The Code on Social Security, 2019 tabled by the Labour Minister in the Lok Sabha recently, seeks to universalize social security benefits to all workers. It is the last in the series of four labour reforms being ushered in by the Government to simplify and consolidate 44 different Labour Laws into 4 broad codes on wages, industrial relations and health, occupational safety and working conditions and social security.
The Code on Social Security, 2019 seeks to amend and consolidate the 9 existing laws related to the social security of employees and create a comprehensive code on it, as well as, extend the benefits to categories of workers who were traditionally not included.
Inclusion of all workers including casual, remote, platform-based, home-based and gig workers
With the rapid advent of technology and communication and changing business models, there is a growing base of gig workers, platform-based workers (for instance, Ola, Uber, Swiggy, etc.), self-employed workers and home-based workers. The very nature of this fast-growing gig economy is that workers are not attached to a single organization and so, the risks and responsibilities of benefits and social security shift to the worker from the organization. They are often ill-equipped to manage unforeseen circumstances such as economic contingencies, prolonged illness and hospitalization, disablements, etc. or retirement (except consultants) and find themselves in dire straits. Offering them tangible social security is essential. Though organizations are experimenting with and developing initiatives to offer benefits to contract-based/ gig workers, there need to be more holistic efforts. The Code on Social Security, 2019 seeks to universalize social security.
The Code expands the definition of the unorganized sector to include gig workers, contract workers, gig workers, inter-state migrant workers, domestic workers, etc. The government will notify special schemes to ensure that the new-age remote and gig workers and others in the unorganized sectors get tangible social security and benefits in terms of housing, pensions, employment injury benefits, skilling, funeral assistance, etc.
Compulsory EPF and ESI
The Code requires all establishments with 10 or more employees, as well as, those in hazardous sectors to mandatorily offer multiple benefits under ESI. All establishments with 20 or more employees in any industry are required to offer EPF, Employees' Pension Scheme and Employees Deposit Linked Insurance Scheme. If organizations do not enrol employees to ESI or do not make contributions, then the benefits that the employee is eligible for will be extracted from the employer.
Organizations with less than 10 and 20 employees respectively can provide ESI and EPF benefits voluntarily.
The Code states that employees cannot opt for National Pension Scheme instead of EPF anymore as the new code offers them better benefits under EPF.
Differential employees’ contribution to the Provident Fund
The Code proposes to reduce the employees’ contribution to the Provident Fund from 12% to 10% in some sectors while leaving the employers’ contribution unchanged. It also allows employees to voluntarily contribute a higher percentage.
The intent behind reducing the employees’ contribution rates is to improve spending and consumption of employees to help the economic slump. So, employees will take home larger pay checks, which makes it lucrative for those joining at the lower rungs of the organization or starting out their career. However, employees will be spending at the cost of long-term savings.
Gratuity for contractual employees
Earlier, gratuity was applicable only to employees who were employed with the organization for a continuous period of 5 years at the rate of 15 days’ wages per completed year of service. In cases of death, disablement, etc, the 5-year rule could be exempted. The Code of Social Security, 2019 extends the gratuity benefits to contract workers who have worked for less than 5 years on a pro-rata basis. This measure will impact the employer in terms of the costing of short-term projects.
Social security fund for unorganized workers using CSR Funds
The Code on Social Security, 2019 proposes the establishment of a Social Security Fund by the organizations by utilising corpus available under their Corporate Social Responsibility allocations. The Social Security Fund will extend benefits such as pension, medical coverage and death and disablement benefits to all unorganized workers including gig workers.
5-year limitation period for dues and stringent penalties for violation
Currently, there are no limitations on the time period for enquiries regarding dues. The Code on Social Security Bill, 2019 places a 5-year limitation period (from the date the alleged amount is due) on enquiry and determination of dues in matters of contribution.
The Code has introduced enhanced and stringent penalties for violations –failure to pay contributions, benefits, cess, contravention of provisions, etc.
Establishment of career centres
The Code proposes the establishment of career centres. Every establishment and employer will be required to notify career centres electronically or otherwise about vacancies before they are filled. However, it will not be obligatory to fill the vacancies through the career centres even though notifying them is obligatory.
Overall, the Code on Social Security is a welcome step by the Labour Ministry to extend social security benefits to a fast-growing base of gig workers and a large segment of unorganized workers. Making organizations responsible for social security to these segments of workers will help address exploitation while also improving their overall compensation.
Add new comment