Index

S. no. Topic Page no.

1. Introduction 2
2. Key Features introduced by Social Security Code 3
3. How the prospective framework differs from current framework 4
4. Critical Analysis of the Advantages and Disadvantages of the 7
Social Security Code
5. Probable impact on stakeholders 9
6. Code of Social Security, 2020 in comparison and contrast with 10
other countries social security systems
7. Conclusion 11
8. References 12
 Introduction

The Code on Social Security, 2020 (SS Code) is a law that seeks to unify and update
the rules on social security for India’s workforce and staff. It encompasses different areas
such as workers’ compensation, provident fund, state insurance, maternity benefit,
gratuity, employment exchanges, unorganised workers’ social security, welfare fund for
cinema workers, and welfare cess for construction workers.

The SS Code replaces 9 central labour laws that had varying terms, bodies, processes,
and advantages. The SS Code 2020 intends to streamline and standardize the existing laws
and broaden the scope of social security to cover all workers, such as those in the
organized and unorganized sectors, and those who work on gigs and platforms. The SS
Code 2020 also strives to encourage the use of technology for enrolment, documentation,
reporting, and payment of dues and benefits.

The need for reform arises from the fact that the existing social security system in
India is broken, complicated, and insufficient. The existing system leaves out a huge part
of the workforce, mainly those in the informal sector, who make up about 90% of the total
workforce in India. The existing system also faces low compliance, poor governance, and
lack of transparency. The existing system also fails to deal with the new issues of the
evolving nature of work, such as the rise of gig and platform workers, who do not have a
steady employer or a regular income.

The SS Code 2020 tries to address these issues by creating a uniform and
comprehensive framework for social security in India. It empowers Central Government to
design various schemes for different types of workers, such as staff, self-employed
workers, gig workers, platform workers, unorganized workers, and so on. The SS Code
2020 also sets up a National Social Security Board, which will guide the Central
Government on the formulation of schemes, policies, and standards for the welfare of
informal workers, gig workers, and platform workers.

It is expected to create a positive impact on the social security scenario of India by

ensuring that all workers get adequate and affordable social protection. It is also expected

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 to boost the ease of doing business in India by lowering the compliance load and
increasing the effectiveness and transparency of the social security management.
However, it also faces difficulties and drawbacks, such as the vagueness of some terms,
the range of coverage, funding mechanism, the plan of execution, and the collaboration
among various stakeholders.

Key features & changes introduced by the Social Security Code

Key Features
◇ The 2019 Bill mandated social security for some establishments, depending on criteria,
such as the size of the establishment and income limits. The 2020 Bill states that the
central government can, by notification, apply the Code to any establishment (based on
size-limit as may be notified).
◇ The Code expands coverage by including the unorganised sector, fixed-term employees,
inter-state migrant workers, etc., in addition to contract employees.
◇ As per the Code, the central government will set up social security fund. Also, state
governments will establish and manage different social security funds for unorganized
workers. It also provides for enrolment of all three types of workers - informal workers,
gig workers and platform workers.
◇ The Code states that the National Social Security Board can also serve as the Board for the
well-being of gig workers and platform workers, besides informal workers. The Board can
suggest and oversee schemes for gig workers and platform workers. For this, the Board
will have a different group of members, such as: (i) five nominees of aggregators, chosen
by the central government, (ii) five nominees of gig workers and platform workers, chosen
by the central government, (iii) Director General of the ESIC, and (iv) five nominees of
state governments.
◇ The Code explains that the central government, state governments, and aggregators can all
contribute to fund schemes for gig workers and platform workers. The Bill lists the
aggregators in Schedule 7. They include nine types such as ride sharing services, food and
grocery delivery services, content and media services, and e-marketplaces. The
government can set a rate for the contribution of each aggregator, which can be between 1-
2% of their yearly income. But this contribution cannot be more than 5% of the money
that an aggregator pays or owes to gig workers and platform workers.

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◇ Under the 2019 Bill, gratuity was payable on the termination of employment, if the
employee has been in the organisation for at least five years. The Code reduces the
gratuity period from five years to three years for working journalists.

How the Prospective Framework differs from Current Framework?

◇ Registration of establishments - In the current framework the registration of an
establishment is required across all the previous labour and employment legislations while
in the prospective framework every establishment to which the Code applies has to
register themselves via the Shram Suvidha Portal. An establishment that is already
registered under the existing labour law rules does not have to enrol again, but they have
to update their registration details on the Shram Suvidha Portal as per the Code.
◇ Appeal Mechanism - Currently, the time limit of 6 (six) months is prescribed for the
Tribunal to decide the appeal from the date of its registration and the fees for filing an
appeal to Tribunal is INR 2000 (Indian Rupees Two Thousand). For an appeal to be raised
by an employer before the Tribunal, the percentage of deposition of sum which is due on
part of the employer is 75% (seventy five percent).
◇ Contribution Rates - Under the extant framework, the contribution rates vary depending on
the type of scheme and the category of workers. For example: the contribution rate is 12%
of wages for both the employer and the employee under the EPF scheme Under the
prospective framework, the Central Government will notify the rates for different schemes
and workers. It can also exempt some establishments or employees from contributing,
with conditions. The rates for gig and platform workers will be set by the Central
Government with the State Governments and the aggregators. The rates for unorganised
workers will be set by the State Governments with the Central Government.
◇ Limitation period - There is no time period prescribed for initiating the proceedings in
terms of determining any dues from an employer and dispute regarding the applicability to
an establishment under the EPF and ESIC as per current framework. However, a limitation
period of 5 years has been prescribed under the Code to initiate proceedings in terms of
determining any dues from an employer and dispute regarding the applicability to an
establishment under the EPF and the ESIC in forthcoming framework.
◇ Opportuity before prosecution – Presently, the employer does not get any chance
beforehand to fix a violation of the EPF and the ESIC or any other labour law rules. Under
the SS Code 2020, the employer gets a chance to fix a violation of the EPF and the ESIC

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 or any other rules under the Code within a certain time-frame before any legal action is
taken against them. But this chance will not be given, if an employer breaks the same rules
again within 3 years from the first time.
◇ Fixed term employment – At present there is no fixed term employment under labour law
legislations. However, this has been introduced under SS Code 2020 which means hiring
an employee for a set time with a written contract. They will get the same or more pay and
benefits as a permanent employee, based on period of service rendered by them.
◇ Gratuity - Under the existing system, an employee on fixed term employment does not get
gratuity on pro rate basis or upon termination of the contract. Also, the employee, nominee
or legal heir has 90 days to apply to the authority for a direction in case of any dispute
over gratuity amount, eligibility, or recipient. Besides, the Central Government has set a
limit of 20 lakh rupees for gratuity under the Payment of Gratuity Act, 1972. In the SS
Code 2020, gratuity is due to an employee when the fixed term contract ends or a Central
Government notified event occurs. No need for 5 years of service in these cases. Fixed
term employees get gratuity pro rata from the employer. They get 15 days’ wages per year
or part over 6 months if they serve for 1 year. The Code extends the application time for
gratuity disputes from 90 to 180 days. The gratuity amount limit is not yet fixed by the
Central Government.
◇ Consolidated definition of “Wages” - The Code defines ‘wages’ uniformly for all 4 codes.
It includes ‘basic pay’, ‘dearness allowance’ and ‘retaining allowance’ (if any). It excludes
bonus, housing, medical, PF, conveyance, HRA, overtime etc. The excluded components
cannot be more than half, or a Central Government notified percent, of the total
remuneration. If they are, they will be considered as wages. Also, remuneration in kind up
to 15% of the total wages will be part of the wages.
◇ Social security for unorganized workers, gig workers and platform workers - The Central
Government has welfare schemes for unorganised workers on life, disability, health,
maternity, old age, etc. Unorganised workers must be 14 years old to register. The Code
requires unorganised, gig and platform workers to be 16 years old and registered with
Aadhar on the Shram Suvidha Portal. They must have worked as gig or platform workers
for 90 days in the last 12 months. The Central Government will make welfare schemes for
gig and platform workers on life, disability, accident, health, maternity, old age, creche,
etc. Additionally, the Central Government has added education as a welfare scheme for
unorganized workers. It has also set up a social security fund for unorganized, gig and

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 platform workers. Aggregators, who connect buyers and sellers of services online, have to
pay 1% to 2% of their annual turnover to the fund.
◇ Voluntary Coverage of EPF and ESIC - The Code introduces voluntary opt in and opt out
of social security schemes, while keeping the employee threshold for EPF and ESIC
unchanged. To opt in or out of EPF, the employer and most employees must agree and
apply to the Central Provident Fund Commissioner. To opt in or out of ESIC, the
employer and most employees must agree and apply to the Director General of the
Corporation.
◇ ESIC - The ESIC Act, 1948 applies to all factories with 10 or more workers, except
seasonal ones. The corporation has limited rights if the employer does not pay the
contribution. The SS Code extends the ESIC to hazardous or life-threatening
establishments with even one worker. The corporation has more rights if the employer
does not insure the employee at the time of appointment or after an accident. The
employer has to register the employee with Aadhar on the Shram Suvidha Portal, unless
already registered under the ESIC. The employee will get a registration number for filing
and claiming benefits.
◇ Maternity Benefit - The Code allows any establishment to use a common creche facility
set up by the government, private, NGO, or other entities. the Code is silent on the aspect
of maximum amount of medical bonus being granted by the Central Government.
Currently, there is no common creche facility and the medical bonus is capped at INR
20,000.
◇ Removal of “principal employer” and “immediate employer” concepts - The ESIC Act,
1948 covers both the “principal employer” and the “immediate employer” of a factory or
establishment. The principal employer can hire workers through an immediate employer,
who works under the principal employer’s supervision. The Code changes this
arrangement and calls them “employer” and “contractor” (or sub-contractor).
◇ Inspector-cum-facilitator - The current laws give officers and inspectors powers to deal
with employers’ non-compliances and pass orders. The Code streamlines the compliance
processes and introduces the Inspector-cum-Facilitator, who can search, seize, inspect, and
advise employers and employees on the Code. The Code follows the principles of natural
justice and gives the employer a chance to comply before prosecution, unless the same
violation is repeated within 3 years. The Code also enables electronic inspection and web-
based information.

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◇ Employment Compensation - The Employees Compensation Act, 1923 covers some
employers for paying compensation for work-related injuries. It has two types of
disablement: partial and total. The Code covers the employers and employees who are not
under ESIC. It has three types of disablement: permanent partial, permanent total, and
temporary. Moreover, The Code makes the employer pay more compensation for work-
related injuries. It also covers accidents during the commute to and from work, if nexus
between the circumstances, time, and place in which the accident occurred and his
employment is established. This provision does not exist in the erstwhile legislation.
◇ Employment Opportunities - The Code replaces the limited role of employment exchange
with the concept of ‘career centre’. It includes any office or portal that offers career
services, such as registration, information, counselling, guidance, job-fairs, surveys, etc.
The career centre aims to improve employment opportunities.
◇ Penalties - The Code imposes higher and stricter penalties for employers who violate its
provisions. The fines are increased in matters pertaining to (including but not limited) the
following -
1. Failure to pay contributions
2. Fails to pay amount of gratuity
3. Fails to provide maternity benefit to a woman
4. fails or refuses to submit any return, report, statement or any other information
5. fails to pay any amount of compensation to which an employee is entitled
6. obstructs Inspector-cum-Facilitator to discharge his duties and fails to produce on
demand by the Inspector-cum-Facilitator any register or document in his custody
7. dishonestly makes a false return, report, statement or information to be submitted.
Moreover, the Code allows compounding of offences for EPF and ESIC and other
offences under the Code. For example: In case of an offence punishable with fine only,
compounding is allowed for a sum of 50% of the maximum fine and in case of an
offence punishable with fine and imprisonment less than a year, compounding is
allowed for a sum of 75% of the maximum fine.

Critical Analysis of the Advantages and Disadvantages of the Social

Security Code

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 The Social Security Code aims to simplify the compliance of social security laws for
businesses. However, it only merges the existing laws without changing their separate
frameworks and benefits. It also keeps the multiple administrative bodies under the same
definition of ‘Social Security Organisation’. This creates duplication and fragmentation in
the social security system.

The Social Security Code does not clearly mention the schemes for the unorganised
sector. It only states that the Central Government will make schemes for state insurance
benefits for unorganised, gig and platform workers and their families. It does not state
anything about provident fund benefits for “self-employed” and “any other class” of
persons. The Social Security Code continues to retain thresholds based on the size of
establishment which limits the reach of the social security benefits. Chapter IX of the
Social Security Code gives a framework for the social security for the unorganized sector.
It says that both the Central and State Governments will make schemes for them. The
schemes will cover matters like (i) life and disability cover, (ii) accident insurance (iii)
health and maternity benefits, (iv) old age protection, (v) creche, and (vi) other benefits as
decided by the Central Government.

The Social Security Code permits various funding sources for the schemes, such as
government, employer, and CSR funds. The States can seek Centre’s assistance in
funding. However, the absence of a uniform framework in the Code may result in
divergent rules or frameworks by the States for the informal sector. This may undermine
the objective of the Code.

The Code fails to address the overhaul of the BOCW Act and the compliance issues
for building workers. It does not make the contractor or employer responsible for
registering building workers. The Standing Committee’s suggestions for improving the
BOCW Act and enabling portability of benefits for migrant and construction workers have
been ignored in the Code.

The Code defines various types of workers to cover different categories of employees
and workers. It acknowledges the evolving employer-employee relationship and offers
coverage to gig, platform, building, contract, home-based, inter-state migrant, motor
transport, self-employed, unorganised and wage workers. These definitions are updated

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 from the existing social security laws, reflecting the current workforce situation, such as
the inclusion of self-migrated workers in the definition of ‘inter-state migrant worker’.
However, the Code’s definitions and classifications of workers are open-ended and
overlapping. For example, a platform worker is also a gig worker, as both work outside a
traditional employer-employee relationship. This may create confusion about the schemes
applicable to them. In practice, workers are classified based on their skills and work
description. This classification may be a cause of concern for employers and workers.

The Code replaces the Gratuity Act and deals with the gratuity payment to employees.
Due to the pandemic, many have demanded to lower the gratuity eligibility from five years
of continuous service to a shorter period. The Standing Committee Report agreed to this
and suggested to reduce it to one year. It also suggested to include all types of workers,
such as contract, unorganised, wage, and fixed term workers, in the gratuity scheme. The
principal employer would be liable to pay the gratuity if the contractor fails to do so.
However, the Code grants gratuity to employees and fixed term employees, but not to
contract, piece rate and time rate workers. Clause 53(2) says that fixed term employees
will get gratuity on pro rata basis. This is to benefit those who do not complete five years
of service. However, this may favour fixed term employees over permanent employees,
who need to serve five years for gratuity.

Probable Impact on Stakeholders

◇ Employers - The Code may increase the compliance burden and cost for employers, as
they have to pay higher contributions and penalties for non-compliance. The Code also
requires employers to register and insure their employees, and provide benefits such as
maternity, gratuity, and creche. However, the Code also allows employers to opt in or out
of some schemes, and use of common facilities and web-based platforms for compliance.
◇ Employees - The Code may enhance the social security and welfare of employees, as it
covers more workers, including unorganised, gig, and platform workers. The Code also
provides benefits such as pension, insurance, maternity, gratuity, and creche. The Code
also introduces the concept of career centre, which can help employees with career
guidance, job-fairs and surveys.

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◇ Government - The Code may improve the governance and administration of social
security schemes, as it consolidates and simplifies the existing laws. The Code also
empowers the Central and State Governments to notify and regulate the contribution rates,
benefits, and schemes for different workers. The Code also introduces the concept of
Inspector-cum-facilitator, who can inspect, advise, and prosecute the employers.
◇ Society - The Code may have a positive impact on the society, as it aims to provide
universal social security to all workers, especially the vulnerable and informal ones. The
Code may also promote social justice, gender equality, and human dignity, as it protects
the rights and interests of workers and their dependents. The Code may also contribute to
the economic growth and development of the country, as it enhances the productivity and
welfare of workers.

Code of Social Security, 2020 in comparison and contrast with other

countries social security systems

The social security systems of other countries vary widely in terms of their scope,
coverage, benefits, and financing. Some countries have comprehensive and universal
systems that cover all workers and offers various benefits such as pension, health,
unemployment, disability, and family benefits. Example of such countries are France,
Germany and Sweden. Other countries like China, Mexico and South Africa have more
limited and fragmented systems that cover only certain categories of workers and provide
fewer benefits.

◇ The Code of Social Security, 2020 covers all workers, including unorganised, gig, and
platform workers, who constitute about 90% of the workforce in India. This is similar to
some countries that have universal coverage, such as France and Germany. However,
unlike these countries, the Code does not specify the contribution rates, benefits, and
schemes for different workers, and leaves them to be notified by the Central and State
Governments. This may create uncertainty and inconsistency in the implementation of the
Code.
◇ The Code of Social Security, 2020 provides various benefits to workers, such as pension,
insurance, maternity, gratuity, and creche. These benefits are similar to those provided by
some countries that have comprehensive systems, such as Sweden and the United

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 Kingdom. However, unlike these countries, the Code does not specify the eligibility
criteria, benefit levels, and duration of the benefits, and leaves them to be notified by the
Central and State Governments. This may create variation and disparity in the provision of
the benefits.
◇ The Code of Social Security, 2020 requires the employers and employees to contribute to
the social security schemes, and also creates a social security fund for unorganised, gig,
and platform workers, to which the aggregators and the Central and State Governments
will contribute. These sources of financing are similar to those used by some countries that
have contributory and non-contributory systems, such as Brazil and Indonesia. However,
unlike these countries, the Code does not specify the contribution rates, fund management,
and expenditure of the social security fund, and leaves them to be notified by the Central
and State Governments. This may create challenges and risks in the financing of the social
security fund.

Conclusion

The Code on Social Security, 2020 aims to include the maximum number of workers
in the country under its protection. It acknowledges the emerging forms of work that do
not follow the usual employer-employee relationship. So undoubtedly it is a step in right
direction towards ease of compliance and universality as it would cover a big segment of
our labour force. By giving the Central Government the authority to both design social
security schemes and collect reliable data of such workers through self-declaration, the
Code helps to have a better understanding of the nature and diversity of our labour force.

The Code on Social Security, 2020 empowers the Central Government to adjust the
contribution rates for EPF and ESIC under Chapter-III and Chapter-IV, respectively. This
will enable the government to respond to the changing economic scenarios and avoid
imposing undue costs on workers and employers. Moreover, a contributory national social
security scheme is a system where workers and employers pay a certain percentage of
their income or profits to a fund that provides benefits to the workers in case of retirement,
disability, unemployment, sickness, maternity, or death. Such a scheme would ensure that
the working population has enough spending power to maintain a decent standard of living
and contribute to the economic growth of the country. Additionally, it would provide

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 adequate and sustainable income support to those who leave the workforce due to old age,
disability, or other reasons, and prevent them from falling into poverty or dependence.
However, to achieve these it is important that there is optimal balance in the rate of
contribution, the level of benefits and eligibility criteria of who can join the scheme.
taking into account the demographic, economic, and social conditions of the country, as
well as the preferences and expectations of the workers and employers. A well-balanced
scheme can ensure the adequacy, sustainability, and equity of social security for all.
Even though there is a lot of hope, we should also be careful because many issues are
still subject to delegated laws and executive rules. We can only judge the effectiveness and
usefulness of the Code after these problems are resolved and the Code is implemented. A
separate regulatory body to oversee the code would help to ensure the well-being of
workers and to measure the impact of schemes.

References: -
1. The Code on Social Security 2020: Addressing the Key Changes and Their Impact – Legal
Developments (legal500.com)
2. Code on Social Security, 2020: Salient Features & Compliance Changes (simpliance.in)
3. Analysis of the Social Security Code, 2020 (axfait.com)
4. Code on Social Security, 2020 - Key Provisions, Significance and Issues (testbook.com)
5. ss_code_gazette.pdf (labour.gov.in)

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