EMPLOYMENT UPDATE | CODE ON SOCIAL SECURITY, 2020
Parliament recently promulgated the Code on Social Security, 2020 (SS Code) which received the assent of the President on 28 September 2020. The SS Code will come into effect on a date notified by the Central Government in the Official Gazette. This marks the third of four labour codes which the Government announced last year. The first being the Code on Wages was passed in 2019, and the second one being the Industrial Relations Code was passed in 2020. More detailed analysis of the Code on Wages, 2019 and the Industrial Relations Code can be found here and here .
The SS Code subsumes nine regulations relating to social security, retirement and employee benefits, viz., (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). The effective date of implementation and the issue of relevant schemes is awaited.
Salient features of the IR Code:
- Definitions: The SS Code has extended its applicability by defining various terms and providing social security in various sectors. The changes and additions to the definitions also aim to bring uniformity across the labour laws. Some important definitions are as follows:
(i) Aggregator has been defined as a digital intermediary or a market place for a buyer or user of a service to connect with the seller or the service provider.
(ii)Gig Worker under the SS 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 relationships.
(iii)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, in exchange for payment.
(iv)Social Security under the SS 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.
(v)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 or with less than 10 workers.
- Benefits to Gig Workers and Platform Workers: The SS Code confers the right on 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 SS Code mandates that the schemes may be funded through a combination of contributions from the central government, state governments, and Aggregators.
- Employees' Provident Fund (EPF): The SS Code has altered the applicability of the Employees' Provident Fund Scheme which will be applicable to every establishment in which 20 or more employees are employed. The Central Government may establish a provident fund where the contributions paid by the employer shall be 10% of the wages for the time being payable to each of the employees. The employee's contribution shall be equal to the employer.
- Gratuity: As per the SS Code, employees shall be eligible to gratuity, provided 10 or more employees are employed or were employed, on any day in the preceding 12 months. The SS Code provides that in case of fixed term employees, the employer shall pay gratuity on a pro rata basis and not on the pre-existing requirement of continuous service of five years.
- Employees State Insurance: The SS Code makes provisions for Employees State Insurance Corporation and 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 SS Code also provides for coverage of Gig Workers and Unorganised Sectors under the Employee State Insurance Scheme.
- Maternity Benefit: The SS Code provides for mandatory maternity leave for six weeks immediately following the day of delivery, miscarriage or medical termination of pregnancy. It provides for maternity benefit of maximum 26 weeks of which not more than 8 weeks shall precede the expected day of delivery. It also provides for a medical bonus of Rs. 3500 or as prescribed by the Central Government. It allows a woman to take two breaks of prescribed duration till the child attains 15 months of age.
MHCO Comment: The SS Code is far from being a mere consolidation of previous legislations. It has enhanced the coverage, extended the benefit to all workers in the organised / unorganised sectors, introduced concepts of providing maximum benefits under minimum governance and reflects uniformity in approach across the four labour codes. Although the SS Code does not provide any specific benefits to Gig Workers and Platform Workers, the SS Code provides the right to the Central and State Governments to notify schemes in this regard. The SS Code is expected to be implemented by April 2021.
This update was released on 01 Jan 2021.
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