicit requirements for transparency in automated decision-making systems. Notably, the ordinance requires platforms to provide accessible information about algorithmic management, ensure human points of contact for worker support in multiple languages, and make grievance and dispute resolution easily available via app interfaces.

Although Rajasthan’s statute, which predates Karnataka’s Ordinance, adopts a two-tier grievance redressal structure and establishes a welfare board, it has yet to incorporate several concrete requirements found in Karnataka’s approach—such as a clearly defined platform-worker framework, proactive disclosure duties, and mandatory, accessible redressal mechanisms. As a result, Karnataka’s Ordinance is emerging as a more practical and worker-centric model in the digital labor regulatory space, offering both substantive social protection and robust accountability tools likely to be more enforceable in practice.

While the Ordinance is now officially notified, it must be tabled before the Karnataka Legislative Assembly and Council within six weeks of their reconvening. Meanwhile, aggregators and platform operators in the affected sectors should begin preparing for compliance—this includes revisiting contract structures, updating HR and payroll systems, enhancing data governance practices, and proactively engaging with the Board.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Suhail Nathani, Managing Partner – Email – suhailnathani@elp-in.com

Retika Yadav, Senior Associate – Email – retikayadav@elp-in.com