Social security is usually understood as some form of monetary support that the government provides to those who are either incapable of being employed or are inadequately employed. In the Indian context, social security has a different meaning altogether.
In India, our social security has spanned over a multiplicity of labour laws that our state and central governments have implemented over the course of many years. These regulate wages and worker benefits, address occupational safety and also set rules for labour and industrial relations.
Labour falls under the Concurrent List of the Constitution. Therefore, both Parliament and state legislatures can make laws regulating labour. The central government has stated that there are over 100 state and 40 central laws regulating various aspects of labour such as the resolution of industrial disputes, working conditions, social security and wages.
The Second National Commission on Labour (2002) found existing legislation to be complex, with archaic provisions and inconsistent definitions.
In 2019, the Ministry of Labour and Employment introduced four Bills to consolidate 29 central laws. These Codes regulate (i) Wages, (ii) Industrial Relations, (iii) Social Security, and (iv) Occupational Safety, Health and Working Conditions.
The Code on Social Security,2020 (Social Security Code) which received the Presidential Assent on 28 September 2020, subsumes nine regulations relating to social security, retirement and employee benefits etc.
The Social Security Code has been enacted to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors. The Social Security Code has vital provisions with respect to social security benefits to workers including gig workers.
It consists of new rules for contribution to social security and payment of employee benefits, including retirement benefits and this article aims to summarize some of the important provisions introduced by the Social Security Code and some challenges in the way of Letter to spirit implementation of the code.
Social Security Code – Consolidation and Expansion
Complying with multiple laws at both the state and center levels has been no less than a nightmare for many businesses, posing a very real and practical hindrance to the ease of doing business in India. Therefore, the new social security code is a welcome change.
The Social Security Code consolidates nine existing central laws namely (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.
New-age businesses that thrive on e-commerce have created new types of jobs. Some of the workers in these new businesses were not covered under any of the existing laws. The new Social Security Code expands the scope of social security by providing for registration of all types of workers. The Code has widened coverage by including the unorganised sector, fixed term employees and gig workers, platform workers, inter-state migrant workers etc., in addition to contract employees. Therefore, in terms of coverage the scope has been expanded.
DEFINITIONS UNDER SOCIAL SECURITY CODE
The Social Security Code amends and expands certain definitions.
- Aggregator: “Aggregator” has been defined as a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider.
Employee: “Employee” has been defined as any person (other than an apprentice engaged under the Apprentices Act, 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. The employee of definition may vary for different chapters under the Social Security Code based on the quantum of wages such an employee earns.
- Gig Worker: “Gig Worker” under the Social Security Code has been defined as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.
- Platform Work: “Platform work” has been defined as a work arrangement outside of 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 payment and a “platform worker” has been defined as a person engaged in or undertaking Platform Work.
- Social Security: “SocialSecurity” under the Social Security Code 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 the SS Code.
- Unorganised Sector: “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:“Unorganised Worker” means a home-based worker, self-employed worker or a wage worker in the Unorganised Sector.
SOCIAL SECURITY CODE- ENTITLEMENTS
- Social security funds for unorganised workers, gig workers and platform workers: The code states that the central government will set up social security funds for unorganised workers, gig workers and platform workers. Further, state governments will also set up and administer separate social security funds for unorganised workers. The code also makes provisions for registration of all three categories of workers – unorganised workers, gig workers and platform workers.
- National Social Security for gig workers and platform workers: The Social Security Code states that in addition to unorganised workers, the National Social Security Board may also act as the Board for the purposes of welfare of gig workers and platform workers and can recommend and monitor schemes for gig workers and platform workers. In such cases, the Board will comprise of a different set of members including: (i) five representatives of aggregators, nominated by the central government, (ii) five representatives of gig workers and platform workers, nominated by the central government, (iii) Director General of the ESIC, and (iv) five representatives of state governments.
- Role of aggregators: The Code clarifies that schemes for gig workers and platform workers may be funded through a combination of contributions from the central government, state governments, and aggregators. For this purpose, the code specifies a list of aggregators. These mention nine categories including ride sharing services, food and grocery delivery services, content and media services, and e-marketplaces. Any contribution from such an aggregator may be at a rate notified by the government falling between 1-2% of the annual turnover of the aggregators. However, such contribution cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.
- Composition of boards for unorganised workers: The Social Security code expands the representation of central government officials in the National Social Security Board for unorganised workers from five members to 10 members. Similarly, the number of state government officials in the state Boards for unorganised workers has been increased from seven to 10 members.
SOCIAL SECURITY CODE- BENEFITS TO EMPLOYEE
- Benefits to Gig Workers and Platform Workers: The Social Security Code provides the right to the Central Government and State Government to notify schemes for such workers related to life and disability cover, health and maternity, provident fund, employment injury benefit, housing etc.
The Code mandates that the schemes may be funded through a combination of contributions from the central government, state governments, and Aggregators. The Central and State Government along with such schemes shall also prescribe the records that are required to be maintained in relation to such Gig Workers and Platform Workers.
The Code also mandates that every Unorganised Worker, Gig Worker or Platform Worker is required to be registered, subject to the fulfillment of the following conditions:
(a) he has completed sixteen (16) years of age or any other prescribed age; and
(b) he has submitted a self-declaration containing the information prescribed by the Central Government.
Every eligible Unorganised Worker, Gig Worker or Platform Worker is to make an application for registration along with prescribed documents including Aadhaar number and such worker shall be assigned a distinguishable number to his application. Whether such schemes would be applicable to all Unorganised Workers, Gig Workers and Platform Workers irrespective of the quantum of salary earned by them, will depend on the final form of the schemes introduced by the State or Central Government.
- Employees’ Provident Fund: The Social Security Code has altered the applicability of the Employees’ Provident Fund Scheme which now will be applicable to every establishment in which twenty or more employees are employed.
The Central Government may, establish a provident fund where the contributions paid by the employer to the fund shall be 10% of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor).
The employee’s contribution shall be equal to the contribution payable by the employer in respect of him. The Central Government, may, by notification, increase the contribution percentages to 12% for both employers and employees of certain establishments.
If any person being an employer, fails to pay any contribution under the SS Code or rules, regulations or schemes made thereunder, he shall be punishable with: (i) imprisonment for a term which may extend to three (3) years, but which shall not be less than one (1) year, in case of failure to pay the employee’s contribution which has been deducted by him from the employee’s wages and shall also be liable to fine of Rupees One Lakh (Rs. 1,00,000/-); or (ii) which shall not be less than two (2) months but may be extended to six (6) months, in any other case and shall also be liable to a fine of Rupees Fifty Thousand (Rs. 5,000/-).
- Gratuity: The Social Security Code has fixed different thresholds with respect to eligibility for gratuity of permanent and fixed term employees.
Gratuity shall be payable to eligible employees by every shop or establishment in which ten or more employees are employed, or were employed, on any day of the preceding twelve months.
Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years, on his superannuation; on his retirement or resignation; on his death or disablement due to accident or disease; on termination of his contract period under fixed term employment.
However, a continuous service of five (5) years shall not be necessary where the termination of the employment of any employee is due to death or disablement or expiration of fixed term employment.
For every completed year of service or part thereof in excess of 6 months, the employer shall pay gratuity to an employee at the rate of 15 days’ wages. The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government.
Gratuity under the Code is payable to employees hired directly or through a contractor. If any person fails to pay any amount of gratuity to which an employee is entitled to, he shall be punishable with imprisonment for a term which may extend to one 1 year or with fine which may extend to Rs. 50,000/-, or with both.
- Employees State Insurance: The Social Security Code allows for voluntary registration under the Employee State Insurance if the employer and majority of the employees agree. Further, the Government has the power to extend the Employee State Insurance Scheme to any hazardous occupation irrespective of the number of employees employed.
The Social Security Code also provides for coverage of Gig Workers and Unorganised Sectors under the Employee State Insurance Scheme. The employer shall pay in respect of every employee, whether employed by him directly or through a contractor, both the employer’s contribution and the employee’s contribution. Neither the employer nor the contractor shall be entitled to deduct the employer’s contribution from any wages payable to an employee or otherwise to recover it from him.
Maternity Benefit : Maternity benefits shall be applicable to every shop or establishment in which ten or more employees are employed, or were employed, on any day of the preceding 12 months; and such other shops or establishments notified by the appropriate Government.
No employer/ nor woman can knowingly employ a woman/work in any establishment during the 6 weeks immediately following the day of her delivery, miscarriage or medical termination of pregnancy. A woman shall be entitled to maternity benefit if she has actually worked in an establishment of the employer from whom she claims maternity benefit, for a period of not less than 80 days in the 12 months immediately preceding the date of her expected delivery.
The maximum period for which any woman shall be entitled to maternity benefit shall be twenty-six weeks of which not more than 8 weeks shall precede the expected date of her delivery. However, the maximum period entitled to maternity benefit by a woman having two or more surviving children shall be twelve 12 weeks of which not more than 6 weeks shall precede the date of her expected delivery.
If any person is in contravention of the provisions of maternity benefits or dismisses, discharges, reduces in rank or otherwise penalizes a woman employee or fails to provide any maternity benefit to which a woman is entitled to, he shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to Rs. 50,000/-, or with both.
PENALTIES UNDER SOCIAL SECURITY CODE
The strength of implementing legislation lies in the ease of compliances as well as in the penalties that deter non-compliance. The Code captures it all. Any failure to deposit employees’ contributions not only attracts a penalty of Rs 100,000, but also imprisonment of one to three years. In case of repeat offence, the penalties and prosecution are severe, and no compounding is permitted for repeated offences.
Employers are required to be aware of this development and assess the impact on their organisations.It is necessary that employees look at the implications of keeping specific salary structures in mind and determine the impact. Implications are also triggered in respect of Fixed Term Employees, where gratuity liability is activated. Aggregators will also have to look at the impact on account of the proposed contribution to social security fund, which could be between 1% to 2% of their turnover, limited to 5% of the payouts being made to gig workers/platform workers etc.
Further, the current policy and process framework will have to be revisited in line with the new Code, and the technology interface should be appropriately built-in.
The employer would have to keep tabs to ensure a smooth transition to the new Code, as after all, well begun is a job half done.
In the end the code stands true to it’s preamble which says “An Act to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in organised or unorganized or any other sectors and for matters connected therewith or incidental thereto”.