The Code on Social Security, 2020 (“SS Code” or "Social Security Code") was passed in 2020 along with 3 other labour codes namely, (i) the Code on Industrial Relations, 2020 (“Industrial Relations Code”), (ii) the Code on Occupational Safety, Health, and Working Conditions, 2020, and (iii) the Code on Wages, 2019 (“Wage Code”). The Social Security Code subsumes the following 9 existing laws on social security in India:

 

a. The Employee’s Compensation Act;

b. The Employees’ State Insurance Act;

c. The Employees’ Provident Funds and Miscellaneous Provisions Act;

d. The Employment Exchanges (Compulsory Notification of Vacancies) Act;

e. The Maternity Benefit Act;

f. The Payment of Gratuity Act;

g. The Cine-Workers Welfare Fund Act;

h. The Building and Other Construction Workers’ Welfare Cess Act; and

i. The Unorganised Workers Social Security Act.

 

The stated objective of the SS Code is to amend and consolidate the above-mentioned laws relating to social security, and to extend social security to all employees and workers either in the organised or unorganised sectors.  The SS Code received the President’s assent in 2020 and is yet to be enacted and implemented. A section concerning the linkage of Aadhaar number to avail the various benefits under the SS Code has already been notified vide notification dated 30 April 2021 released by the Ministry of Labour and Employment and made applicable from 3 May 2021.

 

SALIENT FEATURES

 

Definition of Uniform Wage 

 

The Social Security Code introduces a simplified but expansive definition of ‘wages’ in line with the other 3 labour codes.

 

Registration

 

Every establishment to which the Social Security Code is applicable is required to register itself electronically on the Shram Suvidha Portal, within such time and in such manner as the Central Government may specify. Establishments already registered under any other Central labour law are not required to obtain registration again.

 

Voluntary Opt-in 

 

The provisions concerning Employees’ Provident Fund (“EPF”) and Employees State Insurance Corporation (“ESIC”) can be made applicable voluntarily to establishments having less than the minimum number of employees required for applicability, if the employer and the majority of employees in the establishment agree for such coverage and make an application to the Director-General of ESIC for opting in for such coverage. This voluntary opt-in of applicability of the ESIC and EPF provisions will bring in additional number of workers within the realm of social security schemes.

 

Increased Outgo 

 

As with the Wage Code, the new definition of ‘wages’ provides that if the exclusions (mentioned in the definition) are more than 50% of all remuneration paid, then the amount over 50% will be added back to the wages, for the purpose of calculating benefits that are calculated as a percentage of wages.

 

Under the extant provisions, gratuity is calculated on basic salary and dearness allowance and it excludes any other allowance. With the new definition having a wider scope, this may result in higher outgo for the employers towards gratuity. 

 

Cash Benefit to Nominee 

 

Under the Social Security Code, where a person dies during any period for which he/ she is entitled to a cash benefit under the ESIC, the amount of such benefit up to and including the day of his/ her death can be paid to  any person nominated by the deceased person, his/ her heir or legal representative.

 

Gratuity to Fixed-Term Employees

 

Employees hired on fixed-term employment are eligible to gratuity without the requirement to complete a minimum of 5 years of employment. The Industrial Relations Code prescribes a minimum of 1 year of employment for fixed-term employees to be eligible for gratuity, however, even if they render their services for less than 1 year, they may be eligible for the gratuity calculated on a pro rata basis. In addition, working journalists are eligible to receive gratuity upon completion of 3 years as against the 5 years stipulated for other classes of employees.

 

Registration of Gig and Platform Workers 

 

The Social Security Code mandates registration of gig workers, platform workers, and  unorganised workers to be eligible for the social security schemes framed in accordance with the Social Security Code. The registration may take place electronically, which will be linked to their Aadhaar number.

 

The welfare schemes/ social security programmes may include life and disability cover, health and maternity benefit, old age protection, and education. These schemes may be wholly or partly funded through a combination of contributions from the central government, state governments, CSR funds, beneficiaries, and aggregators.

 

Class of Aggregators and their Contribution 

 

The Social Security Code provides an  illustrative list of aggregators as follows: ride sharing services; food and grocery delivery services; logistic services; e-Market place (both marketplace and inventory model) for wholesale/ retail sale of goods and/or services (B2B/B2C); professional services provider; etc.

 

For the purpose of funding the welfare schemes framed for gig workers and platform workers, aggregators are required to contribute between 1-2% of the annual turnover of the aggregator or 5% of the amount paid/payable by the aggregator to gig workers and platform workers, whichever is less.

 

Accident Coverage During Travel 

 

If an accident is deemed to have arisen while an employee is traveling to and from the place of work, during the course of employment, the employer is required to provide  compensation to the employee.

 

Construction for Residential Purpose 

 

The definition of ‘building or other construction work’ now specifically exempts application to construction of residential units whose total cost of such work does not exceed ₹ 50 lakh, or such a higher amount as may be prescribed. Further information on the Building and Other Construction Workers’ Welfare Cess is available at FAQ on BOCW.

 

Change in Inspector Regime 

 

As with the other labour codes, the inspectors are now replaced with ‘Inspector-cum-Facilitators’, who have been vested with wide powers and duties to administer the provisions of the Social Security Code. In addition, the Social Security Code, unlike the extant provisions, provides an option of compounding of offences committed by employers, where the punishment is limited to fine, or imprisonment for a term which is not more than 1 year and with fine.