A glimpse of the proposed Social Security Code 2019

Reformation of labour legislations in India is continued after notifying the Code on Wages as an Act.  The Code on Social Security, The Code on Industrial Relations and The Code on Occupational Health and Safety are introduced in Lok sabha and expected to be implemented in early 2020.

The Code on Social Security will amend and consolidate the laws related to social security and matters connected to it. That means it replaces existing 9 major Acts such as The Employee Compensation Act 1923, The Employee State Insurance Act 1948, The Employees Provident Funds and Miscellaneous Provisions Act 1952,  The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Cine-Workers Welfare Fund Act, 1981, The Building and Other Construction Workers’ Welfare Cess Act, 1996 and The Unorganised Workers Social Security Act, 2008. It is expected to benefit 50 crore workers.

Applicability

The Code covers employees of both organized and unorganized sectors. It has almost retained the application clause of existing laws for employee compensation, State Insurance, Provident fund, and Gratuity but also relaxed on certain cases such as hazardous processes. For example, An establishment into a hazardous or life-threatening occupation with one employee also now covered under employee state insurance.  Further, the Central government has retained the rights to cover any establishments by notification and making rules where it finds necessary to extend social security irrespective of general applicability mentioned in the code. All eligible establishments are required to register under the Code unless they are already registered under any other labour law. 

What is Social Security?

Social security means the measures of protection afforded to employees 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 enshrined and schemes framed under the Code.

Social security organization

The Code provides for the establishment of several bodies to administer social security schemes. These bodies include:

• The Central Board of Trustees for Employees Provident Fund
• The Employees State Insurance Corporation
• The National Social Security Board for unorganized Workers
• The State Unorganised Workers’ Social Security Board and
• The State Building Workers’ Welfare Boards

The salient features

The code consolidates the salient features and they are as follows:

• 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 a voluntary basis and also to plantations on an optional basis. It further seeks to empower the Central Government to notify the applicability of the said coverage to establishments that carry the hazardous or life-threatening occupation irrespective of the number of workers employed therein. To provide that in case of an employer’s failure to register the employee with employees’ State Insurance Corporation or failure to pay a contribution and the Employees’ State Insurance Corporation releasing the benefits to the workers, then, such benefits shall be recovered from the employer.

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

• 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 the provision of social security for the unorganized 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 a 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;

• To provide for a limitation period of five years for the institution of proceedings in respect of assessment and determination of money dues from the 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 unorganized 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;

• To provide for filing of a single return electronically or otherwise by the employer;

• To provide that the interests charged on delayed payments under the provisions of the proposed Code be specified in the rules;

• To provide a penalty for the different types of violations commensurate with the gravity of the violations;

• To make Aadhaar mandatory for seeding at the time of registration of member or beneficiary or any other person to register or for receiving a benefit;

• To empower the appropriate Government to exempt certain establishments from all or any of the provisions of the proposed Code.

Some interesting and important definitions

It is essential to know some new definitions used for a better understanding of the Code and its application. For example, the ESI provisions are extended to Gig and Platform workers. Gratuity is now payable for Fixed time employees irrespective of the completion of 5 years continuous service on a pro-rata basis.

“Fixed-term employment” means the engagement of an employee on the basis of a written contract of employment for a fixed period: provided that—his hours of work, wages, allowances and other benefits shall not be less than that of a permanent employee doing the same work or work of a similar nature and he shall be eligible for all benefits under law available to a permanent employee proportionately according to the period of service rendered by him even if his period of employment does not extend to the required qualifying period of employment;

“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;

“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;

“Inter-State migrant worker” means any person who is recruited by—  an employer in one State for employment in his establishment situated in another State; or through a contractor in one State for employment in an establishment in another State, under an agreement or other arrangement for such employment and draws wages not exceeding the amount notified by the Central Government from time to time;

“Platform work” means a form of employment in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services in exchange for payment; and “platform worker” means a person engaged in or undertaking platform work;

“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;

Few changes proposed in the code:

Few changes that are proposed in the code are as follows:

• PF contributions from both employee and employer has been proposed to 10 % of the PF salary against the current 12%. EDLI contributions proposed at not more than 1% of PF wages. EDLI admin charges are proposed not more than 0.25% or ¼ of EDLI contributions.
• The employment exchange is now renamed as Career centres.
• No changes proposed on Gratuity benefits and rules other than including fixed-term employees.
• PF portability to NPS account which was discussed in the earlier draft is dropped. 

Overall it is a welcome effort by the central government to provide social security to all sorts of employees including the unorganised sector. It certainly reduces the burden of employers in terms of various returns as it consolidates the 9 major legislations.