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Why India’s Food Delivery Workers Deserve Better Pay And Labour Protection

Why India’s Food Delivery Workers Deserve Better Pay And Labour Protection

The food delivery segment has done well during the Covid crisis, thanks to an increased average order value (AoV) and an overall improvement in unit economics. But Zomato and Swiggy delivery workers say that their wages have dropped drastically 

Although food delivery work was initially touted as ‘gig work’, essentially a temporary job to supplement one’s income, many ‘delivery partners’ think it is a full-time job, given the terms and conditions of employment

After staging mass protests in the past year, food delivery workers are now vocal about exploitation at work on social media, which raises questions about the gig economy model

After the first wave of the Covid-19 pandemic swept India in early 2020, 40-year-old Mishra* (aka Delivery Bhoy on Twitter) lost his job at a Mumbai startup. A UI/UX engineer by profession, he turned to the gig economy for immediate help and joined Swiggy as a delivery partner. Instead of burning through his entire life’s savings to meet the high cost of living in a Tier 1 city like Mumbai, Mishra’s best hope lay in signing up with food delivery platforms to pay the bills. 

“When I was laid off, I realised that I should pick up any job as my bank balance was drying up fast; it had nearly reached a three-digit figure… The situation was so bad that I started googling ‘jobs I can find today’ out of sheer desperation. That was when Swiggy and Zomato ads popped up on search results. I had a smartphone, and I owned a two-wheeler. So, I immediately signed up with Swiggy in May last year,” he said. 

Mishra is one of the many white-collar workers who have turned to the gig economy and joined the last-mile delivery workforce to stay afloat after the Covid crisis brought the Indian economy to a standstill. Inc42 spoke to around 6 food delivery workers mainly employed in metro cities. It turned out that at least three of them held white-collar jobs before turning to gig work (read food delivery) after the jobs bloodbath last year. 

But the gig economy model which usually guarantees a flexi-hour employment model is slowly changing. What was built as a lucrative opportunity to earn a ‘quick buck’ has now turned into a full-fledged primary job for a majority of the delivery workers in the country. In an economy that is just recovering from job losses and business shutdowns, gig work provides an ample opportunity to course correct. But, there is growing discontentment among India’s gig workers about low wages and dangerous working conditions too entrenched in the business of doorstep food delivery. 

Time after time, both activists and delivery people have accused food delivery unicorns Swiggy and Zomato of unfair treatment. Now ‘delivery partners’ are also complaining about the fall in wages and the aggressive control these companies have over them. All these have led to a raging debate on whether the gig economy is as free and fair as it claims to be or whether gig workers have any actual control over the terms of work. 

Both Swiggy and Zomato have resorted to advanced algorithms to maximise control over their logistics and delivery personnel. Food delivery startups are now mandating minimum log-in hours, frequency of breaks and how often delivery workers are eligible for incentive payouts. All of this is now being crunched and decided by an algorithm that looks to maximise a company’s unit economics. 

With gig workers having no say in their terms of payments, and with companies explicitly rolling out full-time work offers, many critics are now questioning the core gig economy thesis that delivery workers are part-time employees. Hence, the question: Are they, indeed, gig workers going by the global industry standard? Or should they be considered full-time employees and shed the part-time/contractual tag to grab the benefits enjoyed by company full-timers? 

The Gig Reality: Paying Little, Promising Less

Historically, gig economy unicorns such as Uber and DoorDash pushed back on such legislation in the US and Europe when the legal systems sought to classify the gig workers of those companies as full-time employees eligible for social security benefits. Uber and DoorDash consider their delivery workers and cab drivers as contractual, part-time employees. And the food aggregator-cum-delivery companies in India have taken the same stand. Would that change anytime soon?

Consider this. According to Zomato’s Red Herring Prospectus (RHP), the company received a legal notice from the Employees’ Provident Fund Organisation (EPFO) in January 2020 for allegedly “neglecting and evading” payment of PF contributions towards delivery partners. The EPFO also asked Zomato to classify delivery partners as employees under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and said that social security benefits should be provided to them. Zomato, however, challenged this requirement.

“Our delivery partners are not employees under the Act, and hence, the (EPFO) Act is not applicable to them. Any unfavo(u)rable order, including any (legal) interpretation that renders us a deemed employer of our delivery partners, may result in increased costs and adversely impact our business and operating models, our results of operation, cash flows and financial condition,” Zomato said in its IPO prospectus issued in July 2021. 

Although companies like Zomato have fixated on the definition that delivery workers literally their operational backbone are not full-time employees, many of these gig workers have told Inc42 that they consider it a full-time job.  Here is the case in point.

Incentive Pay Is A Method Of Control 

For most delivery workers, the daily or weekly incentives offered by food delivery platforms account for most of their monthly payouts. Both Swiggy and Zomato provide a flat base pay of INR 20-25 for the first 6-7 km that a delivery worker covers after picking up food. For any additional distance logged after that initial stretch, platforms pay around INR 5-6 per km. However, it is the daily incentive structure that matters most in such cases. 

Going by our conversation with Swiggy delivery workers, the company pays INR 100 as a daily incentive whenever a rider hits a target payout of INR 300 for the day. But this payment is meant for a ‘part-time’ worker who has to log in for at least six hours a day during the day/night shift. 

Swiggy also pays INR 200 as a daily incentive to a ‘full-time’ worker if he can complete a minimum number of orders amounting to INR 575 for the day. But to get this incentive, one has to clock 12 hours, including the mandatory log-in during peak hours (lunch and dinner slots). Swiggy also mandates its workers to maintain a rating of 4.6 to be eligible for these incentives.  

Zomato, on the other hand, piloted a full-time offer late last year that promised a ‘minimum guarantee’ pay of INR 4,000-5,000 a week for deliveries in Delhi. But to be eligible for this guaranteed payout, workers have to log in for a minimum of 60 hours a week. Zomato even ran adverts on job portals under the ‘full-time’ jobs section. (Inc42 was the first to report this development.)

The fact that both Swiggy and Zomato provide higher incentives for ‘full-time’ work does not go with the official narrative that all food delivery workers are part-timers/freelancers/contract hires and cannot have access to standard employee benefits. If anything, it only raises more questions about the gig economy’s wages, working hours and whether a new cadre of employees will try to earn living wages at a time when the post-Covid economic recovery in India remains abysmally slow.

Zomato thinks otherwise. According to the company, its payouts for delivery partners are fair, given the work that they put in. Citing the example of its average payouts in a city like Bengaluru, the food delivery platform says that the top 20% of its delivery partners (who use bikes) put in more than 40 hours a week and earn more than INR 27,000 per month.

“Minus the fuel costs, they take home about INR 20,000 per month, which is 2x of India’s average per capita income. Also, this is what our business model can support today (remember, we still make losses and our founder and CEO takes zero salary),” the company says in its response.

The Low Wage Story: Will It Change?

Kaveri Medappa, a doctoral researcher at the University of Sussex in the UK who studied the job patterns of delivery workers in India, says that most of them work at least 12-14 hours a day for Swiggy/Zomato. According to Medappa, many delivery workers voluntarily quit their previous jobs because Swiggy and Zomato promised higher incomes. In fact, a group of workers she interviewed were commerce or engineering graduates but opted for delivery work as jobs were not available. 

“Some of them were bank employees who sold loans to customers or worked as sales representatives in retail outlets. But post the pandemic, they had to face pay cuts and then turned to delivery jobs for higher income. Then there was a big group of workers who were laid off from the construction industry. They also joined Swiggy/Zomato last year,” she adds.  

Medappa says that it does not make much economic sense for Swiggy and Zomato to pay more to workers, given that these companies are in a labour surplus market. When there is such an abundant supply of cheap labour, food delivery companies can continue to find workers who may agree to work for any nominal amount. 

Overall, delivery workers are making anywhere between INR 15K and INR 20K a month (gross income), according to Inc42’s analysis of Mishra’s weekly payment data. However, they have to pay for fuel, which mostly amounts to INR 4-4.5K a week. That leaves Mishra with a net monthly income of INR 14-15K. 

Here is a look at Mishra’s current payout from Swiggy in a given week:

And here is Mishra’s payment from Zomato for a given week:

Much like Mishra, another Hyderabad-based delivery person Jayaram* says that his wages too have dropped considerably in the past year. Jayaram has worked for multiple food delivery platforms, including Swiggy, Zomato and UberEats (before it was sold to Zomato in January 2020 for $300 Mn).

“I worked for UberEats more than three years ago; it was my first food delivery company. We used to earn INR 1,000-1,100 a day on that platform because UberEats did not have any distance restrictions. At times, we used to cover 10-20 km for a single order. After Zomato acquired the company last year, all delivery workers at UberEats were moved there. But what I currently earn from Zomato is half of what I used to get at UberEats,” says Jayaram. 

Zomato, however, has termed these findings as “biased (or maybe even vested) misunderstanding”. 

“According to our point of view, if these allegations were even remotely true, our business would not sustain. Why? Because our delivery partners are the face of our brand – unhappy delivery partners would lead to unhappy customers, which would be terrible for our business… Over 60% of our delivery partners rate us a 9 or a 10 (out of 10) in our happiness/NPS surveys,” the food delivery company says.

It further adds that gig work is not for everyone, and those aspiring for a much higher payout are better off training for a different job profile. Zomato also claims that permanent employment does not feature among the top 10 requests whenever it runs a survey involving delivery partners. “Our data is statistically significant and not based on anecdotes (from social media handles),” the company states. 

“We are transparent about this with our partners from the start. This is an unskilled opportunity; it is not for undergraduates or graduates who can find better-paying jobs. We ideally don’t want any of our delivery partners to work with us for more than a year or two. We want this gig to be a pit stop for them before they find something which aligns better with their long-term aspirations,” adds Zomato. 

During the weeks that Zomato and Swiggy saw fierce criticism from delivery personnel and some netizens alike on social media, Zomato decided to respond by throwing money at TV advertorials that starred popular Bollywood star Hrithik Roshan and Katrina Kaif. The ad received much backlash from activists and some netizens alike accusing Zomato TV of being insensitive to the problems faced by gig workers. This also prompted the company to issue a long statement to clear the air.  

The Economics Of Food Delivery Has Improved, But Wages Have Not

Initially, one may assume that the Covid crisis is responsible for falling wages in food delivery work (lockdowns, limited operations by restaurants and people’s diminishing buying capacity due to job loss and pay cuts are some of the key reasons that have hindered the business in pandemic times). But the financials published by Zomato in its RHP and the data obtained from analysts and brokerages portray a different picture.

Analyst data shows that the average order value (AoV) an important metric that indicates the average amount spent by customers on food delivery has bounced back to pre-pandemic levels. 

The AoV data of Zomato, estimated by the investment bank Jefferies Group in a report, shows that the metric dipped considerably in FY19 and FY20, hovering at INR 260-280 per order. But even after the pandemic hit in FY21, the AoV improved significantly to INR 400. “As consumers spent more time at home with families, the share of group ordering increased, which led to higher AoV,” the investment bank said.

GIG-economy-Graph-1

Jefferies also pointed out that the take rates, including restaurant commissions, other charges and delivery fees charged from customers, increased from 21.2% to 22.6% per order. Despite improvements in AoV in FY21 and an increase in the commission charged from restaurants, Zomato paid less to delivery workers, as per the company’s RHP. More importantly, the company’s delivery expenses (read payouts to delivery partners) declined by 13.7% between FY20 and FY21.

The Way Forward For India’s Gig Economy

Srujana Katta, who also studies the gig economy and is another doctoral candidate at the University of Oxford, tells Inc42 that digital platforms like Zomato and Swiggy initially promise greater benefits and payouts to entice workers onto their platforms. But these benefits are often retracted after companies develop a critical mass of workers who rely on them for their livelihoods. 

“Their expansionist approach (hugely promoted when companies rapidly expand to new services and cities) and obligations to VC funders are part of why platforms aim to cut costs and keep their operations very lean. This translates to very poor (and worsening) pay and work conditions. Let us also remember that this platform labour model — where workers are contracted on a per-gig basis without employment benefits — is spreading to more sectors of the economy,” adds Katta.

These problems are not faced by cheap labour markets alone. Even developed economies like the European Union (EU) are working on specific laws to address the gig economy. In early 2019, the EU came out with draft legislation that suggested free mandatory training for workers and limits on working hours and the length of the probationary period. 

“The rules would also prevent employers from stopping a worker from taking up another job outside of working hours and require that all new employees get key information on their responsibilities and working conditions within a week,” the EU said in its consultation paper.

According to Katta, if India enacts similar measures, it will likely entail financial risks to platforms, as stated in Zomato’s IPO prospectus. But interpreting social security for gig workers as financial risk means people are uncritically accepting the platforms’ narratives and priorities, she says.

“If providing workers with minimum pay and protection poses an existential risk to platforms, it means they are doing something wrong, to begin with. Zomato has good reason to be wary of the threat that a social security law would pose to its unethical business model. But that should not stop us from advocating for pro-worker regulations,” Katta adds.  

Prominent economist Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF), has provided suggestions on how the gig economy can overcome its issues with workers. In his book titled Stakeholder Capitalism, he offers radical solutions to global income inequality. Schwab argues that the gig economy is a product of the fourth industrial revolution that chose to forgo the traditional employee-employer relationship that existed during previous industrial revolutions. 

In today’s gig economy, there are no provisions for workers to collectively bargain for their payouts and working conditions that existed before due to trade union activities. In hindsight, the current version of the gig economy clearly cannot sustain its treatment of workers who lack legal rights and financial benefits that traditional employees receive. Hence, Schwab suggests that government legislation can look into creating ‘modernized unions’ that will allow companies and workers to negotiate mutually for better pay and upskilling options.

In India, workers’ unions and NGOs such as the Indian Federation of App-based Transport Workers (IFAT), All India Gig Workers Union (AIGWU) and Jhatkaa have been campaigning for a long time to ensure better working conditions and negotiation power. However, occasional protests and campaigns may not be enough to persuade gig economy platforms to look at delivery workers’ rights. Even in California, the home state of Silicon Valley startups, there have been lawsuits to define the status of platform workers. This is yet to happen in India, but experts argue that legal recourse could be the first step towards upholding gig workers’ rights.

*Note: Delivery workers’ names were changed on request.