Current Status:
The Code on Social Security Bill, 2019 (‘the Code’) tabled in the lower house of Parliament, i.e. ‘Lok Sabha’ on December 11, 2019 and was referred to Standing Committee for its report on December 23, 2019. The report of Standing Committee is awaited.
Effect on Previous Legislatures: The Code proposes to consolidate the law on social security in India and replace the following extant statutes:
1. Employee’s Compensation Act, 1923 (Employee’s Compensation Act);
2. Employees’ State Insurance Act, 1948 (ESI Act);
3. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act);
4. Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 (Employment Exchanges Act);
5. Maternity Benefit Act, 1961 (Maternity Benefit Act);
6. Payment of Gratuity Act, 1972 (Gratuity Act);
7. Cine-Workers Welfare Fund Act, 1981;
8. Building and Other Construction Workers’ Welfare Cess Act, 1996; and
9. Unorganised Workers Social Security Act, 2008 (Unorganised Workers Act).
Applicability: There are different applicability thresholds for the schemes defined under the chapters of the Code. The applicability of various chapters under the Code are given in the First Schedule of the Act. The chapter wise applicability of various provisions are:
| Chap. No. | Chapter Name | Applicability |
| III | Employee’s Provident Fund | Every establishment in which twenty or more employees are employed. |
| IV | Employee’s State Insurance | Every establishment in which ten or more Corporation employees are employed other than a seasonal factory:
Provided that Chapter IV shall also be applicable to an establishment, which carries on such hazardous or life threatening occupation as notified by the Central Government, in which even a single employee is employed: Provided further that an employer of a plantation, may opt the application of Chapter IV in respect of the plantation by giving willingness to the corporation, where the benefits available to the employees under that Chapter are better than what the employer is providing to them. Provided also that the contribution from the employers and employees of an establishment shall be payable under section 29 on and from the date on which any benefits under Chapter IV relating to the Employees State Insurance Corporation are provided by the Corporation to the employees of the establishment and such date shall be notified by the Central Government |
| V | Gratuity | (a) every factory, mine, oilfield, plantation, port and railway company; and
(b) every shop or establishment in which ten or more employees are employed, or were employed, on any day of the preceding twelve months; and such shops or establishments as may be notified by the appropriate Government from time to time |
| VI | Maternity Benefit | (a) to every establishment being a factory, mine or plantation including any such establishment belonging to Government; and
(b) to every shop or establishment in which ten or more employees are employed, or were employed, on any day of the preceding twelve months; and such other shops or establishments notified by the appropriate Government. |
| VII | Employee’s Compensation | Subject to the provisions of the Second Schedule[1], it applies to the employers and employees to whom chapter IV does not apply. |
| VIII | Social Security and Cess in the respect of Building and other Construction Work | Every establishment which falls under the building and other construction work |
| IX | Social Security for Unorganised Workers | Unorganised sector, unorganised workers, gig worker, platform worker |
| XIII | Employment Information and Monitoring | Career centres, vacancies and employers |
The provisions of the Code are not applicable on apprentices as they are not considered as employees of the company.
Salient features proposed under the Code are:
1. Definition of ‘Wages’ – The definition of wages defined under various enactments is aligned under the Code. As per the Code, ‘wages’ shall mean all remuneration whether by way of salaries, allowances or otherwise, which would, if the terms of employment (express or implied) were fulfilled, be payable to a person employed in respect of his / her employment, and includes basic pay, dearness allowance and retaining allowance.
A important change in the definition is the inclusion of a proviso that provides that in case the excluded components of the wages (other than retirement benefits such as gratuity) exceed 50% of all remuneration paid to a worker or employee, then the amount in excess of this 50% will be deemed to be the ‘wages’ so that the wage portion remains at the 50% level.
2. Explanation to definition of ‘Factory’ – The Bombay High Court judgement in Assistant Director, ESIC v Western Outdoor Interactive Private Limited [First Appeal Number 143 of 2012], stated that programming, developing and application of software would amount to a ‘manufacturing process’ for determining a status of a factory under Employees’ State Insurance, Act 1948 .
To clarify this fact, an explanation has been given for the definition of ‘Factory’ under the Code, that mere fact that that an electronic data processing unit or a computer unit is installed in any premises or part thereof shall not make the establishment a factory if no manufacturing process is being carried on in such premises or part thereof.
3. Statutory benefits to fixed term contact employees – The fixed term employees are largely governed by the terms of the contracts rather than the statutory provision. The Code provides that the fixed term employees[2] shall be considered eligible for all such benefits that are available to a regular employees on a proportionate basis even if their period of employment does not extend to the qualifying period of employment required under the statute.
4. Option of voluntary registration under employees’ state insurance scheme – The present law for employee state insurance does not provide with an option for the employer to get a voluntary registration under the scheme. However, the Code provides for such option to the employer to get voluntarily covered under the framework.
5. Contribution to Provident Fund – Currently, both employer and employee are required to contribute 12% of wages[3], the Code has proposed that the government may notify a different rate for the employees’ share of provident and pension fund contribution than what is prescribed under the statute. The rate of contribution to be made by an employee can be reduced from 12 % while the contribution rate of the employer will remine same.
6. Establishment of career centres – There was a requirement of setting ‘employment exchanges’ under Employment Exchange Act, in the similar way ‘career centres’ are to be established under the Code that would collect the information regarding the person who seek employment. Along with this, it will also collect and furnish information regarding the people who seek vocational guidance or guidance to start their own ventures.
Unlike the Employment Exchanges Act, that applied to only such establishments in the private sector which employ 25 or more persons to send vacancy details regarding their establishment to the ‘employment exchanges’, the Code requires notification of vacancies to career centres by every establishment.
7. Specific period to inquire and determining the dues in matters of contribution – There has been a proposal of introducing a limitation period for the determination of amount due and initiation of inquires of 5 years from the date from which the alleged amount is due as regards to the chapters of employees’ provident fund and employees’ state insurance fund. Currently there are no such imitation.
8. Recovery of employees’ insurance fund contribution – A new provision has been proposed in the Code whereby if the employer fails to insure an employee or pay any contribution in respect of an employee, the authority may pay such benefits to the such employee or get the amount recovered form the employer.
9. Provisions for ‘gig workers’ and ‘platform workers’ – The code has introduced and defined terms like ‘gig workers[4]’ and ‘platform workers[5]’ and ‘aggregator[6]’. There is a provision wherein the government can formulate a scheme for the benefit of such employees. Currently, these were not covered under many employee benefit statues.
10. Enhanced penalties for violations – The penalties provided for the violations provided by the code are:
| Offence | Fine | Imprisonment |
| Failure by an employer, to pay employees contributions deducted by him from the employees’ wages | INR 100,000 | Imprisonment between one to three years |
| Failure by an employer, to pay any contribution liable to be paid under the Code | First instance INR 50,000 and Second and subsequent instances: INR 300,000 | Imprisonment upto six months Second or subsequent instance: Between two to five years |
| Deducts employers contribution, reduces wages, penalizes woman employee, fails to pay gratuity, maternity benefit, cess, fails to produce records, doesn’t comply with any provisions | First instance: upto INR 50,000 & /or Second and subsequent instances: INR 300,000 for failure to pay charges, cess, gratuity, maternity benefit or compensation | First instance: Upto One year Second and subsequent instances: Between two to five years |
| Fails to submit returns, obstructs executive officer, fails to pay compensation, send a statement of fatal accident | First instance: upto INR 50,000 | |
| Dishonestly makes a false return, report, statement or information to be submitted | Imprisonment upto six months |
The Code has introduced an option of compounding of any offence which is not punishable with imprisonment only / imprisonment and fine.
11. Funding of schemes through corporate social responsibility fund – The code provides a power to the government to fund the schemes for the benefit of unorganized workers by the fund created under corporate social responsibility within the meaning of the Companies Act 2013.
References:
1. The draft Code on Social Security Bill, 2019, Url: https://labour.gov.in/sites/default/files/375_2019_LS_Eng_0.pdf
2. An article in economic times dated 11.12.2019, Url: https://economictimes.indiatimes.com/news/economy/policy/social-security-code-bill-introduced-in-lok-sabha/articleshow/72468216.cms
[1] The Second Schedule provides with a list of persons who are employees within the meaning of second proviso to clause (26) of section 2.
[2] “Fixed term employment” means the engagement of an employee on the basis of a written contract of employment for a fixed period.
[3] Wages means a sum of basic wages, dearness allowance and retaining allowance.
[4] “Gig worker” means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.
[5] “Platform worker” means a person engaged in or undertaking platform work and “Platform work” means a form of employment 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.
[6] “Aggregator” means a digital intermediary or a market-place for a buyer or user of a service to connect with the seller or the service provider;
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