The
Code on Social Security, 2020: How it impacts wages and benefits of employees
The new code has new rules for
contribution to social security and payment of employee benefits, including
retirement benefits
An essential step to reforming workplaces is the coming of the
code on social security in India. 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.
Consolidating laws
Complying with multiple laws at both the state and centre 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 Code on Social Security, 2020,
subsumes eight existing central labour laws. These laws are the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952; Payment of Gratuity
Act, 1972; Employees’ Compensation Act, 1923; Maternity Benefit Act, 1961;
Employees’ State Insurance Act, 1948; Workers Cess Act, 1996; Cine Workers
Welfare Fund Act, 1981; Building and Other Construction and Unorganised
Workers’ Social Security Act, 2008.
The Code on Social Security, 2020 consists of new rules for
contribution to social security and payment of employee benefits, including
retirement benefits. The Code has been passed by the Parliament and awaits the
nod of the President. The Government is considering implementing the Code by
December 2020, along with other three labour codes, viz., The Industrial
Relations Code, 2020, Code on wages, 2019 and The Occupational Safety, Health
and Working Conditions Code, 2020.
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
including gig workers, unorganised workers and platform workers. Therefore, in
terms of coverage the scope has been expanded. Gig workers will now become
eligible for life and disability coverage, maternity benefits, pension etc.
Taking care of the retirals
The law also expands scope to cover fixed-term contract workers
who will now be eligible for gratuity; whereas earlier only employees which
were permanent were covered. Under the Code, gratuity becomes due to an
employee upon their termination from employment after a continuous service
period of at least five years, which is the same as before.
The events giving rise to gratuity are superannuation,
retirement, resignation, death or disablement due to accident or disease or
termination of a contract under fixed-term employment or on the happening of
any event notified by the central government. However, the completion of five
years of continuous service is not necessary in the case of termination of
employment due to death or disablement or expiration of fixed-term employment or
happening of any such event as may be notified by the Central Government. In
the case of death of an employee, the gratuity would be due to their nominee or
legal heir. With the inclusion of ‘expiration of fixed term employment’, fixed
term contract workers will become eligible for gratuity and this is a welcome
move.
A social security fund will be created for paying these benefits
to workers and it will be funded by central and state governments and also
through CSR funding. Aggregators who are digital intermediaries employing gig
workers will have to set aside at least around 1-2 per cent of their annual
turnover (amount not exceeding 5 per cent of the amount payable to the workers)
for the purpose of this social security fund. Hopefully, related rules may be
announced in the coming days so that more clarity will be available as to how
employers will estimate the total amount payable to the workers to set aside an
appropriate amount. The law also states that the central government may provide
for self-assessment of contribution by aggregators, leaving scope for
regulation.
As per existing laws, employers in certain businesses with at
least 100 workers need prior government approval to carry out layoffs and
retrenchment. This limit has now been increased to 300. This change puts power
back in the hand of businesses, workers may be more prone to be at the
receiving end of arbitrary dismissal.
The Code also provides for the setting up of a ‘National Social
Security Board’. The functions of the Board include recommending schemes to the
central government and also monitoring the schemes for the different types of
workers, advising the Government on the matters relating to the administration
of the Code amongst others. A regulatory authority to separately administer the
code would be beneficial to monitor the welfare of workers and it can better
track the efficacy of schemes. The Code contains penal provisions in the case
of failure to pay gratuity to employees or a failure to pay the contributions.
Also, the Code prioritizes employees’ dues under the Insolvency and Bankruptcy
Code, 2016.
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