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Published by Enhelion, 2021-03-05 03:56:27

Module 5

Module 5


Meaning of ‘Social Security’: Social security protection is clearly defined in ILO
conventions and UN instruments as a basic human right. Social security is the
protection that a society provides to individuals and households to ensure access to
health care and to guarantee income security, particularly in cases of old age,
unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner.

The Code on Social Security 2020 (the Code), which received Presidential assent on 28
September 2020, subsumes nine legislations relating to social security, retirement and
employee benefits. These are: (i) The Employees Compensation Act, 1923, (ii) The Employees
State Insurance Act, 1948, (iii) The Employees Provident Fund and Miscellaneous Provisions
Act, 1952, (iv) The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959,
(v) The Maternity Benefit Act, 1961, (vi) The Payment of Gratuity Act, 1972, (vii) The Cine
Workers Welfare Fund Act, 1981, (viii) The Building and Other Construction Workers Cess
Act, 1996, and (ix) The Unorganized Workers’ Social Security Act, 2008.

However, the Code is not simply a consolidation of previous laws. It has expanded its coverage,
extended the advantage to all workers in the organised/unorganised industries, adopted
maximum compensation principles under minimal governance and represents a clear approach
across the four labour codes.


The Code has expanded coverage through the inclusion, in addition to temporary employees,
of the non-organized market, permanent and gig workers, platform workers, cross-state
migrants, etc. It requires special contributions from aggregators that are “internet
intermediaries, or a marketplace for the purchaser or users of a service to communicate with
the seller or service provider”. For establishments, therefore, it is necessary to review and revise
their practices to comply with the Code.


Another highlight of the Code is the clarity in calculating wages for the purpose of social
security. Given the uncertainty in the existing rules, particularly with regard to Provident Fund,
this is indeed a welcome change. The Code offers a detailed description of the salary. In order
to prevent improper structuring of wages to reduce social security benefits, clear ceiling
exclusions have been provided. The Code also attempts to harmonise the definition across
various labour laws.

Employee is defined as any person employed on wages in an establishment, either directly or
through a contractor, (other than an apprentice employed under the Apprentices Act, 1961), in
order to do skilled, semi-skilled or unskilled, manual, operational or supervisory job, whether
expressed or implied by the terms of employment.

Gig Worker is defined as a person who performs, participates in or operates outside
conventional employer/employee relationships and earns from such activities.

Platform work is defined as a work arrangement that falls outside a traditional employer-
employee relationship in which organisations or individuals use an online platform to access
other organisations or individuals to solve specific problems or to provide specific services or
any such other activities which may be notified by the Central Government, in exchange for

The Code defines social security as measures of protection given to employees, unorganised
workers, gig workers and platform workers to ensure that they have access to healthcare and
security of income, especially when they are elderly, unemployed, ill, disabled, injured at work,
maternity or loss of a bread-winner.

Unorganized sector is explained as an undertaking owned by persons or self-employed persons
engaged in the production and sale of goods or in providing some kind of service. Where such
an undertaking has employees, then the number of such employees is less than ten (10) workers.


1 Section 2(60).

The Social Security Code currently does not provide gig workers and platform workers with a
particular social security, but requires the central and state government to develop schemes
relating to life and disability coverage, health, maternity, provident fund, occupational injury
insurance, home etc for such workers. The Code provides that such schemes can be financed
by a combination of contributions from the central government and the aggregators’.

Section 113 of the Code requires every unorganised worker, gig worker or platform worker to
be registered after fulfilling certain conditions. The worker must have completed 16 years of
age or any other age as prescribed by the central government. The said worker also has to
submit a self-declaration stating such information as the Central Government may prescribe.
Each eligible unorganized worker, gig worker or platform worker shall apply for registration
along with the prescribed documents. A distinct number shall be assigned to that worker's
application. It is up to the state or central government to decide if the schemes would be valid
for all unorganised workers, gig workers and platform workers regardless of their salaries.


Under the Code, the definition of 'inter-state migrant workers' has been expanded to include
those workers who travel from one state to an establishment in a destination state for
employment and who may subsequently alter their establishment within the said destination
state under an agreement or other employment arrangement. For such workers to count as inter-
state migrant workers, their wage should not exceed INR 18,000 per month. Since contract
labour also includes inter-state migrant workers, such workers would count as 'employee' under
the Code and receive such benefits as are given to employees. Therefore, upon implementation
of this Code, employers will need to provide inter-state migrant workers with social security at
par with their other employees.


Establishments are comprehensively defined by the Code to mean, inter alia, places such as
factories, motor transport undertakings and newspaper establishments where an industry,

commerce, trade, production or occupation is carried on. Registration would be mandatory for
all such establishments covered by the Code. Nonetheless, establishments already registered
under any other relevant central labour law will not need to obtain such registration as their
current registration will be considered for the purposes of the Code.


Under the Code, establishments which have lesser number of employees than the threshold for
coverage provided under the provisions of the Employees' Provident Fund ('EPF') and the
Employees' State Insurance Fund ('ESI'), will have the option, subject to certain conditions, to
benefit from voluntary coverage under the same threshold. The employers may also opt out of
such voluntary coverage. The Code aims to encourage the provision of such benefits to workers
of smaller establishments by offering some flexibility, while providing employers with a safety
net to opt out of such coverage.


As mentioned in section 16 and Chapter III of the Social Security Code, the applicability of the
Provident Fund Program for Workers has been altered to cover every establishment employing
twenty (20) or more employees. A provident fund can be set up by the central government,
where the contributions paid by the employer to the fund are ten per cent (10 per cent) of the
salaries currently payable to each of the workers (whether directly employed by the employer
or via a contractor). The contribution of an employee shall be equal to the contribution payable
by the employer in respect of the employee. Through notification, the central government can
raise the contribution percentages for both employers and employees of certain establishments
to twelve percent.

If any person, being an employer, fails to pay any contribution under the Code or the laws,
regulations or schemes provided for therein, he shall be punishable by imprisonment for a
period which may extend to three years, but shall not be less than one year if he fails to pay the
contribution of the employee which he has deducted from the salary of the employee and shall
also be liable to a fine of one lakh rupees.


With reference to chapter V, the qualifications for gratuity of permanent and fixed-term
employees, the Code has fixed various thresholds. Gratuity shall be payable to qualified
workers on any day of the preceding twelve months by any shop or establishment in which ten
or more employees are working or have been employed. The gratuity shall be payable to an
employee on termination of his employment after continuous service for a period of not less
than five years- on pension; on retirement or resignation; on death or disability due to accident
or illness; on termination of a fixed-term employment contract period. However, when the
termination of any employee's job is due to death or injury or the expiry of fixed-term
employment, a continuous service of five years is not mandatory. The employer shall pay
gratuity to the employee at a rate of fifteen days' salary for each completed year of service or
part thereof exceeding six months. The amount of gratuity payable to the employee shall not
exceed the amount notified by the Central Government. Under the Code, gratuity is payable to
workers employed directly or through a contractor.

If any person fails to pay any amount of gratuity to which an employee is entitled, he or she
shall be punishable with imprisonment that may extend to one year or a fine that may extend
to rupees fifty thousand (Rs. 50,000/-), or both.


If the employer and the majority of the workers consent, the Social Security Code provides for
voluntary registration under Employee State Insurance. In addition, regardless of the number
of workers working, the government has the right to expand the Employee State Insurance
Policy to any dangerous occupation. The Code also provides for coverage under the Employee
State Insurance System to gig workers and unorganised industries. The employer shall pay both
the employer's contribution and the employee's contribution in respect of each employee,
whether employed by him directly or through a contractor. Neither the employer nor the

contractor is entitled to subtract the employer's contribution from any salary owed to or
otherwise recovered from the employee.


Under the Code, maternity benefits shall extend to all shops or establishments where ten or
more workers are employed or have been employed on any day of the preceding twelve months
and to such other shops or establishments as have been notified by the relevant government.
For the six weeks immediately following the date of birth, miscarriage or medical termination
of pregnancy, no employer can knowingly hire such a woman in any facility. A woman shall
be entitled to maternity benefit for a period of not less than eighty days in the twelve months
immediately preceding the date of her planned delivery if she has previously served in the
establishment of the employer from whom she receives maternity benefit. The maximum time
during which any woman is entitled to maternity allowance shall be twenty-six weeks, of which
no more than eight weeks precede the anticipated delivery date. However, for a woman with
two or more surviving children, the maximum time entitled to maternity compensation shall be
twelve weeks, of which no more than six weeks shall precede the date of her planned delivery.

Where any person is in violation of the provisions on maternity benefits or dismisses,
discharges, reduces rank or otherwise penalises a female employee or fails to provide any
maternity benefits to which a female employee is entitled, he shall be punishable by
imprisonment for a period of up to six months or by a fine which may extend to rupees fifty
thousand (Rs. 50,000/-) or both.


Insofar as providing social security to gig and platform workers is concerned, the Code takes
into consideration the changing economic and employment landscape. The government has, in
the Seventh Schedule of the Code, classified logistics services as an aggregator. Thus, all the
provisions of the Code that are applicable to aggregators will apply to logistics services as well.
This means that workers employed on platforms such as Zomato and Swiggy will also be

eligible for social security benefits under this Code. The protection offered by the Code is a
welcome step to create financial security and encourage employment in the logistics sector.

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