Pension Plans: Gig workers need social security, but don’t drive them towards the costly EPFO

With employment structures changing, the social security/pension vision for employees needs to evolve. People working in the digital economy may not hold permanent jobs, or even be working for/with one party—these ‘gig’ workers include cabbies using multiple ride-hailing platforms, freelance software developers, workers with short-term contracts (running into a matter of just months), etc.

Given how they fall outside the purview of the traditional employer-employee engagement, there is no social security cover for them under the current regulations. Now, the Centre has brought a social security Code that will cover gig workers. As per Business Standard, the government has plans to extend EPFO and ESIC cover to gig workers from the next fiscal.

The Code provides for a contribution from the government, and there is a 5% cap on companies’ contribution. The problem is that the EPFO and ESIC have proved both costly and inefficient, as many experts have pointed out.

The government must realise that most of the gig-economy workers do not have regular monthly incomes. So, they need flexi-payment, allowing them to contribute as per convenience. Against such a backdrop, an assortment of schemes makes little sense if the NPS already offers such flexibility.

The government should instead get gig workers enrolled under the NPS, which has offered higher returns—as against a return of 8.5% from EPF, NPS offers 9-11%—and more transparency.