REFSA BRIEF · Conceptualizing the Gig Economy in Malaysia REFSA BRIEF Issue 7 June 2020 Sun Cheng...

Conceptualizing the Gig Economy in Malaysia

REFSA BRIEFIssue 7 June 2020

Sun Cheng Kidd [email protected]

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Conceptualising the Gig Economy in Malaysia

EXECUTIVE SUMMARY

● ThegigeconomyinMalaysiaiscurrentlytreatedasaseparatesilo of the economy with its workers facing many social and economic adversaries and often being exploited by platform providers.Thiscanbeshownwithworkersinthegigeconomy:

○unable to earn a living wage due to the gig economy’secosystemthatwasstructuredbyplatformproviders.

○not entitled to any social security benefits, such as theEmployees Provident Fund (EPF), social security andinsurance benefits such as the Employment InsuranceSystem(EIS)andmedicalinsuranceprovidedbytheSocialSecurityOrganization(SOCSO).

○excludedfromregulationprotectingfundamentalprinciplesandrightsatwork.

○unabletoformlabourunionsandtocollectivebargaining.

○not being identified and recognized by the government,resultinginlackingcriticaldataonthem,consequentlyinpossibleineffectivepolicymakingbeingimplemented.

● Atpresent, legal,governmentandpublicdiscourseonthe gig economy has been inconsistent particularly in the use of terminology, which contribute to widespread confusion inthe categorization of different platform types, aswell as non-platformtypes.

○Legal discourse - as things stand, the Employment Act1955considersworkersinthegigeconomyasindependentcontractorsandnotemployees.Thismeans independentcontractorsarehiredunder theContract forServiceandareonlytold“what”todo,andnot“how”todoaspecificproject or task, while employees are hired under theContractofServiceandaretold“what”and“how”todoaspecificprojectortaskbyhisorheremployer.

○Government&PublicDiscourse-workersinthegigeconomyareoftentakentoincludefreelancers,own-accountworkersandself-employed.Thisislargelyduetothefactthatthegovernment andmedia, in particular, use the terms ‘gigworkers’and ‘freelancers/self-employed’ interchangeably,


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completelydisregardingthecleardifferencesbetweenthetwogroups.

● Withthisinmind,thereisa need for the categorization of the gig economy into two task-oriented platforms:

○ ‘Cloudwork’-isweb-basedandpurelydigitalformofon-demandlabourwheretasksaretaskscompletedbehindacomputeranywhere.

○ ‘Gigwork’ - is location-based and tasks aremediated toselectedindividualsandcrowdthroughaplatformorwork-on-demandappsandthetaskiscompletedoffline.

● Needlesstosay,gigeconomyworkersarebadlyaffectedbythepandemic,thus,werecommendtwoshort-termmeasures:

○Establish an Income Support Scheme (ISS)forworkersinthegigeconomy,withitsdatabasesharedwithSOCSO’sSelf-Employed Social Security Scheme (SESSS) to aidworkerstostayfinanciallyafloat.

○Ramping up programs that facilitate workers in the gig economy to match with diverse platform providersinlinewiththeirrespectiveskills,aswellasupskilling,toprovide alternative gig-job options to workers that havebeenoptedoutduetothenatureoftheirwork.

● We also propose a long-term measure that reclassifies gigeconomy workers as “independent employees” insteadof“independentcontractors”andintroducesaregulatoryframeworkthatgovernsthegigeconomy.Thisframework:

○establishes a “Contract of Agreement” between workersinthegigeconomyandplatformproviders,whichworkerswouldconsequentlyberecognizedbythegovernment.

○establishes an automatic enrollment of social securityprogramssuchasSOCSO’sSelfEmployedSocialSecuritySchemeandEPF’si-SaraanforworkersinthegigeconomyviaaPlatform-to-Government(P2G)datasharingsystem.

○ introduces a tax system via a Platform-to-Government(P2G)datasharingsystem.

○ requiresplatformproviderstoprovideanoticeofterminationforworkersandseverancepayforconstructivedischarge.

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○allows the government to take legal action againstplatformproviders if there is evidence of exploitation ordiscriminationofworkers.

○encouragesmarketcompetitionamongplatformprovidersby attracting workers with lucrative benefits, perks andprocurementofvarioustypesofinsurance.

○grants workers the right to form labour unions andcollectivelybargainagainstplatformproviders.


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INTRODUCTION

Overthepasttwomonths,theMalaysiangovernmenthasintroducedthree fiscal stimulus packages, totaling RM 260 billion, in order tosupport theMalaysianeconomy in themidstof theCOVID-19crisis.Whilethestimuluspackagesaimtocushiontheimpactoftheeconomicdownturn on low-income households and small-medium enterprises(SMEs),itdoesn’tadequatelyaddresstheself-employedandworkersinthegigeconomyduringthispandemicduetotheirlackofasocialsafetynet.Eventhoughtheself-employedarenotbetter-off,thepurposeofthispaperistoaddressspecificallythechallengesworkersinthegigeconomy faceaswell as thepolicies recommended toensurebettersocialprotectionsareputinplace.

DEFINING THE GIG ECONOMY

Gig economy is often termed as ‘platform economy’, ‘on-demandeconomy’, and ‘sharing economy’ that refers to “the demand and supply of short-term or task-based working activities that are matched through online labour platforms via mobile work on-demand via apps”.1 Thewide rangeofactivities thatareexecutedthrough ‘online platforms’ and ‘work on-demand via apps’ can becategorizedalongtwotask-orientedplatformsnamely:

(i) ‘Cloudwork’ - isweb-based and purely digital form of on-demand labour where tasks are tasks completed behind acomputer anywhere. Cloud work can be subdivided into threetypes ofweb-based digital labour. The first type ofweb-baseddigitallabourisfreelancemarketplaces,wheretasksaregiventospecificindividuals.Ifthetaskisnotgiventoaspecificindividualbut to an undefined group of people online, it is crowd work.Therearetwotypesofcrowdwork:microtaskingcrowdworkandcontest-basedcreativecrowdwork.

(ii) ‘Gig work’ - is location-based and tasks are mediated toselected individuals and crowd throughaplatformorwork-on-demandappsandthetaskiscompletedoffline.Theselocation-based services are further differentiated into different sectorssuchas,accommodation,transportationanddeliveryservices,aswellashouseholdservicesandpersonalservices.

1 De Stefano, V. (2016).

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(Source:Schmidt(2017)2)

Table1:DefinitionsofsubcategoriesinCloudworkandGigwork

ThiscategorizationsuggestedbySchmidt(2017)proposedthesimplestandmostplausibleway todifferentiate theGigeconomy,evenwiththemanyhybridplatformsandsub-categories.Theorderof thesixplatformtypes listedaboveroughlyportray thehistoricalsuccessioninwhich they have emerged.Within the first of three categories, asubstantialmarketconsolidationhasalreadyhappenedsincetheearly21stcenturyandquiteanumberofresearcheshasalreadybeendone.3Meanwhile, the last three categories aremore recent and not verywell understood.More research is needed to acquire data on theserelatively new platforms and to deduce the necessarymeasures toprotectworkers’rightsfrombeingfurtherdiminished.

2 Interpreted from Schmidt, F. A. (2017). 3 See Crocker, T. D. (2019), for the formation history of the Cloud.


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(Source:Schmidt(2017)45)

Figure1:ATypologyoftheGigEconomy

Asshown inFigure1, thecategorizationof thegigeconomycanbedistinguishedwithtwoquestions:aretheservicesandtaskscoordinatedviatheplatformboundtoaspecific location?Andaretheseservicesandtasksboundtoaspecificperson?Ifitcanbedonefromeverywhereandanywhere,itiscloudwork.Ifitcanbedonebyanyoneandisgiventoanunspecifiedgroupitiscrowdwork.Iftheworkhastobedoneataspecificlocationandisgiventooneselectedindividual,itisgigwork.Localmicrotaskingistheonlyformofgigworkgiventoacrowd.Bothaspects have extensive implications for how the platforms operate,thesituationofthecontractors,thelegalframeworkthatappliesandpotentialregulatorymeasures.

4 Modeled from Schmidt, F. A. (2017), Figure 2: Categorization of digital labour markets in the platform economy 2/25 Examples of platforms are obtained from Malaysia Digital Economy Corporation (MDEC)’s eRezeki.

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PRESENT STATUS OF THE GIG ECONOMY IN MALAYSIA

Unfortunately,atpresent,legal,governmentandpublicdiscourseonthegigeconomyhasbeeninconsistentparticularlyintheuseofterminology,which contribute to widespread confusion in the categorization ofdifferentplatformtypes,aswellasnon-platformtypes.

Legal Discourse: Employees vs. Independent Contractors

Asthingsstand,theEmploymentAct1955considersworkers inthegig economy as independent contractors and not employees. An“independentcontractor”is,inessence,anindividualwhoishiredorappointed under aContract for Service solely towork on a specificprojectortaskforpurposesoftheprincipal’stradeorbusiness.6Ontheotherhand,accordingtotheAct’sFirstSchedule,an“employee”isan individualwho isengagedunderaContractofServicewithanemployerbasedontheamountofwagesandonthetypeofoccupationof the employee.7 In other words, independent contractors are hired under the Contract for Service and are only told “what” to do, and not “how” to do a specific project or task, whileemployees are hired under the Contract of Service and are told “what”and“how”todoaspecificprojectortaskbyhisorheremployer.Thisalsoessentiallymeansthat independentcontractorsarenotprotectedundertheEmploymentAct.

Government & Public Discourse: Freelancers vs. Workers in the Gig Economy

“Workersinthegigeconomy”areoftentakentoincludefreelancers,own-account workers and self-employed. This is largely due to thefactthatthegovernmentandmedia,inparticular,usetheterms‘gigworkers8’and‘freelancers/self-employed’interchangeably,completelydisregarding the clear differences between the two groups. Mediaoutlets,forexample,refertogigworkersthesameasthefreelancers/self-employedorregardworkersinthegigeconomyareonlyworkersingigwork,neglectingworkersinthecloudwork.TheDepartmentofStatisticsMalaysia,ontheotherhand,considers“own-accountworkers”aspotentialgigworkers,anddoesnotprovideanydataorinformationonthegigeconomy.Malaysians,inessence,arecluelessonwhoisinthegigeconomyandwhoisnot.Thus,itisimportanttoclarifyherethatfreelancersare“own-accountworkers”,andareconsideredasself-employed.Freelancers have a primary income that comes from independent client-based work and do not actively make use ofonlineintermediariestofindwork,unlikeworkersinthegig

6 Employment Act 1955, Pt.1, s.27 Employment (Amendment of First Schedule) Order 20128 Gig workers are workers that work in ‘gig work’ types of jobs


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economy, even though they may have an online self-marketing presence.Inotherwords,theseestimated1.5to4millionMalaysiansarenotassignedwithjobsthroughanonlineplatform.9

Therearecertainlystepstakento identifyandsafeguardthewelfareofworkersinthegigeconomy.FormerPrimeMinisterTunDrMahathirMohamadremarkedthatthegigeconomyhasbeenidentifiedasanewsourceofeconomicgrowthandwillbemadepartofthe12thMalaysiaPlanduringthePrimeMinister’sQuestionTime(PMQT)intheDewanRakyatonOctober22,2019.Hestatedthatplanstoregulatethegigeconomytoensurethatthewelfareofworkersisprotectedhasbeenunderreviewbyhisadministration.Sincethen,aspecialcommittee,“JawatankuasaKhasBagiMembincangkanIsuPekerjaGigEkonomi”wassetup,comprisingtheMinistryofYouthandSports(KBS),theMinistryofDomesticTradeandConsumerAffairs (KPDNHEP),and ledby theMinistryofHumanResource(MOHR).10ThespecialcommitteemetoncelastDecember. The initialwork of the committeehas alreadybegunwithengagementwithMalaysiaDigitalEconomyCorporation(MDEC)toinquireonthegeneralecosystemofthedigitallabourplatformsandthework-on-demandappsavailableoutthereandbeingbyMalaysianswhopartakeoncasual,short-term‘tasks’or‘gigs’.Additionally,theMinistryofTransport (MOT)playsa large role in regulating thegigeconomy,particularlyintermsofthee-hailinganddeliveryservicescommunity.A6monthstrialperiodforride-hailingservices,whichwasapprovedbythegovernmentinNovemberlastyearhasalreadystartedonJanuary1,2020,withalocalmotorcyclee-hailingserviceDegoRidetakingthefirstleap.11FollowedbyGrabwithitsGrabBike.

THE RISE OF THE GIG ECONOMY

Theriseofthegigeconomyoverthepastdecadecanbeattributedtotheconfluenceoftwomajortrends.Firstly,it is estimated that about 1.1billionyoung jobseekersareexpected toenter the labourmarket between 2012 and 2020,manyoftheminSouthAsiaandSub-Saharan Africa.12Meanwhile, 2.64million youngMalaysians hasentered the labour market between February 201213 and February2020.14Underatightmarket,unemploymentandunder-employmentbecameamajorsocialandeconomicconcernforpolicymakers,employedpopulation and job seekers. Secondly, the increasing spread of

9 An estimation is provided because figures from the Department of Statistics Malaysia (DOSM), Labour Force Survey, and the World Bank Group varies from 1.5 to 4 million Malaysians. 10 See Special committee on gig economy looking ways to prevent mistreatment of workers. (2019). 11 See Loheswar, R. (2020). 12 See Human Development Report 2015. (2015).13 See Labour Force Statistics Malaysia. (2013). 14 See Key Statistics of Labour Force in Malaysia. (2020).

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digital connectivity.57%oftheworld’spopulationareconnectedtotheinternetand67%oftheworld’spopulationisalreadyusingthemobilephone.15Inresponsetotheconfluenceofmorejobsdemandfromplaceswithlargepoolofnewlabourmarketentrantsandwherejobsareoftenlimitedormightnotexist;andthehighinternetandmobile penetration of the world’s populations, “online platforms”and“work-on-demandapps”arecroppingupinvariousindustriestoenableanewwaveofonlineoutsourcinginthesesectorsandentailsemploymentgrowthandpovertyreduction.16Moreover,theflexibilityand casualization of work has attracted many, especially youngerjobseekers.

TheWorldBankestimatesthattheglobalgigeconomyisgrowingbyabout33%annuallyin2015,17whileMalaysia’sEmployeesProvidentFund(EPF)reportedthatthegigeconomyworkforceinMalaysiahadgrownby31% in2017,surpassing thegrowth in theconventionalworkforce.18By2019,26%ofthetotal15.3millionMalaysianworkforceformpartofthegrowinggigeconomyasreportedbytheWorldBank.19Thesestatistics,however,aredoubtfulduetothevaguenessintheclassificationanddefinitionofthegigeconomy.Onthebrightside,Malaysiahassomedefinitefiguresongigworkersandcrowdworkers.Intermsoftransportationanddeliveryservices(gigwork),therearecurrently about 90,000drivers20 (with PublicServiceVehicle (PSV)license21)orabout200,000drivers22(withandwithoutPSVlicense)across46e-hailingcompanies.23WhilethemarketsizeoftheMalaysiancrowdeconomyisestimatedtobevaluedatRM949millionin2018.Moreover, there are nearly 158,000 trained digital workers underMalaysia’sDigitalEconomyCorporation(MDEC)’sflagshipplatforms,eRezekiandtheGlobalOnlineWorkforce(GLOW)inthesameyear.24These statistics have clearly supported the argument that the gigeconomy is onameteoric riseby its contribution to theeconomy.Hence,thegigeconomyshouldnotbeconceivedasaseparatesilointheMalaysianeconomy.

15 See Global Digital Report 2019. (2020). 16 Kuek, S. C., Paradi-Guilford, C. M., Fayomi, T., Imaizumi, S. & Ipeirotis, P. (2015). 17 ibid.18 See Zainul, E. (2017). EPF calls for higher government contribution in retirement schemes.19 See Schmillen, A. D., Tan, M. L., Abdur Rahman, A. A., Lnu, S. N. B. H., & Weimann Sandig, N. (2019). 20 See 91,978 e-hailing drivers have obtained PSV license: Loke. (2019). 21 PSV license is a type of vocational driving license in Malaysia that allows the holder to drive any type of vehicle used to transport paying passengers.22 See Lai, A. & Hendawy, S. (2019). 23 See E-Perkhidmatan Pengusaha Kenderaan | Syarikat E-hailing. (2020). 24 See Sharing Economy Initiative in Malaysia. (2019).


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CHALLENGES OF WORKERS IN THE GIG ECONOMY IN MALAYSIA

Thegigeconomy,needlesstosay,hasitsadvantageforbeingflexibleandbeingyourown‘boss’.However,thegigeconomyhasitspitfallsandperils,andfacemanysocialandeconomicadversaries.Andthisis largelyduetothemisclassification(ornoclassification)ofthegigeconomy.

Workers in the gig economy are bound to be exploited by platformproviders, as they are not considered as ‘employees’ under theEmployment Act, subsequently they are not protected by it. Tounderstand thematter,we have to understand the role of platformproviders.Thegigeconomyisoftenknownastheplatformeconomybecauseitcomprisesonlineplatformsthatrequireatleastthreeparties:platformprovider,independentcontractors,andplatformclients.Theplatformprovideractsasanintermediarythatcoordinatesthesupplyanddemandsidesoftheothertwoparties,whichultimatelyallowtheprovidertoshiftmostofthecost,riskandliabilitiestotheothertwoparties.Platform providers, in essence, can grow exponentially without having to face production costs growing proportionally, and have full access to and control over the data, processes and rules of the platform.Astheplatformeconomyisdrivenbyventurecapitals, it is increasingly prone to foster the advent ofmonopoliesor at least oligarchies. Platform providers would essentially achieveeconomiesofscales.

With that, themisclassification of the gig economy allows platformproviderstostructureanecosystemwhereworkersinthegigeconomyareunabletoearnalivingwage.Moreover,lessscrupulousplatformprovidersdonotofferreasonableandfairwages.Thisleadstosomegigworkersworkingmorethan10hoursadayjusttoearnadecentincometosupporttheirfamily.Besidesthat,ifworkersfaceanyformoflegalmatters,theplatformprovidersarenotresponsibleforiteither.Workersinthegigeconomyarealsonotentitledtoanysocialsecuritybenefits. This includes access to retirement benefits, such as theEmployeesProvidentFund(EPF),socialsecurityandinsurancebenefitssuchastheEmploymentInsuranceSystem(EIS)andmedicalinsuranceprovidedbytheSocialSecurityOrganization(SOCSO).Theyarealsonotentitledtopublicholidaysandmaternity leave.The likelihoodofbeingterminatedwithoutnoticeoraseverancepayisveryunsettlingaswell.

Workers in the gig economy are not only excluded from theEmploymentAct,buttheymightalsofindthemselvesexcludedfromregulation protecting fundamental principles and rights at work. Asa consequence,workersmayfind themselvesexcludedor limited intheir right to freedomofassociationandtocollectivebargaining,as

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wellasfindingthemselvesinbreachofregulationsuchascompetitionandantitrustlaw.25Moreover,theycouldbenotincludedinthescopeofregulationagainstchild labour26anddiscrimination.27Thisrendersthequestionofemploymentstatusall themoresignificant in termsofworkersprotectionasnotonly issuesconcerningminimumwagesandemploymentbenefitsbutalsoaccesstofundamentallabourandhumanrightsareatstake.

Furthermore,asworkersinthegigeconomyarenotclearlydefined,policymakerslackcriticaldataaboutthem.Thismeansthatthelackof datamakes it hard to track howmany workers are there, theirdemographics,ortheirhouseholdincomes.Thislackofdatacancausean inabilitytoaccuratelyassesstheneedsoftheworkers inthegigeconomy,whichthencreatesthepossibilityofineffectiveandwastefulpolicies being implemented. This poses a serious concern especiallyduring this crisis, where financial assistance and social support areunabletobechanneledcorrectlytothe in-needsectors.Aone-size-fits-allapproachtoprovideassistancewillbeineffectiveandmayevenleadtounintendedconsequences.

Withallthatbeingsaid,thebenefitsofworkersinthegigeconomy,suchashigherautonomyandflexibility,aswellastheopportunitytoworkonmultiple platforms, canbevastly outweighedby the costs.These include the possibilities of not getting a paycheck, facinglegalchallenges,payingheftymedicalbills,andbeingexploitedandoppressedbyplatformproviders.Thus,when new working models leave the sandbox stage and become so widespread that it affectsthelivesofmillionsofpeople,thegovernmentmustputthe interests of society before the business interest of individual entrepreneurs. Regulation is necessary to protect social security,worker’srightsandconsumerrightsalsointhedigitalrealm,especiallyduringtheongoingpandemic.

CURRENT POLICIES SUPPORTING THE GIG ECONOMY

Presently,twoprogramshavebeenimplementedbythegovernmentto provide some support to the gig economy. The first is SOCSO’sSelf-Employment Social Security Scheme (SESSS), under the Self-Employment Social Security Act 2017, a compulsory scheme forthe self-employed that explicitly includes e-hailing drivers.28 The

25 See De Stefano, V. (2015). 26 Minimum Age Convention, 1973 (No.138). (2019). International Labour Organization. 27 Discrimination (Employment and Occupation) Convention, 1958 (No.111). (2017). International Labour Organization. 28 In the beginning, this scheme is compulsory for the self-employed in the Passenger Transportation Sector which are taxi, e-hailing and bus drivers under the same Act, which took effect on 1 June 2017.


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Schemeprovidesprotectionforself-employedinsuredpersonsagainstemployment injuries including occupational diseases and accidentsduringwork-relatedactivities.ThesecondisEPF’sVoluntaryContributionwithRetirementIncentive(i-Saraan),whichallowstheself-employedand those who do not earn a regular income to make voluntarycontributionstowardstheirretirement,andatthesametimereceiveadditionalcontributionfromthegovernment.

POLICIES RECOMMENDATION: WHICH WAY FORWARD?

AstheCOVID-19pandemiclooms,thevulnerabilityofworkersinthegigeconomyhasbeenexposedfurther.Forinstance,thelackofsocialprotectionandtheabsenceofastraightforwardtransmissionmechanismforstimuluspayments,aswellas thebigdrop-inactivitydueto theMovementControlOrder (MCO).With that, this sectionof thepaperwill provide short-and long-term policy recommendations aimed atsafeguardingthewelfareofgigworkers.

Short-term policy recommendations

1.EstablishanIncomeSupportScheme(ISS)forworkersinthegigeconomy,withitsdatabasesharedwithSOCSO’sSelf-EmployedSocialSecurityScheme(SESSS).

In the PRIHATIN stimulus package announced by the PrimeMinisterMuhyiddinYassinon27March2020,full-timee-hailingdrivers were entitled to a one-off cash handout amountingRM500.Althoughthecashhandoutwaswelcome,itisinsufficientfore-hailingdriverswhowillnothaveanincomeformorethantwomonths(shouldtheMovementControlOrder(MCO)29endonJune9).EvenifwetakeintoaccountPRIHATIN’sBantuanPrihatinNational (BPN) cash handouts for low-income households, themaximume-hailingdriversmayonlyreceiveisuptoRM2,90030,provided that his or her household income is below RM4,000,and if they areunmarried andearnunderRM2,000. Even thishigherfigureofRM2,900maybeinsufficienttosupportanentirehousehold.

On5thJune,morethantwomonthsaftertheannouncementofthePRIHATINstimuluspackage,PrimeMinisterMuhyiddinYassinannouncedamatchinggrantofuptoRM50millionforplatformproviderswhichcontributetowardsSOCSO’sSelf-EmployedSocial

29 MCO - a measure implemented by the government to contain COVID-19, was imposed on March 18.30 An e-hailing driver receives RM500, if his or her household income is below RM4,000 and is single, earn-ing below RM2,000, they’ll receive RM1,600 and RM800, totaling RM2,900

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SecuritySchemeandEPF’si-SaraanunderthePelanJanaSemulaEkonomi Negara (PENJANA) Short-Term Economic RecoveryPlan.31 This is a positive and recommended policy approach,however,itisstillunsustainableforworkerstoweatherthiscrisis.

ItisproposedthatatemporaryIncomeSupportScheme(ISS)beenactedforworkersinthegigeconomy,withitsdatabasesharedwithSOCSO’sSelf-EmployedSocialSecurityScheme(SESSS).This means that workers in the gig economy (and the self-employed)whohaveregisteredunderSESSSwillautomaticallyreceivefinancialassistancefromtheISS,whilethosewhohavenotcanapplyindependentlythroughtheISS.TheISSwillserveasimilarpurposeascashhandouts,whichwillhelpworkersinthegigeconomyandtheself-employedtostayafloatthroughoutthis economic downturn. However, instead of a one-off cashhandout,amonthlygrantshouldbeoffereduntilthepandemichas subsided.Thiswill beamoresustainableoption for themcompared to the former. Also, by sharing ISS’s databasewithSESSS,ithelpstofacilitatetheregistrationprocessforrecipientswho already have signed up for SESSS. This speeds up theprocessofinjectingmoneyintotheeconomy.

2.Rampingupprogramsthatfacilitateworkersinthegigeconomyto match with diverse platform providers in line with theirrespectiveskills,aswellasupskilling,toprovidealternativegig-joboptions.

MCOhasdrivenmanyfull-timee-hailingdriversoutofjobs.Inresponse,manyplatformprovidersnowencouragetheire-hailingdrivers to become delivery drivers.32 This trendmay continueuntilaCOVID-19vaccineisdeployedenmasse,aswepreparefora“newnormal”aftertheMCOislifted.Socialdistancingwillbeapriority,whichmeanse-hailingdriversmaybeapprehensiveaboutpickinguppassengers.Inaworse-casescenariothismightdrivethemoutofthee-hailingindustryentirely.Passengerstoomightfacesimilarapprehension.Suchsupplyanddemandshockswithintheindustrymaylastforsometime.

It isconsequentlyproposedthatprogramsare launchedwhichareabletofacilitateworkersinthegigeconomytomatchwithdiverse platforms providers in linewith their respective skills,as well as upskilling, to provide alternative gig-jobs options.Theseprogramsshouldbedesignedtokeepworkersinthegigeconomy,especiallye-hailingdrivers,tocontinuetohaveajoband an income throughout this crisis. For instance, programs

31 Pelan Jana Semula Ekonomi Negara (PENJANA) Short-Term Economic Recovery Plan (2020).32 See Grab driver shares what it’s like for e-hailing drivers during the MCO in Malaysia. (2020).


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suchasMDEC’seRezekiandGo-eCommerceshouldbepromotedaggressivelyandbeimplementedeffectively,withhigherlevelsoffunding.TheeRezekiprogramallowsgigworkerstomatchwithgig-platformsinlinewiththeirrespectiveskills.Thisprogramhasthreecategories,digitalmicrotask,digitalworks,anddigitally-enable task, which are able to provide an alternative for gigworkers thatwill be badly affected byMCO and the pandemicitself.TheGo-eCommerceprogramisanonlineentrepreneurialplatformwiththetoolstohelpgigworkerstobuildtheirveryownbusinesses.Thisprogramprovidesanopportunityforgigworkerstoupskillthemselvesandevenbuildtheirownbusinesses.

Thesetypesofprogramsareimportanttoprovidesupportforbadlyaffectedworkersinthegigeconomybytemporarilyprovidinganalternativeforthem,whilealsohelpingenhanceanddiversifytheirskillsets.TherecentannouncementunderthePENJANAstimuluspackageundertookasimilarapproachbyallocatingMDECRM25million for theGlobalOnlineWorkforce(GLOW)programwhichaimstoupskillMalaysiantoearnincomefromservinginternationalclientswhileworkingonlinefromhome.33

Long-term policy recommendations

1. Establishanewcategoryofworkers:“independentemployees”

As the gig economy continues to grow exponentially, defyingtraditional means of employment as well as revolutionizingthe concept of freelancing and self-employment, it is evidentthat a solution is required to safeguard the long-termwelfareof gig workers. However, the legal concepts of Employees vs.Independent contractorspersistently pose a conundrum to thegigeconomy,astheoptionispresentedasbinary.Thelackofacleardefinitionofwhoandwhatgigworkersarecreatesadditionalconfusionandunintendedconsequencesashighlightedabove.

1.1. Reclassificationofgigeconomyworkers

Inresponsetothewidespreadconfusionandthelackofasocialsafetynetforworkersinthegigeconomyabouthowtheyshouldbeclassified,itisproposedthatanewcategoryofworkersbecreated:“independentemployee”.Thisthirdcategory will be a hybrid of an “employee” and an “independent contractor”,specificallycateredtoworkersinthegigeconomy.Inotherwords,thismodelfocusessolelyontheamountofcontrolexercisedoveraworker,defining

33 ibid.

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independentemploymentasan intermediatecategoryofworkforthosewhoarenotasautonomousasindependentcontractorsbutwhoarealsonotsubjecttothesamedegreeof instructionandsupervisionas traditionalemployees.34This proposed legal entitywould be entitled tomany ofthe same protections granted to traditional employees,butwhotradeadegreeofeconomicassuranceforgreaterflexibilityinsettingthetermsandconditionsoftheirwork.

1.2. Argumentsagainstclassifyingworkersinthegigeconomyasemployeesordependentcontractors

Firstly,argumentsmade forworkers in thegigeconomytobeconsideredasemployees,mayriskcannibalizingthebusinessmodelofmanyplatformprovidersbydrasticallyincreasingtheircoststructure,likelyleadingtoadecreaseinconsumerwelfareasthosecostsarepassedontoplatformclients.Farmoreimportantly, itwouldlikelybeapyrrhicvictoryforworkersbecauseitwouldalsoendangertheveryflexibilitythathasdrawnmanyofthemtothegigeconomyinthefirstplace,astheirputative“employers”wouldhaveeveryincentivetoexertthemaximumlevelofcontrolforwhichtheywouldbepaying.Inotherwords,ifacompanyis“madetogiveitsworkersallthebenefits,protections,andentitlementsofemployment,thenthatcompanywillexpecttheworkertobehavelikeanemployee.Whilethistrade-offmay sound ideal, testimonials fromMalaysianshave showed otherwise35. Malaysians stated that theyprefertocontroltheirownschedule.

Inaddition,suggestionsforahybridclassificationbetweenemployees and independent contractors, known as“dependentcontractors”.Thisnameisinaptbecausethereis good reason to believe that the majority of workersin the gig economyare not dependent on the platformsfor which they work. This suggestion essentially fails toaccountforthemostimportantandvaluedcharacteristicsof gig economy work: the flexibility and autonomy thatsuchworkprovides.

34 Nadler, M. L. (2018) 35 See Lee, C. H. (2019), for examples.


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1.3. Proposalofregulatoryframeworkgoverningthegigeconomy

1.3.1. Establishing a “Contract of Agreement” between aworkerinthegigeconomyandtheplatformprovider

A Contract of Agreement is a legallybinding agreement which establishesthe relationship between anindependentemployeeandaplatformprovider. This contract stipulates adegreeofflexibilityandautonomy for

independent employees, as independent employeesare not obliged towork for a set amount of hoursandcantakeleavethehourstheywant.Additionally,this contract entitles independent employees tosome statutory rights, but are much lesser ascompared to an employee’s contract of service.This also means the independent employee underthis contract is not exclusive toonly one company.

Thisnewcontractandclassificationindefinitelyrequirea “right to control” employment test for platformproviderstouseinthedeterminationofifaworkerisconsideredasan independentemployee.While it isdifficulttoproposeanactualtestforitduetothelackofdataonthegigeconomyanditsworkers,therearecertainly few criteria and considerations needed tofulfill.Firstly,provingthattheindependentemployeeishiredforshort-termortask-basedworkingactivitiesthatarematchedthroughonlinelabourplatformsviamobileworkon-demandviaapps.Secondly,itmustencompassbothgigworkand crowdwork. Thirdly,provideserviceforplatformprovidersandnotonlytoplatformclients.Thisisobviousthatacomplexmultifactor test is requiredtodeterminean independentemployee. However, if it is well designed, it wouldempower workers in the gig economy, as well asensuring that platform providers are not overlyburdenedbythiscontract.

The Ministry of Human Resource (MOHR) overseesthisframeworkandhasjurisdictionoverthecontractsbetween platform providers and independentemployees.Furthermore,aPlatform-to-Government(P2G)datasharing36ecosystemmustbeestablished

36 Modeled from European Union’s Business-to-Government (B2G) data sharing. A collaboration in which a company or other private organization makes available its data to the public sector for a public interest purpose.

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to ensure this frameworkholds inplace. P2Gdatasharing is a mandatory collaboration betweenplatform providers and the Ministry to allowautomaticenrollmentofsocialsecurityprogramsforindependentemployees,taxingthegigeconomy,aswellasprovidinginsightsoneconomicdevelopmentand statistical data on the gig economy. With anational centralized database, P2G data sharingallows the government to access these data andprovidenecessaryfinancialassistancewhenneeded,particularlyduringacrisis.Whiletherewillcertainlybeconcernsontheprivacyandconfidentialityoverthesedatabeingsharedacrossmultipleinstitutions,itisthusutmostimportanttoensurethesedataareconsentedandencrypted.

1.3.2. Automaticenrollmentofsocialsecurityprogramsforworkersinthegigeconomy

An independent employee would beautomatically enrolled into SOCSO’sSelfEmployedSocialSecuritySchemeand EPF’s i-Saraan once he or shehas a Contract of Agreement with aplatform provider,with the aid of the

Platform-to-Government (P2G) data sharing. P2Gdatasharingisessentialhere,becauseindependentemployeesmayworkmultipleplatform.Thus,eachplatformproviderisrequiredtoprovidethedataontheamountof incomeeach independentemployeeearnedviaP2Gdatasharing,andthedatabasewillwork out the insurance deductions and retirementcontributions.Independendentemployeesthatearnbelowthenationalminimumwagecanoptoutofthedeductionsandcontributionsastheyareassumedtobeworkinginthegigeconomyasasidejob.Platformproviders are undoubtedly required to provideminimal retirement contribution for independentemployees.Insurancedeductions,ontheotherhand,willbemostlydesignedforoccupationaldiseaseandinjury, and platform providers are not required tocontribute.37 Further benefits on insurance will beexplainedbelow.

Thismechanismisjustifiable,asasurveyconducted

37 The current SOCSO’s Self Employed Social Security Scheme only requires only workers to voluntarily contribute.


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by The Centre has shown that 64% of workers inthegigeconomyarewillingtohaveunderRM200amonthasideforsocialsecuritybenefits.Inaddition,the survey has also shown that workers are morewillingtocontributeforemploymentinjuryinsuranceaswellas retirementsavings.Hence,anautomaticenrollment is necessary to cover all independentemployeesandprovideamore robust social safetynet.

1.3.3. Taxingthegigeconomy

Asthegigeconomycontinuestogrowexponentially, the government wouldinevitablyloseasubstantialamountofrevenueduetothereductionoftaxablecommunities.Similartothemechanismusedforautomaticenrollmentforsocial

securityprogramsasmentionedabove,independentemployeescanbe taxedviaP2Gdatasharing.Thegross income of an independent employee acrossplatform providers can be measured and taxed.Subsequently, generating more revenue for thegovernment and creating a level playing field intermsoftaxation.However,itisimportanttoensurethatthetaxrateislogicalandnotoverlyburdeningindependentemployees.

1.3.4. Terminationofagreementandexploitationofworkers

Under thisnewregulatory framework,platform providers have to provide anotice of termination of independentemployees,particularlywhenitcomestolayoffsanddownsizing.Thismayrequireplatform providers to compensate

a severance pay to independent employees and anoticeofterminationforaweek.Whileindependentemployees can be fired due to unsatisfactoryworkperformance,poorbehaviortowardsplatformclients,or unethical conduct that violates the platform’spolicies,itisfairtoatleastgiveareasonforwhytheindependentemployeeisbeingterminated.However,an independent employee cannot be firedwhen heorshereportsanincidentorapersontotheMinistryof Human Resource or whistle blows to industryregulators.

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This framework is also designed to preventexploitationorattheveryleastreduceexploitationof independendent employees. Here, platformproviders’businessmodelhastonotonlycareforthecreationofanefficientorwell-functioningmarketthatcanincreasetheplatform’ssharebutalsoempowerindependent employees. As mentioned above, theMinistry of Human Resource have jurisdiction overthis framework, whichmeans legal actions will betakenagainstplatformprovidersifthereisevidenceof exploitation or discrimination of independentemployees. With a regulatory body in charge,platform providersmust provide a decent workingconditionandprofitablelabour,aswellaspreventingchild labour. Inaddition,platformproviderscannotdiscriminate against independent employees basedonvariouspersonal traits, suchas their sex, race,color, national origin, religion, age or disabilities.Thisultimatelydecentralizesplatformprovidersandbringsmorebalancetothepowerasymmetryofthegigeconomy.

1.3.5. Marketcompetition

As the regulatory framework has seta benchmark on legal protectionsand social security measures,platform providers are encouragedand incentivizedtocompetewithoneanother for independent employees.

This can be done by attracting independentemployees with lucrative benefits and perks, suchas rebates, subsidy, financial and tax services orprocurementsofvarioustypesofinsurance.Hence,rather than statutorily enumerate a specific list ofbenefitstobeprovided,thedecisionwillbeleftupto the platform providers and their workers basedupontheirparticularindustriesandbusinessmodels.Variety among the benefits made available couldbecomeanimportantwayforplatformproviderstodifferentiate themselves from one another as theycompete for independent employees. For instance,platformprovidersinthetransportationsectormightfind that helping independent employees procurebetter terms of automobile insurance is a boon totheirrecruitmentefforts.


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1.3.6. Therighttoformlabourunions

Witha strongmarket competitionandminimalregulatorymeasurescomparedto employees, it is crucial to allowindependentemployeestounionizeandcollectively bargain against platformproviders. The reason for this is that

labour unions have proven to secure lasting andenforceable workplace gains. Thus, labour unionscanaddressworkermisclassificationclaims,demandbetterworkingconditionsorbenefits,andevenpushforlegalandregulatoryreform.Labourunionswillbethekeyinformingacheckandbalanceinthisnewframework.

(author)Figure2:Anillustrationoftheproposedregulatoryframeworkfor“independentemployees”inthetransportationanddelivery

servicesector.

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1.3.7. Currentlimitationsonenforcingthisnewregulatoryframework

Admittedly,thisframeworkhasitslimitations.Firstly,to enable a Platform-to-Government (P2G) datasharing,thegovernmenthastoseverelyupgradeitsdatabaseserveranddigitalconnectivitytocopewiththevolumeandspeedofdatatrafficfromplatformproviders to the government’s server. Secondly,thereisagenerallackofbargainingpowerconferredto labour unions. This is largely due to frequentunion-bustingandlegislationthatdoesnotenshrinethe right to unionize, consequently weakening thepowerof labourunionsinMalaysia.Withthatsaid,thegovernmentmustaddresstheseissuesinordertoenactaframeworkthatcaterstoadigitallyreliantlabourforce.

CONCLUDING THOUGHTS

It is evident that the government has to do more to address thechallengesgigworkersface,duringthispandemicandbeyond.Withgigworknotclearlydefined,policymakerslackcriticaldataaboutthem,andthiscomplicateseffortstoprovidethemwithfinancialassistanceandsocialsupport.Moreover,theylackanysocialorlegalprotection,liketheEmployeesProvidentFund(EPF),EmploymentInsuranceSystem(EIS), other insurance provided by the Social Security Organization(SOCSO),andlegalprotection.

This rendersgigworkerssomeof themostvulnerable in the labourmarket.Thegovernmentshoulddowhateveritcantohelpthem.Thispaperproposesseveralpolicyrecommendationsthatmayalleviatetheburdensfacedbygigworkers.ThefirstrecommendationistoestablishanIncomeSupportScheme(ISS)forgigworkers,with itsdatabasesharedwithSOCSO’sSelf-EmployedSocialSecurityScheme(SESSS),providing a claimable grant once a month until the pandemic hassubsided.Thesecondpolicyinvolvestherampingupofprogramswhichfacilitategigworkerstomatchwithdiversegig-platformsinlinewiththeirrespectiveskills,aswellasupskilling,toprovidealternativegig-joboptions.Finally,itisproposedthatanewcategoryofworker,knownasa“independentemployee”,isestablished,alongwitharegulatoryframeworktogovernthegigeconomy.


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