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Social security refers to protection measures given to employees to ensure healthcare access and income security in cases such as old age, unemployment, work injury, maternity etc. The Code on Social Security, 2019 replaces nine labour laws related to the employee provident fund, maternity benefit, social security for unorganized workers and widens the coverage of benefits to include platform and informal workers.

Organized and Unorganized Sectors in India:

  • The organized sector includes primarily those establishments which are covered by the Employees State Insurance Act, 1948, Factories Act, 1948, the Shops and Commercial Establishments Acts of State Governments, the Industrial Employment Standing Orders Act, 1946 etc.
  • This sector already has a structure through which social security benefits are extended to workers covered under these legislations.
  • The unorganized sector on the other hand, is characterized by the lack of labour law coverage, seasonal and temporary nature of occupations, high labour mobility, dispersed functioning of operations, casualization of labour, lack of organizational support, low bargaining power, etc. all of which make it vulnerable to socio-economic hardships.
  • The nature of work in the unorganized sector varies between regions and also between the rural areas and the urban areas, which may include the remote rural areas as well as sometimes the most inhospitable urban concentrations.
  • In the rural areas it comprises of landless agricultural labourers, small and marginal farmers, share croppers, persons engaged in animal husbandry, fishing, horticulture, beekeeping, toddy tapping, forest workers, rural artisans, etc. where as in the urban areas, it comprises mainly of manual labourers in construction, carpentry, trade, transport, communication etc. and also includes street vendors, hawkers, head load workers, cobblers, tin smiths, garment makers, etc

The Code on Social Security, 2019:

  • Social security schemes: Under the Code, the central government may notify various social security schemes for the benefit of workers. These include an Employees’ Provident Fund (EPF) Scheme, an Employees’ Pension Scheme (EPS), and an Employees’ Deposit Linked Insurance (EDLI) Scheme. These may provide for a provident fund, a pension fund, and an insurance scheme, respectively. The government may also notify: (i) an Employees’ State Insurance (ESI) Scheme to provide sickness, maternity, and other benefits, (ii) gratuity to workers on completing five years of employment (or lesser than five years in certain cases such as death), (iii) maternity benefits to women employees, (iv) cess for welfare of building and construction workers, and (v) compensation to employees and their dependants in the case of occupational injury or disease.
  • In addition, the central or state government may notify specific schemes for gig workers, platform workers, and unorganised workers to provide various benefits, such as life and disability cover. Gig workers refer to workers outside of the traditional employer-employee relationship (e.g., freelancers). Platform workers are workers who access other organisations or individuals using online platforms and earn money by providing them with specific services. Unorganised workers include home-based and self-employed workers.
  • Coverage and registration: The Code specifies different applicability thresholds for the schemes. For example, the EPF Scheme will apply to establishments with 20 or more employees. The ESI Scheme will apply to certain establishments with 10 or more employees, and to all establishments which carry out hazardous or life-threatening work notified by the central government. These thresholds may be amended by the central government. All eligible establishments are required to register under the Code, unless they are already registered under any other labour law.
  • Contributions: The EPF, EPS, EDLI, and ESI Schemes will be financed through a combination of contributions from the employer and employee. For example, in the case of the EPF Scheme, the employer and employee will each make matching contributions of 10% of wages, or such other rate as notified by the government. All contributions towards payment of gratuity, maternity benefit, cess for building workers, and employee compensation will be borne by the employer. Schemes for gig workers, platform workers, and unorganised workers may be financed through a combination of contributions from the employer, employee, and the appropriate government.
  • Social security organisations: The Code provides for the establishment of several bodies to administer the social security schemes. These include: (i) a Central Board of Trustees, headed by the Central Provident Fund Commissioner, to administer the EPF, EPS and EDLI Schemes, (ii) an Employees State Insurance Corporation, headed by a Chairperson appointed by the central government, to administer the ESI Scheme, (iii) national and state-level Social Security Boards, headed by the central and state Ministers for Labour and Employment, respectively, to administer schemes for unorganised workers, and (iv) state-level Building Workers’ Welfare Boards, headed by a Chairperson nominated by the state government, to administer schemes for building workers.
  • Inspections and appeals: The appropriate government may appoint Inspector-cum-facilitators to inspect establishments covered by the Code, and advise employers and employees on compliance with the Code. Administrative authorities may be appointed under the various schemes to hear appeals under the Code. For instance, the appropriate government may notify an appellate authority to hear appeals against the order of the Inspector-cum-facilitator for non-payment of maternity benefits. The Code also specifies judicial bodies which may hear appeals from the orders of the administrative authorities. For example, industrial tribunals (constituted under the Industrial Disputes Act, 1947) will hear disputes under the EPF Scheme.
  • Offences and penalties: The Code specifies penalties for various offences, such as: (i) the failure by an employer to pay contributions under the Code after deducting the employee’s share, punishable with imprisonment between one and three years, and fine of one lakh rupees, and (ii) falsification of reports, punishable with imprisonment of up to six months.

The Provisions of Constitution of India on Social Security:

The Constitution of India has affirmed social and economic justice to all its citizens. The Fundamental Rights and Directive Principles of State Policy, enshrined in our Constitution, need a special mention in view of their supreme importance and influencing the social security legislations, which provide sufficient guarantee against exploitation.

Article 21- Right to life and liberty

Article 24 – Prohibition of employment of children in factories, etc –

Article 38 – State to secure a social order for the promotion of welfare of the people –

Article 39 – Certain principles of policy to be followed by the State – The State shall, in particular, direct its policy towards securing

Article 41 – Right to work, to education and to public assistance in certain cases

Article 42 – Provision for just and humane conditions of work and maternity relief

Article 43 – Living wage, etc, for workers

Article 43A – Participation of workers in management of industries

Why is there a need for such a code?

  • To amalgamate a clutch of existing laws and proposes several new initiatives including universal social security for unorganized sector workers and, insurance and health benefits for gig workers.
  • To Corporatize of existing organizations like EPFO and ESIC headed by people other than the labour minister.

From economic point of view:

  • The labour markets both geographically and employment wise is fragmented.
  • But the code still leaves some of the fragmentation intact.
  • It has 2 different version for organized and unorganized workers separately.
  • There is high level of distinction intact because of which informalization they persist more.