Law and You > Labour Laws > The Code on Social Security, 2020 > Introduction to the Code on Social Security, 2020

Social security encompasses protective measures extended to employees, including unorganized workers, gig workers, and platform workers. Its purpose is to ensure their access to healthcare and provide income security, especially in situations such as old age, unemployment, sickness, invalidity, work-related injuries, maternity, or the loss of a breadwinner. These rights and schemes are conferred under the Code on Social Security, 2020.

Following bills were passed in the Lok Sabha on 23rd September 2020

• Industrial Relations Code, 2020
• Code on Occupational Safety, Health & Working Conditions Code, 2020
• Social Security Code, 2020
• Code on Wages,2019 (already received President assent on 8 th August 2019)

These bills are outcome of the policy “‘Shramev Jayate” and “Satyamev Jayate”. Key focus is on interest of employee to avoid procedural complexities in implementation of various welfare and safeguard provisions. They aim is to provide common definitions, flexibility to Employer, ensure industrial peace and provide social security and welfare facility to all the employees.

The Second National Commission on Labour, which submitted its report in June 2002, had recommended that the existing set of Labour laws should be broadly amalgamated into the following groups, namely:

• Industrial Relations;
• Wages;
• Social Security;
• Safety; and
• Welfare And Working Conditions

Three stakeholders namely Employer, Employee/their Union and Government decided to reform the existing Labour laws. In the past focus was on Mill workers and now the focus of IT and ITES Sectors and Unorganized Sector, which accounts for more than 90%.

Code on Social Security (CoSS), 2020 was introduced by withdrawing the earlier Code of 2019, it has amended and consolidated the laws relating to employee’s social security with the goal to extend social security to all employees & workers either in organized, unorganized, or any other sector. CoSS also amalgamates, simplifies & rationalizes the relevant provisions of the following central labour enactments relating to social security:

• The Employees’ Compensation Act, 1923
• The Employees’ State Insurance Act, 1948
• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
• The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
• The Maternity Benefit Act, 1961
• The Payment of Gratuity Act, 1972
• The Cine Workers Welfare Fund Act, 1981
• The Building and Other Construction Workers Welfare Cess Act, 1996
• The Unorganised Workers’ Social Security Act, 2008.

Social Security:

According to Section 2(78) of the Code on Social Security, 2020 “social security” 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 by means of rights conferred on them and schemes framed, under this Code.

The Central Government shall formulate and notify, from time to time, suitable welfare scheme for unorganized/gig/platform workers on matters relating to-

• Life and disability cover;
• Health and maternity benefit;
• Old age protection;
• Education; crèche; etc.

The stare Government shall formulate and notify, from time to time, suitable welfare scheme unorganized, including schemes relating to:

• Provident fund;
• Employment injury benefit;
• Housing
• Educational scheme for children;
• Skill upgradation of workers;
• Funeral assistance;
• Old age homes;

Social Security Organizations:

According to Section 2(79) of the Code on Social Security, 2020 “Social Security Organisation” means any of the following organisations established under this Code, namely:—

(a) the Central Board of Trustees of Employees’ Provident Fund constituted under section 4;

(b) the Employees’ State Insurance Corporation constituted under section 5;

(c) the National Social Security Board for Unorganised Workers constituted under section 6;

(d) the State Unorganised Workers’ Social Security Board constituted under section 6;

(e) the State Building and other Construction Workers’ Welfare Boards constituted under section 7; and

(f) any other organisation or special purpose vehicle declared to be the social security organisation by the Central Government;

Objectives of Code of Social Security, 2020:

The Code on Social Security, 2020, is a significant piece of legislation in India aimed at reforming and consolidating various social security laws. The objectives of this Code include:

• Universalization of Social Security: The Code aims to extend social security benefits to all workers, including those in the organized and unorganized sectors, ensuring no one is left out.
• Simplification and Rationalization: By consolidating and rationalizing the existing central labour laws related to social security, the Code simplifies the legal framework, making it more accessible and understandable.
• Enhancing Coverage: The Code seeks to widen the coverage of social security schemes to include a broader range of workers, including gig workers, platform workers, and those in the informal sector.
• Portability of Benefits: The Code promotes the portability of social security benefits, allowing workers to carry their entitlements across different jobs and geographical locations.
• Improvement of Administration: It aims to streamline the administration of social security schemes, making them more efficient and effective through the use of technology and better governance structures.
• Enhancing Compliance: By simplifying the legal requirements and reducing the burden of compliance, the Code encourages employers to comply with social security regulations.
• Provision of a Social Safety Net: The Code aims to provide a robust social safety net for workers, ensuring support in case of unemployment, sickness, disability, and old age.
• Inclusion of New Workforce Categories: Recognizing the changing nature of work, the Code includes provisions for the social security of gig and platform workers, acknowledging their growing significance in the economy.
• Fiscal Sustainability: The Code is designed to ensure the fiscal sustainability of social security schemes, balancing the need for benefits with the financial capacity of the system.
• Protection of Worker Rights: It seeks to protect the rights of workers by ensuring fair and equitable social security benefits, contributing to improved living standards and social justice.

Thus, the Code on Social Security, 2020, aims to create a comprehensive, inclusive, and sustainable social security system in India, aligned with the needs of a modern and dynamic workforce.

Significant Features of Code of Social Security, 2020:

The significant features of the Code on Social Security, 2020, are as follows:

• Consolidation of Laws: The Code consolidates nine existing social security laws into a single framework. These include: The Employees’ Compensation Act, 1923; The Employees’ State Insurance Act, 1948; The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,; The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; The Maternity Benefit Act, 1961; The Payment of Gratuity Act, 1972; The Cine Workers Welfare Fund Act, 1981; The Building and Other Construction Workers Welfare Cess Act, 1996; The Unorganised Workers’ Social Security Act, 2008.
• Coverage for All Workers: It extends social security benefits to all workers, including those in the organized and unorganized sectors, gig and platform workers, and self-employed individuals. Gig workers are those who fall outside the conventional “employer-employee relationship”. Platform workers are similar to gig workers but access organisations or individuals through an online platform to provide services for payment. The Code recognizes gig and platform workers, providing for their social security through specific schemes funded by contributions from aggregators (such as food delivery services, ride-sharing companies, etc.). An unorganised worker is defined as a worker who works in the unorganised sector, including those not covered by the Industrial Disputes Act, 1947, or other provisions of the Bill (such as provident fund or gratuity). It also includes self-employed workers. Special provisions are made to extend social security benefits to workers in the unorganized sector, including agricultural workers, home-based workers, and daily wage earners.
• Social Security Schemes: The government can notify various social security schemes, including those for life and disability cover, health and maternity benefits, provident fund, employment injury benefits, housing, educational schemes for children, skill upgradation, funeral assistance, and old age protection. The government may notify schemes for unorganised sector workers (such as home-based and self-employed workers), gig workers, and platform workers.
• Social Security Fund: The Code provides for the creation of a social security fund to provide these benefits to workers. This fund will be financed by central and state governments and also through CSR funding. Aggregators, who are digital intermediaries employing gig workers, will have to contribute at least around 1-2 per cent of their annual turnover (up to a maximum of 5 per cent of the amount payable to the workers) to this social security fund.
• Portability of Benefits: The Code ensures the portability of social security benefits, allowing workers to access benefits regardless of their location or change in employment.
• National Social Security Board: The Code also provides for the establishment of a ‘National Social Security Board’. The Board’s functions include recommending schemes to the central government, monitoring the schemes for different types of workers, and advising the Government on matters relating to the administration of the Code, among others.
• Gratuity Provisions: The Code provides for gratuity payments for fixed-term employees, with no minimum service requirement. It also includes provisions for gratuity benefits to employees on termination of employment after completing five years of service.
• Maternity Benefits: The Code ensures that every woman is entitled to maternity benefits, including paid leave, medical bonus, and nursing breaks.
• Employees’ Provident Fund (EPF): The Code retains the existing provisions of the EPF but provides for certain improvements such as extending coverage to new categories of employees and simplifying administrative processes.
• Employees’ State Insurance (ESI): ESI coverage is extended to all establishments employing ten or more workers, including those in the unorganized sector and gig and platform workers.
• Employment Information and Monitoring: The Code mandates the maintenance of a comprehensive database of workers to facilitate effective implementation of social security schemes.
• Penalties for Non-Compliance: The Code specifies penalties for non-compliance, ensuring that employers adhere to the social security norms and contribute to the welfare of their workers.
• Use of Technology: Emphasis on the use of technology for the registration of workers, filing of returns, and payment of contributions, making the process more efficient and transparent.
• Adjudication of Disputes: The Code provides for a simplified dispute resolution mechanism, including the establishment of Social Security Appellate Tribunals for quick resolution of disputes.

These features collectively aim to create a more inclusive, efficient, and comprehensive social security system in India, addressing the needs of a diverse and evolving workforce.

Applicability and Scope:

In the First Schedule of the CoSS 2020, applicability thresholds are defined for each scheme. Some examples being :-

• CoSS 2020 is applicable to any establishment (subject to size-threshold as may be notified) for making certain benefits mandatory. All eligible establishments are required to be registered under the Code, unless they are already registered under any other labour law.
• EPF shall be applicable to establishments with 20 or more employees.
• ESI shall be applicable to certain establishments with 10 or more employees; to all establishments which carry out hazardous or life-threatening work as notified by the central government
• CoSS 2020 not only recommends or administers schemes for unorganised sector workers but also dwells into the welfare of gig and platform workers, where such schemes were not applicable till now and these schemes shall be funded by central government, state governments, and aggregators (as mentioned in Seventh Schedule)

Scheme of the Code:

There are 14 Chapters, 164 Sections and 7 Schedules:

Chapter	Sections	Name of Chapter	Important Provisions
Chapter-I	1-3	Preliminary	This Chapter deals with title extent Commencement and application Definitions Registration and Cancellation of Establishment 91 concepts have been defined New category of workers has been included namely Gig workers and Platform workers. Wages Definition has been revised. Definition of Contract Labour and Career Center have been added The Code does not come into force automatically-a notification has to be issued for this purposes.
Chapter-II	4-13	Deals with the different social security organizations.	This Chapter makes provisions for constituting Central Board for PF. The National Security Board for Unorganized workers. The State Unorganized workers Social Security Board. The Building and Other Construction Workers Welfare Board.
Chapter-III	14-23	Deals with Employees Provident Fund Organization (EPFO)	EPFO’s coverage is applicable to all establishments having 20 or more workers-earlier only scheduled employments work covered. Option is given to establishments having less than 20 workers to join EPFO. There is a provision for bringing workers under the category of self-employed under EPFO. Penalty has been increased from Rs. 10,000 to 1,00,000 and 1 to 3 years imprisonment – similarly subsequent failure attracts fine of 3,00,000 rupees or 2 to 5 years imprisonment.
Chapter-IV	24-52	Deals with ESIC	No Change in the number of persons for making ESIC applicable i.e. 10 workers. Voluntary registration has been allowed for establishments with less than 10 workers under the code. Establishments in hazardous sectors can be linked to ESIC even if only one worker. The Scheme has been extended from 566 districts to 740 districts i.e. all the districts in India. Employer of a plantation can opt for registration by giving willingness.
Chapter-V	53-58	Deals with Gratuity	Provision for Gratuity has been made for Fixed Term Employee – No minimum service period. In case of working journalists the minimum continuous service is 3 years instead of 5 years. Option to obtain an insurance for discharging the liability for payment towards gratuity is liberalized, insurance can be obtained from any insurance company regulated by IRDA.
Chapter-VI	59-72	Deals with Maternity Benefits	There are no notable changes
Chapter-VII	73-99	Deals with Employees Compensation	The definition of dependant is marginally expanded to include Grand parents if no Parent of the employee is alive – earlier it was only paternal grand parents who were eligible. In cases of Occupational diseases – uniform period of employment of 6 months has been proposed – earlier it could be less than 6 months in some types of industries. Provision has been made to pay compensation to an employee / member of his family as a result of collapse of house provided by the employer in a plantation. The minimum limit of compensation of 1,20,000 and 1,40,000 in cases of death and permanent disability is removed. So also the base salary of Rs. 8,000 is removed.
Chapter-VIII	100-108	Social Security and Cess in Respect of Building and other Construction Workers	Provision has been made for the establishment of building and other construction workers welfare board to exercise the functions under the chapter. The chairman of the board has to be nominated by the State Government – earlier it was the Central Government. There is no change in the cess amount that can be collected – not less than 1% and not exceeding 2%.
Chapter-IX	109-114	Unorganized workers gig workers and platform workers.	Coverage is provided for gig, platform workers and unorganized workers under the ambit of social security Scheme. The code requires that all unorganized workers, gig workers or platform worker has to be registered. Self declaration has to be submitted (earlier there was no provision for electronically submitting self declaration now it is there). Aadhaar number is compulsory for registration earlier it was not there. The code also makes provision for setting up call centers or helplines to help the unorganized workers (earlier there was only provision for facilitation centers.
Chapter-X	115-121	Finance and Accounts	Provision has been made empowering the social security organizations to invest the money vested in it .
Chapter-XI	122-132	Authorities, Assessment, Compliance and Recovery	The code makes provision for appointment of Inspectors cum-Facilitators. An inspection scheme for generation of web based inspection may be made by notification. Assignment of unique number to each establishment for the purpose inspection. Timely uploading of inspection reports. The Inspector cum-facilitator has to act as an advisor. Records can be maintained electronically or otherwise. Provision has been made for recovering the amount as arrears of land revenue.
Chapter-XII	133-138	Offences and Penalties	The punishments have been increased almost 10 times. Failure to pay contribution – upto 3 years imprisonment (however shall not be less than 1 year with 1 lakh fine if the offence is non payment of employees contribution deducted). Failure to pay gratuity – imprisonment upto 1 year and fine upto 50,000 rupees. Other offences – upto 6 months or fine which may extent to 50,000 rupees. There is opportunity for compounding of offences. Prior opportunity before prosecution is a must.
Chapter-XIII	139-140	Employment Information and Monitoring	Employer before filling up any vacancy may be required to report about the vacancy to the career center.
Chapter-XIV	141-164	Miscellaneous	Makes Provision for establishment of Central and State Social Security Fund. Aadhaar card is proof of Identity for registration or seeking benefits by unorganized worker. The liability in case of transfer of an establishment is fixed under the code.

Schedules:

• The First Schedule – Applicability
• The Second Schedule – List of Persons who are Employees within the meaning of the third proviso to clause (26) of Section 2
• The Third Schedule – List of Occupational Diseases
• The Fourth Schedule – List of Injuries Deemed to result in permanent partial and total disablement
• The Fifth Schedule – Matters that may be provided in the schemes
• The Sixth Schedule – Factors for working out lump sum Equivalent of compensation amount in case of permanent Disablement and Death
• The Seventh Schedule – Classification of Aggregators

Conclusion:

The Code on Social Security, 2020, is part of India’s broader labour law reforms aimed at consolidating and simplifying the country’s extensive and fragmented labour regulations. This code seeks to streamline and enhance the social security framework, ensuring better coverage and benefits for workers across various sectors. The Code amalgamates nine central labour laws related to social security into a single framework, simplifying the regulatory landscape. This makes compliance easier for employers and more straightforward for workers to understand their rights and entitlements.

One of the significant goals of the Code is to expand the social security net to cover a larger segment of the workforce, including gig and platform workers, unorganized sector workers, and those in the informal economy. This is a positive step toward inclusive social protection. The Code mandates benefits such as gratuity, maternity benefits, and employee provident fund contributions, ensuring that workers have access to essential social security measures. It also introduces provisions for health and safety, welfare measures, and retirement benefits. By creating a single social security organization, the Code aims to enhance administrative efficiency and reduce redundancy. This is expected to improve the delivery of social security benefits and reduce bureaucratic delays.

For employers, the Code represents a shift towards more standardized and transparent social security obligations. For employees, it promises greater security and predictability regarding their social security benefits. However, the success of the Code largely depends on effective implementation and compliance.

Despite its potential benefits, the Code has faced criticism regarding its implementation mechanisms, the adequacy of benefits, and the enforcement of provisions. Concerns have been raised about the practical challenges in extending coverage to informal and gig workers and the actual enforcement of the new regulations. The effectiveness of the Code will be assessed over time as it gets fully implemented. Continuous monitoring, feedback, and adjustments will be crucial to ensure that the intended benefits reach all sections of the workforce and that the objectives of the Code are met.

In summary, the Code on Social Security, 2020, represents a significant step towards modernizing and expanding India’s social security system. Its success will depend on how well it is implemented and how effectively it addresses the challenges and needs of a diverse and dynamic workforce.

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