FRAMEWORK FOR WELFARE FEE IMPLEMENTATION UNDER THE KARNATAKA PLATFORM BASED GIG WORKERS (SOCIAL SECURITY AND WELFARE) ACT, 2025.

FRAMEWORK FOR WELFARE FEE IMPLEMENTATION UNDER THE KARNATAKA PLATFORM BASED GIG WORKERS (SOCIAL SECURITY AND WELFARE) ACT, 2025.

I. Welfare Fee for Gig Workers in Karnataka:

The Government of Karnataka has issued an order dated 16 February, 2026 (“Order”) under the Karnataka Platform Based Gig Workers (Social Security and Welfare) Act, 2025 (“Act”) and the Karnataka Platform Based Gig Workers (Social Security and Welfare) Rules, 2025 (“Rules”). The purpose of this Order is to protect gig workers who provide services through digital platforms and aggregators, and to ensure that these intermediaries do not exploit such workers.

II. What is the Welfare Fee?

Section 20 of the Act introduces a ‘welfare fee’ that must be paid on every payout made by a Platform or Aggregator to a Gig worker . The fee ranges between 1% and 5% of each payout, but it is not charged on ‘settled payments’ such as tips and incentives. The welfare fee is paid by the Platforms and Aggregators themselves, not by the workers, as they continue to receive 100% of their earnings from the Platform.

The fee applies to a wide range of entities, including aggregators, digital platforms, e marketplaces, ride hailing services, logistics and delivery platforms, and professional service marketplaces.

III. How Will Payments Be Tracked?

Section 21 of the Act creates a Payment and Welfare Fee Verification System (“PWFVS”). Under this system, all payouts to workers and all welfare fee deductions must be mapped and disclosed, so that the authorities can track what is being paid and whether the correct welfare fee has been deposited. Until this system becomes fully operational, Platforms are allowed to self report the required details on a quarterly basis.

Rule 17 further requires Aggregators to calculate, self declare, and pay the welfare fee every quarter, again excluding tips and incentives from the calculation. All Platforms and Aggregators must deposit the welfare fee at the end of each quarter into a designated bank account, the details of which will be published by the Labour Department.

IV. Welfare Fee Rates for Different Services:

The order fixes a 1% welfare fee for all listed categories, but with caps per transaction depending on the type of service and vehicle used. The welfare fee structure is as follows:

V. Penalty

Although the Order does not specifically mention any penalty for non payment or delayed payment of the fee by Aggregators or Platforms, the Act addresses this issue under Section 23. Section 23(1) provides that, if any Aggregator or Platform fails to pay the welfare fee payable under Section 20 within the prescribed time, it is liable to pay simple interest at the rate of 12% (twelve percent) per annum on the unpaid fee, calculated from the date on which the payment became due until the date it is actually paid. Further, Section 23(2) provides that where an Aggregator or Platform contravenes the provisions of the Act or the rules made under it, or fails to comply with them, the State Government may impose a fine of up to INR 5000 (Rupees Five Thousand only) for the first contravention and up to INR 1,00,000 (Rupees One Lakh only) for any subsequent contravention. In effect, even though the Order itself is silent on penalties, the Act ensures a financial consequence in enforced on the Aggregators or Platforms.

VI. Conclusion

The notification seeks to extend social security benefits to Gig workers who are engaged through digital intermediaries. It mandates the levy and collection of a welfare fee from all platforms listed in Schedule I of the Act and channels these amounts into a dedicated fund for gig worker welfare schemes. It recognizes gig work and provides social protection to workers. The framework also aims to ensure transparency in platform worker transactions through the PWFVS and establishes a clear compliance system to hold platforms accountable.

Authors: Neeraj Vyas, Cyril Chacko