Code on Social Security, 2020

Background

In India, labour is a subject in the Concurrent List. Ever since it is in the Concurrent List,
both the Parliament and the state legislatures can legislate laws on it. As per the Central
Government, before the new labour codes were passed, there were more than 40 central
laws and more than 100 state laws on labour and related matters.

The Second National Commission on Labour (2002) recommended that the central labour
laws should be integrated into groups like:

o Industrial relations
o Wages
o Social security
o Safety
o Welfare and working conditions
o

This was recommended by the Commission because the existing labour laws were archaic,
complex and had inconsistent definitions. The Commission suggested simplification of the
labour codes for the sake of transparency and uniformity.

In 2019, the Central Government introduced four bills on labour codes to consolidate 29
central laws. These are:

1. Code on Wages
2. Industrial Relations Code
3. Social Security Code
4. Occupational Safety, Health and Working Conditions Code

While the Wages Code was passed in 2019, the other three bills were referred to a Standing
Committee on Labour. As per the recommendations of the Committee, the government
replaced these bills with new ones in September 2020, and these were passed in the same
month.

The SS Code shall come into force on such date as the Central Government may, by
notification appoint and different dates may be appointed for different provisions of the SS
Code.

LAWS SUBSUMED

SS Code has subsumed the following enactments:

1. The Employees’ Compensation Act, 1923;

2. The Employees’ State Insurance Act, 1948;
3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;
5. The Maternity Benefit Act, 1961;
 6. The Payment of Gratuity Act, 1972;
7. The Cine- Workers Welfare Fund Act, 1981;
8. The Building and Other Construction Workers Welfare Cess Act, 1996; and
9. The Unorganised Workers’ Social Security Act, 2008.

Definitions

Employee (sec. 2(26)): means any person (other than an apprentice engaged under the
Apprentices Act, 1961) (52 of 1961) employed on wages by an establishment, either directly
or through a contractor, to do any skilled, semi-skilled or unskilled, manual, operational,
supervisory, managerial, administrative, technical, clerical or any other work, whether the
terms of employment be express or implied, and also includes a person declared to be an
employee by the appropriate Government, but does not include any member of the Armed
Forces of the Union:

Provided that for the purposes of Chapter III (PF), except in case of the Employees
Provident Fund Scheme and Chapter IV(ESI), the term employee shall mean such employee
drawing wages less than or equal to the wage ceiling notified by the Central Government
and includes such other persons or class of persons as the Central Government may by
notification, specify to be employee, for the purposes of those Chapters:

Provided further that for the purposes of counting of employees for the coverage of
an establishment under Chapter III and Chapter IV, as the case may be, the employees,
whose wages are more than the wage ceiling so notified by the Central Government, shall
also be taken into account:

Provided also that for the purposes of Chapter VII (Employees Compensation), the
term employee shall mean only such persons as specified in the Second Schedule and such
other persons or class of persons as the Central Government, or as the case may be, the
State Government may add to the said Schedule, by notification, for the purposes of that
Government;

Employer (sec. 2(27))

"employer" means a person who employs, whether directly or through any person, or
on his behalf, or on behalf of any person, one or more employees in his establishment and
specifically includes certain category of workers,

(a) in the case of a factory, the occupier of the factory i.e the person with ultimate control
over the affairs of factory
(b) in relation to mine, the owner of the mine or agent or manager having requisite
qualification under the law for the time being in force and appointed by the owner or agent of
the mine as such;
(c) in relation to any other establishment, the person who, or the authority which has ultimate
control over the affairs of the establishment and where the said affairs are entrusted to a
manager or managing director, such manager or managing director;
(d) contractor; and
(e) legal representative of a deceased employer
Social Security (Sec. 2(78))
"social security" means the measures of protection afforded to employees,
unorganised workers, gig workers and platform workers to ensure access to health care and
to provide income security, particularly in cases of old age, unemployment, sickness,
invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on
them and schemes framed, under this Code;

Self-employed worker (Sec. 2(75))

"self-employed worker" means any person who is not employed by an employer, but
engages himself in any occupation in the unorganised sector subject to a monthly earning of
an amount as may be notified by the Central Government or the State Government, as the
case may be, from time to time or holds cultivable land subject to such ceiling as may be
notified by the State Government;

Home-based worker (Sec. 2(36))

“home-based worker" means a person engaged in, the production of goods or
services for an employer in his home or other premises of his choice other than the
workplace of the employer, for remuneration, irrespective of whether or not the employer
provides the equipment, materials or other inputs;

Gig Worker (Sec. 2(35))

"gig worker" means a person who performs work or participates in a work arrangement and
earns from such activities outside of traditional employer-employee relationship.

Platform Worker (Sec. 2(61))

"platform worker" means a person engaged in or undertaking platform work. For the
exchange in payment such workers work outside traditional employer-employee relationship.
Organisations or individuals to use an online platform to access other organisations or
individuals to solve specific problem or service or any such other activities which may be
notified by the central government, in exchange of payment.

Aggregator (Sec. 2(2))

"aggregator" means a digital intermediary or a market place for a buyer or user of a

service to connect with the seller or the service provider.

Unorganised worker (Sec.2(85))

"unorganised" sector means an enterprise owned by individuals or self-employed

workers and engaged in the production or sale of goods or providing service of any kind
whatsoever, and where the enterprise employs workers, the number of such workers is less
than ten

Unorganised worker (Sec.2(86))

 "unorganised worker" means a home-based worker, self-employed worker or a wage
worker in the unorganised sector and includes a worker in the organised sector who is not
covered by the Industrial Disputes Act, 1947 or Chapters III to VII of this Code.

Salient Features of Social Security Code

 The Code provides for the establishment of several bodies to administer the social
security schemes, such as the Central Board of Trustees to administer the EPF
scheme, and an Employees State Insurance Corporation to administer the ESI
Scheme. The Draft Rules provide for the manner of constituting these organisations,
the composition of various sub-committees under these organisations and specifies
their power, functions, and term. It also provides for the manner of transacting
business, the quorum for conducting meetings, frequency of meetings, and the fee
and allowances of members of such organisations.

 To extend the coverage of Employees’ State Insurance to all establishments

employing ten or more employees and to the employees working in establishments
with less than ten employees on voluntary basis and also to plantations on option
basis. It further seeks to empower the Central Government to notify the applicability
of the said coverage to establishments which carries on the hazardous or life
threatening occupation irrespective of the number of workers employed therein (even
with one employee);

 To extend the Employees’ Provident Fund, Employees’ Pension Scheme and

Employees Deposit Linked Insurance Scheme to all industries or establishments
employing twenty or more employees and thereby expands the existing coverage;
schedule removed

 To make provision for specifying differential rates of employees’ contribution for class
of employees for employees’ provident fund as the Central Government may notify
for a specified period;

 To provide that the money dues shall be the charge on the assets of the employer
and shall be paid on priority basis in accordance with the Insolvency and Bankruptcy
Code, 2016;

 To provide that in case of employer’s failure to register the employee with

Employees’ State Insurance Corporation or failure to pay contribution and the
Employees’ State Insurance Corporation releasing the benefits to the workers, then,
such benefits shall be recovered from the employer;

 The Code provides that the central or state government may exempt an employer or
an establishment from any or all of the provisions of the Code or schemes framed
under it. The Draft Rules provide that such an exemption may be granted if: (i) the
employees of an establishment receive benefits similar or superior to the benefits
granted by the EPF or the ESI scheme, or (ii) the establishment has been complying
with the EPF or the ESI scheme for three years continuously before making the
 application for exemption and has not defaulted in payment of contribution during
such period, among other

 To empower the Central Government to frame schemes for providing social security,
to the gig workers and platform workers who do not fall under traditional employer-
employee relation;

 to empower the Central Government, by notification, to constitute a Social Security

Fund or funds for provision of social security for the unorganised workers, platform
workers or gig workers or any such class of workers;

 to provide for payment of gratuity in case of Fixed Term Employment on pro-rata

basis even if the period of fixed term contract is less than five years;

 to provide for maternity benefit to the woman employee;

 to provide for compensation to the employees in case of the accidents while

commuting from residence to place of work and vice versa;

 To provide for levying and collecting the cess for the purposes of social security and
welfare of building workers; for Aadhaar-based registration of construction workers
on the portal of the central or state government or the state welfare boards. When a
construction worker migrates from one state to another, he will be entitled to benefits
in the state where he is working. The Rules also specify the procedure for self-
assessment and payment of cess by the employer. Further, it provides that delay in
payment of cess will invite a penalty of 1% every month.

 To provide for limitation period of five years for institution of proceedings in respect of
assessment and determination of money dues from employer;

 To expand the sources of the fund for schemes to include funds from corporate
social responsibility or any other source as may be specified in the scheme and also
contains enabling provision for constituting the special purpose vehicle for the
purpose of implementation of schemes for unorganised workers;
 To provide for renaming the designation of Inspector as Inspector-cum- Facilitator
and to enhance his power to supply information and give advice to employers and
workers concerning the most effective means of complying with the provisions of the
proposed Code.