SOCIAL SECURITY CODE: Analysis

Relevance: Mains: G.S paper II: Issues relating to development and management of Social Sector/Services

Introduction:

The Union Cabinet approved the fourth labour code – the Code on Social Security Bill 2019 on Wednesday. The bill seeks to consolidate the laws relating to social security of workers and subsume eight central laws. Last month, the Cabinet had approved Industrial Relations Code Bill, 2019 (third code), which was later introduced in the Lok Sabha.

The Code on Wage (first code) has already been approved by Parliament. The Code on occupational safety, health and working conditions (second code) has already been introduced in the Lok Sabha and later sent to a standing committee for review. This would be pushed for passage in the Budget Session after the committee’s report submission in the House.

The Social Security Code will subsume 8 Central Labour Acts namely Employees Compensation Act, 1923, Employees‘ State Insurance Act, 1948, Employees Provident Funds and Miscellaneous Provisions Act, 1952, Maternity Benefit Act, 1961, Payment of Gratuity Act, 1972, Cine Workers Welfare Fund Act, 1981, Building and Other Construction Workers Cess Act, 1996, Unorganized Workers Social Security Act, 2008.

The Code on Social Security, 2019:

The Code on Social Security, 2019 was introduced in Lok Sabha by the Minister of State for Labour and Employment. It replaces eight laws related to social security, including the Employees’ Provident Fund Act, 1952, the Maternity Benefit Act, 1961, and the Unorganised Workers’ Social Security Act, 2008. Social security refers to measures to ensure access to health care and provision of income security to workers.

• Social security schemes: Under the Code, the central government may notify various social security schemes for the benefit of workers. These include an Employees’ Provident Fund (EPF) Scheme, an Employees’ Pension Scheme (EPS), and an Employees’ Deposit Linked Insurance (EDLI) Scheme. These may provide for a provident fund, a pension fund, and an insurance scheme, respectively.
• The government may also notify:

• an Employees’ State Insurance (ESI) Scheme to provide sickness, maternity, and other benefits,
• gratuity to workers on completing five years of employment (or lesser than five years in certain cases such as death),
• maternity benefits to women employees,
• Cess for welfare of building and construction workers, and
• Compensation to employees and their dependants in the case of occupational injury or disease.
  In addition, the central or state government may notify specific schemes for gig workers, platform workers, and unorganised workersto provide various benefits, such as life and disability cover. Gig workers refer to workers outside of the traditional employer-employee relationship (e.g., freelancers). Platform workers are workers who access other organisations or individuals using online platforms and earn money by providing them with specific services. Unorganised workers include home-based and self-employed workers.

• Coverage and registration: The Code specifies different applicability thresholds for the schemes. For example, the EPF Scheme will apply to establishments with 20 or more employees. The ESI Scheme will apply to certain establishments with 10 or more employees, and to all establishments which carry out hazardous or life-threatening work notified by the central government. These thresholds may be amended by the central government. All eligible establishments are required to register under the Code, unless they are already registered under any other labour law.
• Contributions: The EPF, EPS, EDLI, and ESI Schemes will be financed through a combination of contributions from the employer and employee. For example, in the case of the EPF Scheme, the employer and employee will each make matching contributions of 10% of wages, or such other rate as notified by the government. All contributions towards payment of gratuity, maternity benefit, cess for building workers, and employee compensation will be borne by the employer. Schemes for gig workers, platform workers, and unorganised workers may be financed through a combination of contributions from the employer, employee, and the appropriate government.
• Social security organisations: The Code provides for the establishment of several bodies to administer the social security schemes. These include:

• a Central Board of Trustees, headed by the Central Provident Fund Commissioner, to administer the EPF, EPS and EDLI Schemes,
• an Employees State Insurance Corporation, headed by a Chairperson appointed by the central government, to administer the ESI Scheme,
• national and state-level Social Security Boards, headed by the central and state Ministers for Labour and Employment, respectively, to administer schemes for unorganised workers, and
• state-level Building Workers’ Welfare Boards, headed by a Chairperson nominated by the state government, to administer schemes for building workers.

• Inspections and appeals: The appropriate government may appoint Inspector-cum-facilitators to inspect establishments covered by the Code, and advise employers and employees on compliance with the Code. Administrative authorities may be appointed under the various schemes to hear appeals under the Code.

For instance, the appropriate government may notify an appellate authority to hear appeals against the order of the Inspector-cum-facilitator for non-payment of maternity benefits. The Code also specifies judicial bodies which may hear appeals from the orders of the administrative authorities. For example, industrial tribunals (constituted under the Industrial Disputes Act, 1947) will hear disputes under the EPF Scheme.

• Offences and penalties: The Code specifies penalties for various offences, such as: (i) the failure by an employer to pay contributions under the Code after deducting the employee’s share, punishable with imprisonment between one and three years, and fine of one lakh rupees, and (ii) falsification of reports, punishable with imprisonment of up to six months.

Need for such a code:

• To amalgamate a clutch of existing laws and proposes several new initiatives including universal social security for unorganized sector workers and, insurance and health benefits for gig workers.
• To Corporatize of existing organizations like EPFO and ESIC headed by people other than the labour minister.

Is it the good step to achieve maximum social security for our workforce?

• Social safety related to labour laws has indeed become
• Things have changed and we have to incline to the requirements of present day.
• It should be looked into that there is no hindrance to present day employment creation.
• The number of people employed in the gig economy is increasing day by day.
• But they are the ones who are not covered under the law.
• For the first time this code brings them under insurance security laws.
• As we grew, our economy has diversified and our labour laws had not been undated.
• The people working in the plantation sector, ola, uber, wielding, e-commerce platforms will now be given social security.

 

Economic Views

• The labour markets both geographically and employment wise is fragmented.
• But the code still leaves some of the fragmentation intact.
• It has 2 different version for organized and unorganized workers separately.
• There is high level of distinction intact because of which informalization they persist more.

Affect on the labour workforce:

• There is general apathy towards labour laws.
• Employers are so allergic to labour rules and regulations laws that many a times they resist from setting a new enterprise.
• Idea behind the new codes are to create more and more employment so proper conducive environment is created.
• Implementation was difficult of earlier 44 laws.
• The code is simplier, remove contradiction in definition, regime to give protection and further their welfare, benefits and incentives to workers.

Challenges and loopholes in the bill:

• The Bill fails to appreciate that provision of meaningful social security on such a massive scale is beyond the capacity of any single ministry at any single level of government, and that social security has to be fundamentally rethought, instead of creating a patchwork drawn from different extant laws.
• The vision to universalise social security is absolutely the right one. Social security has traditionally encompassed, apart from income security in retirement, child and family benefits, sickness and healthcare benefits, maternity benefits, disability benefits, old-age benefits, survivors’ benefits, unemployment benefits and employment guarantees, and employment injury benefits.
• Housing and education are key pre-requisites of such security, if not integral parts of it. All these cannot be delivered by any single scheme or by any single department or ministry, to a population as large as India’s.
• Nor can these be delivered from the funds contributed by workers and their employers whether into the provident fund or into any corporate social responsibility fund. The present government seeks to provide healthcare to all. And housing for all. These are to be funded by the exchequer. These point to the overlap between welfare policies of the government and social security narrowly conceived.
• Therefore, it is essential to rethink social security from top to bottom. It should be envisaged holistically, its different components delegated to different arms and agencies of the government at all levels. Quality education that equips people to learn throughout their lives and regular upgradation of skills in this era of rapid technological obsolescence should also be part of it.

Conclusion:

• It is a giant step in the way of reforms.
• It is very robust to cover each and every one under social security.
• Attempt is made to bring all unorganized workers under it.
• But more substancial reforms will be needed in the operative part of it.