Author(s): Shivansh Gaur
Paper Details: Volume 3, Issue 5
Citation: IJLSSS 3(5) 32
Page No: 326 – 340
I. INTRODUCTION
The Code on Social Security, 2020, marks a watershed moment in the evolution of Indian labour law, signifying a deliberate shift towards consolidating and streamlining social security provisions for workers nationwide. Inspired by the recommendations of the 2nd National Commission on Labour, the Code integrates nine existing legislations into a unified statutory framework, regulating both organized and unorganized sectors. Enacted with presidential assent on September 28, 2020, its core objective is to ensure comprehensive social security covering sickness, maternity, disability, and related needs for all employees and workers. Far from being a mere administrative reform, this legislation embodies a paradigm shift in the protection of labour rights and enhancement of worker welfare within India’s dynamic economic landscape.
II. COVERAGE AND APPLICABILITY
The Code applies universally to all employees on wages within any establishment, irrespective of their occupation. This broad applicability signifies a departure from previous legislation, which often had limitations based on the type of employment or sector (Code on Social Security, 2020). Under the earlier Payment of Gratuity Act, 1972, “wages” were defined narrowly, encompassing only certain emoluments earned by an employee while on duty or leave. In contrast, the Social Security Code redefines “wages” to include all forms of remuneration expressible in monetary terms—such as basic pay and dearness allowance— while explicitly excluding overtime compensation, house rent allowances, and other forms of additional compensation (Code on Social Security, 2020). Furthermore, the Code has an overriding effect over any inconsistent provisions in existing laws or agreements. This ensures that its stipulations take precedence over previous regulations or contracts made before or after its enactment (Code on Social Security, 2020).
The Code on Social Security, 2020 (Code 2020), which was approved by Parliament on 23 September 2020, signifies a major step in the consolidation of social security legislation in India. This reform is designed to simplify and unify the numerous existing laws related to social security benefits for workers. The bill was introduced in the Lok Sabha on 19 September 2020, following its predecessor, the Code on Social Security, 2019 (Code 2019), which had been evaluated by the Standing Committee on Labour during 2019-2020.
While Code 2020 largely mirrors the provisions of Code 2019, it incorporates essential changes that improve clarity and broaden coverage. This report delineates the key changes, explores their implications, and offers an in-depth understanding of the newly established legal framework under Code 2020. A significant reform area is voluntary coverage under Chapter III, which pertains to employee provident fund contributions, and Chapter IV, which concerns the employees’ state insurance fund. In Code 2019, voluntary coverage could only be initiated with the agreement of both the employer and a majority of employees in a relevant establishment. Code 2020 enhances this provision by enabling employers who are voluntarily covered to opt out, given that a similar consensus is reached. This modification offers greater flexibility for establishments, especially those facing economic challenges, by allowing an exit option if both parties agree. Employers are now provided with a clear process to discontinue coverage, contingent upon the approval of relevant authorities, such as the Director General of the Employees’ State Insurance Corporation or the Central Provident Fund Commissioner.
Another crucial change in Code 2020 is the inclusion of contract labour in the definition of ‘employee.’ Previously, Code 2019 excluded contract workers employed through third-party providers from social security provisions. However, Code 2020 now includes these workers within the broader definition of ‘employee.’ This expansion has two significant ramifications. Firstly, establishments that would have previously been below the coverage threshold may now qualify if they hire contract workers for roles like housekeeping or security. Secondly, while there are provisions for recovering costs related to provident fund contributions, state insurance, and compensation from contractors, there is no such mechanism under the gratuity section. This situation raises concerns for industries that rely on contract labour, as they may incur additional financial burdens without a clear way to recoup costs.
The definition of ‘building or other construction work’ has also been updated in Code 2020. Under Code 2019, construction work on private residential properties was excluded from social security coverage if it involved a limited number of workers. Code 2020 changes the focus from the nature of the property to the purpose of the construction, specifically exempting projects intended for personal residence. Furthermore, the total cost of such projects must not exceed INR 50,00,000, and the number of workers engaged must fall within limits established by the appropriate government. These adjustments aim to prevent potential misuse of exemptions previously allowed under Code 2019, while providing clearer guidelines regarding the types of projects included in the new social security framework.
Significant revisions have also been made to the definition of ‘inter-state migrant worker.’ The earlier Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 applied solely to workers hired through contractors. Code 2019 broadened this definition to encompass any worker directly recruited by an employer from one state for work in another. Code 2020 retains this expanded definition and clarifies that workers earning up to INR 18,000 per month qualify as inter-state migrant workers. This provision extends protections to a wider segment of the workforce, including those hired directly by employers, enhancing the safety net for this vulnerable group, especially in light of the challenges highlighted by the COVID-19 pandemic.
Regarding gratuity for working journalists, Code 2020 maintains much of the framework established by its predecessor. The Standing Committee on Labour had proposed reducing the eligibility period for gratuity from 5 years to 1 year, acknowledging the prevalence of short- term employment in India’s labour market. However, Code 2020 keeps the 5-year requirement in place, with a specific exception for working journalists, who become eligible after 3 years of continuous service. This clarification aligns with existing provisions under the Working Journalists and Other Newspaper Employees (Conditions of Service) Act, 1955, and is consistent with past practices, providing some relief to journalists in an industry characterized by high turnover and short-term contracts.
The provision for crèche facilities is another area where Code 2020 offers greater flexibility. While Code 2019 mirrored the approach of the Maternity Benefit Act, 1961, which mandated that establishments with 50 or more employees provide crèches, Code 2020 allows for the establishment of common crèche facilities. Employers can now utilize crèches operated by the government, municipalities, non-governmental organizations, or private entities. Additionally, groups of employers can collaborate to create shared crèche facilities, addressing challenges related to space and resources, particularly in urban areas. This is a significant advancement for both employers and employees, especially women, who gain enhanced childcare support in the workplace.
Another essential aspect of Code 2020 pertains to social security contributions by aggregators. Following the introduction of terms like ‘aggregator,’ ‘gig worker,’ and ‘platform worker’ in Code 2019, Code 2020 continues to focus on the social security needs of gig workers. A scheme developed by the Central Government for life and disability coverage, health and maternity benefits, and other protective measures can be fully financed by contributions from aggregators. Code 2020 sets these contributions at between 1-2% of the annual turnover of aggregators in specified sectors, such as ride-sharing and food delivery services. Including gig workers in social security schemes marks a significant change in recognizing and addressing the vulnerabilities faced by this growing segment of the workforce. In terms of legal enforcement, Code 2020 enhances the provisions on compounding offences, allowing offenders to resolve certain violations without imprisonment. While Code 2019 introduced the idea of compounding for offences that do not carry prison terms, Code 2020 goes a step further by detailing the amount to be paid for compounding. The amount is determined as half of the maximum fine for offences punishable by fine alone and three-fourths of the maximum fine for offences that could lead to imprisonment of up to one year. This enhancement clarifies the legal framework, providing a transparent compounding process and alleviating burdens on both offenders and the judicial system.
While the Code on Social Security, 2020 introduces necessary reforms, it could have benefited from greater consultation with industry stakeholders. The choice not to release the draft bill for public comment—deviating from standard practice—has resulted in some unaddressed concerns. Nonetheless, the Code represents a positive step toward modernizing India’s social security system and extending protections to a broader array of workers, including those in the gig economy, contract labourers, and inter-state migrants. Its success will hinge on the effective implementation of these provisions and further adjustments to meet the concerns of both employers and workers. The implications of the Code will be felt throughout India’s organized and unorganized sectors, shaping the future landscape of social security for years to come.
III. STRUCTURE AND PROCEDURE OF THE CODE
The Code is structured into various chapters that address different aspects of social security:
- Social Security Organizations: Establishes mandatory registration for all establishments.
- Employee Compensation: Outlines employer responsibilities for compensating employees injured during work.
- Provident Fund and Gratuity: Integrates existing laws into a cohesive framework. Every establishment is required to obtain registration under this Code, including those already registered under any Central Act. Workers across different categories must also register under applicable chapters in the Code. Moreover, businesses undergoing closure are mandated to apply for registration cancellation (Code on Social Security, 2020).To enhance compliance and authenticity, employees in the unorganized sector must establish their identity through Aadhaar numbers to access benefits available under the Code (Code on Social Security, 2020). The Code also provides for the establishment of several boards responsible for administering various schemes. These include:
State Building Workers Welfare Boards
National Social Security Board
State Unorganised Workers’ Social Security Board
These boards are tasked with enforcing different schemes aimed at protecting workers’ rights and ensuring their access to social security benefits.
IV. SCHEMES UNDER THE CODE
The Central Government is empowered to frame various schemes under the Code through notifications. Key schemes include:
Employees’ Provident Fund Scheme
Pension Scheme
Deposit Linked Insurance Scheme
Each chapter outlines specific applicability criteria based on the size and nature of establishments:
| Chapter No. | Chapter Name | Applicability | Existing Legislations |
| III | Employees’ Provident Fund | Every factory and establishment employing 20+ | Employees’ Provident Fund Act, 1952 |
| IV | Employees’ State Insurance Corporation | All factories except seasonal ones employing 10+ | Employees’ State Insurance Act, 1948 |
| V | Gratuity | Every factory/plantation/port/oilfield/mine | Payment of Gratuity Act, 1972 |
| VI | Maternity Benefit | Every establishment employing 10+ | Maternity Benefits Act, 1961 |
| Chapter No. | Chapter Name | Applicability | Existing Legislations |
| VII | Employees’ Compensation | Certain employers for injury compensation | Employees’ Compensation Act, 1923 |
| VIII | Social Security for Construction Workers | Every building/construction work | Building and Other Construction Workers’ Welfare Cess Act, 1996 |
| IX | Social Security for Unorganised Workers | Unorganised sector/gig/platform workers | Unorganised Workers’ Social Security Act, 2008 |
| XIII | Employment Information and Monitoring | Career centers/vacancies | Employment Exchanges Act, 1959 |
V. EMPLOYEES’ STATE INSURANCE
The Employees’ State Insurance Fund (ESI Fund) has been established under the Code on Social Security, 2020 as a vital mechanism for providing essential medical benefits and compensation to insured individuals. This fund represents a significant advancement in India’s social security framework by ensuring a consistent and equitable provision of health care services and financial support across various sectors.
COVERAGE AND ELIGIBILITY
Under this Code, the ESI Fund extends coverage uniformly to all establishments employing ten or more persons, thereby creating a standard benchmark for participation in the scheme. This provision is particularly significant for ensuring that larger workplaces contribute to the welfare of their employees. At the same time, the Code recognizes the challenges faced by smaller enterprises and offers the option of voluntary membership for establishments that employ fewer than ten workers. This dual approach not only promotes inclusivity but also encourages small businesses to join the system, thereby expanding the safety net for more workers across diverse employment settings.
EMPLOYER RESPONSIBILITIES
Employers play a crucial role in the functioning of the ESI Fund, as they are mandated to register their employees with the Employees’ State Insurance Corporation (ESIC). This registration is essential for employees to access the benefits provided under the ESI scheme. Employers must also ensure the timely payment of contributions to the fund, which is critical for maintaining the financial sustainability of the scheme and ensuring that the benefits remain available to all insured persons. Failure to comply with these responsibilities can result in penalties for employers and potential disruptions in service for employees.
BENEFITS FOR INSURED INDIVIDUALS
Once registered, insured individuals become entitled to a range of benefits designed to support them during times of need. The ESI Fund provides periodical payments in case of sickness or disablement, thereby offering financial relief during challenging periods when individuals may be unable to work. This safety net is particularly important for low-income workers who often lack alternative sources of income during times of illness or injury.
Moreover, the ESI framework also extends its protective umbrella to the dependents of injured or deceased employees. In the unfortunate event of an employee’s injury or death, their dependents are eligible to receive financial support, which can include compensation for loss of income and medical expenses. This provision acknowledges the wider impact of workplace injuries or fatalities and ensures that families are not left in precarious situations due to the loss of a breadwinner.
COMPREHENSIVE COVERAGE
The ESI Fund’s comprehensive approach to providing benefits reflects a broader commitment to social security and welfare. By encompassing both direct benefits for employees and supportive measures for their dependents, the fund aims to create a more resilient workforce and safeguard families from the economic shocks associated with health crises or workplace accidents.
Furthermore, the provision for medical benefits through the ESI Fund emphasizes preventive health care, which is crucial in promoting overall employee well-being and productivity. Insured individuals can access a range of medical services, including hospitalization, outpatient care, and preventive services, thus contributing to a healthier workforce and reducing the long- term burden on public health systems.
The establishment of the Employees’ State Insurance Fund under the Code on Social Security, 2020 marks a significant step towards enhancing social security provisions in India. By extending coverage to a broad range of workers and mandating employer responsibilities for registration and contributions, the Code fosters a more inclusive and supportive environment for employees. The comprehensive benefits offered to insured individuals and their dependents serve to create a safety net that not only addresses immediate financial needs but also promotes long-term health and stability within the workforce. As the implementation of this framework progresses, its effectiveness will depend on the commitment of both employers and employees to uphold their respective responsibilities, ensuring that the ESI Fund continues to provide essential support to those who need it most.
VI. GRATUITY PROVISIONS
Under previous legislation, such as the Payment of Gratuity Act, 1972, employees were only eligible to receive gratuity after completing five years of continuous service, which applied to scenarios involving retirement or death. This provision effectively excluded a significant number of workers, particularly temporary and fixed-term contract workers, from accessing this important benefit. The stringent five-year requirement often left these workers without any form of gratuity, despite their contributions to their employers and the organization.
PRO-RATA GRATUITY FOR FIXED-TERM CONTRACTS
The introduction of new provisions under the Code on Social Security, 2020 marks a significant shift in this paradigm by allowing employees on fixed-term contracts to receive gratuity on a pro rata basis, irrespective of the five-year continuous service requirement. This change is particularly advantageous for temporary workers, who frequently find themselves in roles that do not meet the traditional criteria for gratuity eligibility. The pro-rata approach ensures that these workers are compensated fairly for their duration of service, thus recognizing their contributions even if they do not stay with a single employer for an extended period.
By allowing gratuity to be calculated based on the actual time worked, this new provision acknowledges the evolving nature of employment in contemporary labor markets, where temporary and fixed-term contracts are increasingly common. This recognition is crucial, as it empowers temporary workers, providing them with a financial safety net that acknowledges their service and efforts, regardless of the nature of their employment. This change fosters a more inclusive work environment and enhances job security for a demographic that often faces precarious employment situations.
This historical figure sets a precedent for what could be expected in terms of maximum gratuity payout, but the actual limit under the new provisions is yet to be clarified. Defining a clear threshold amount is essential for both employers and employees. For employers, it provides a framework for financial planning and compliance with gratuity obligations. For employees, understanding the threshold helps in assessing the potential benefits they could receive upon the termination of their contracts or employment. The absence of a defined limit raises questions about future payouts and could lead to uncertainties regarding the sustainability of gratuity funds, especially for employers who may need to manage financial liabilities effectively.
THRESHOLD AMOUNT FOR GRATUITY
While the new provisions enhance gratuity eligibility for fixed-term workers, it is important to note that the threshold amount for gratuity has yet to be defined by the Central Government under this Code. In the context of the previous Payment of Gratuity Act, the gratuity limit was set at INR 20 lakhs. This historical figure sets a precedent for what could be expected in terms of maximum gratuity payout, but the actual limit under the new provisions is yet to be clarified. Defining a clear threshold amount is essential for both employers and employees. For employers, it provides a framework for financial planning and compliance with gratuity obligations. For employees, understanding the threshold helps in assessing the potential benefits they could receive upon the termination of their contracts or employment. The absence of a defined limit raises questions about future payouts and could lead to uncertainties regarding the sustainability of gratuity funds, especially for employers who may need to manage financial liabilities effectively.
IMPACT ON TEMPORARY WORKER
The amendments aimed at facilitating gratuity payments to fixed-term employees are particularly significant in the context of the gig economy and a workforce increasingly characterized by short-term engagements. As industries evolve and more companies rely on temporary or project-based staffing solutions, ensuring that these workers are granted access to benefits traditionally reserved for permanent employees is vital in promoting a fair and equitable labor market. Temporary workers often experience higher job insecurity and lack access to benefits like health insurance, retirement plans, and other forms of social security. The ability to receive gratuity on a pro-rata basis helps mitigate some of these challenges, providing a measure of financial security at the end of their contracts. This development could also serve to improve overall worker morale, incentivizing temporary employees to perform at their best, knowing that they will be compensated for their service, even if their employment is short-term. The shift towards granting pro-rata gratuity to fixed-term contract workers under the Code on Social Security, 2020 is a progressive move that reflects changing employment patterns in the modern labor market. This change not only expands the safety net for temporary workers, ensuring they receive due compensation for their contributions but also signifies a broader recognition of the rights of all workers, regardless of their employment status. As the threshold amount for gratuity is finalized by the Central Government, it will be crucial for stakeholders to remain engaged to ensure that the provisions are implemented effectively, enhancing the welfare of workers across various sectors while promoting compliance and transparency among employers.
VII. ADDITIONAL EMPLOYEE BENEFITS
The Code outlines several key employee benefits:
Maternity Benefits: Women employed in establishments are entitled to maternity benefits calculated at their average daily wage for up to 26 weeks if they have worked for at least 80 days in the preceding twelve months (Maternity Benefits Act, 1961). If no prenatal confinement or postnatal care is provided by employers, women are entitled to a medical bonus.
Employee Compensation: Workers are entitled to compensation from employers for fatal accidents or injuries sustained during work-related activities as defined under the Employees’ Compensation Act (Employees’ Compensation Act, 1923). The amount compensable is determined based on a percentage of monthly wages multiplied by relevant factors established by law.
VIII. CESS FOR CONSTRUCTION WORKERS
Under the Code on Social Security, 2020, a cess is specifically levied for building and construction workers as a strategic means to secure funds for welfare initiatives designed to benefit these workers. This approach marks a significant evolution from previous regulations, such as the Building and Other Construction Workers’ Welfare Cess Act, 1996, which mandated the collection of funds through a different framework. The newly introduced cess represents a concerted effort to enhance the social safety net for this vulnerable segment of the workforce.
PURPOSE AND SIGNIFICANCE OF THE CESS
The primary aim of imposing a cess is to create a dedicated financial pool that can be utilized for various welfare initiatives aimed at improving the living and working conditions of building and construction workers. These initiatives may include health and safety programs, access to social security benefits, housing support, education for workers’ children, and financial assistance during periods of unemployment or illness. By establishing a specific cess for this sector, the Code acknowledges the unique challenges faced by construction workers, who often work under precarious conditions and may lack access to essential social protections.
The financial resources generated from this cess are intended to address the pressing needs of workers in the construction industry, promoting their overall welfare and ensuring they have access to necessary support services. This not only helps in improving the quality of life for these workers but also contributes to the broader goal of fostering a more resilient and productive labor force in the construction sector.
RATES AND COLLECTION MECHANISM
The cess will be charged at rates specified by the Central Government, with a range set between a minimum of 1% and a maximum of 2% of the total project cost. This flexible rate structure allows the government to adjust the cess based on economic conditions, project types, or other relevant factors, ensuring that the funding mechanism remains responsive to the needs of both workers and the industry.
One of the notable changes introduced by the Code is the shift to a self-assessment mechanism for the collection of the cess, as opposed to the previous requirement for government officers to collect it. This self-assessment approach empowers employers and project owners to take responsibility for calculating and remitting the appropriate cess amounts based on their construction projects. By allowing employers to assess their own contributions, the Code aims to streamline the collection process, reduce administrative burdens, and enhance compliance.
IMPLICATIONS FOR EMPLOYERS AND WORKERS
This self-assessment mechanism has several implications for both employers and workers. For employers, it offers greater autonomy and flexibility in managing financial obligations related to the cess. However, it also necessitates that they maintain accurate records and ensure compliance with the regulations to avoid penalties or legal repercussions. Employers must be diligent in their assessment practices, as inaccuracies or failures to comply could lead to disputes with regulatory authorities.
For workers, the introduction of this cess is a positive development, as it signifies a commitment from the government to enhance their welfare and provide necessary support through targeted initiatives. The funds generated will contribute to a safety net that can address various risks and vulnerabilities associated with construction work, which is often characterized by job insecurity and hazardous working conditions.
In conclusion, the cess levied for building and construction workers under the Code on Social Security, 2020 represents a significant advancement in the approach to funding welfare initiatives for this essential workforce. By establishing a dedicated financial mechanism that operates through a self-assessment process, the Code not only facilitates more efficient revenue collection but also reinforces the commitment to safeguarding the rights and welfare of construction workers. This proactive approach is expected to lead to improved living conditions, enhanced social security benefits, and overall better support for a group of workers who play a crucial role in the nation’s development.
IX. SOCIAL SECURITY FOR UNORGANIZED WORKERS
A key innovation within the Code on Social Security, 2020 is its comprehensive approach toward unorganized workers, including gig and platform workers. Historically, legislation such as the Unorganized Workers’ Social Security Act (UWSSA) failed to sufficiently address the unique challenges and needs of these categories of employment, leaving a significant gap in social security coverage. The introduction of this new framework marks a significant advancement, establishing distinct provisions tailored specifically to support unorganized and non-traditional workers in today’s dynamic labor market.
QUALIFICATION CRITERIA
To qualify for benefits under the Code, workers must meet specific criteria designed to ensure that those who truly require assistance are able to access the protections and benefits provided. First and foremost, individuals must be at least sixteen years old. This age requirement acknowledges the need to protect young workers while also aligning with national labor laws that set the minimum age for employment. By establishing this threshold, the Code aims to safeguard the rights and welfare of younger individuals entering the workforce, ensuring they have access to necessary social security benefits.
Additionally, workers are required to submit a self-declaration certificate in accordance with guidelines set by the Central Government. This self-declaration process is designed to streamline registration and create a more accessible pathway for workers to confirm their employment status and eligibility for social security schemes. By allowing workers to self- declare, the Code reduces bureaucratic hurdles that might otherwise impede access to benefits. This approach is particularly important for unorganized and gig workers, who may not have formal employment contracts or documentation to support their claims. The self-declaration certificate serves as an essential tool for empowering these workers, granting them the agency to advocate for their rights and access entitlements.
SUPPORTIVE INFRASTRUCTURE
Recognizing the unique challenges faced by unorganized workers, the Code also encourages state governments to provide helpline facilities aimed at assisting these individuals in navigating the registration processes and accessing available social security schemes. This support infrastructure is crucial in addressing the informational and procedural barriers that often prevent unorganized workers from benefiting from social security programs. By establishing helplines, state governments can offer direct assistance, answer queries, and provide guidance on how to complete the registration process, thereby enhancing accessibility to the social security system.
The establishment of helplines not only aids in the registration process but also promotes awareness among unorganized workers regarding their rights and available benefits. Many workers in this sector may lack knowledge about the protections afforded to them under the new Code or how to access these benefits. Helpline facilities can play a vital role in disseminating information, educating workers about their entitlements, and facilitating a smoother interaction with government services.
In summary, the Code on Social Security, 2020 represents a transformative step in acknowledging and addressing the needs of unorganized workers, gig workers, and platform workers. By establishing specific qualifications for access and providing supportive resources such as helplines, the Code aims to create a more inclusive and equitable social security framework. This innovation not only recognizes the realities of modern employment but also seeks to empower workers, ensuring they have the necessary support and resources to navigate the complexities of their employment landscape. Ultimately, these provisions reflect a commitment to enhancing the welfare and protection of some of the most vulnerable segments of the workforce, fostering a more robust and equitable labor market.
X. COMPLIANCE OBLIGATIONS
Under the Code on Social Security, 2020, employers are mandated to maintain detailed and comprehensive records concerning their employees, a requirement that plays a critical role in the overall framework of social security and labor rights. This mandate is not merely administrative; it serves several essential purposes that extend beyond compliance with legal standards.
IMPORTANCE OF RECORD-KEEPING
Firstly, the requirement for detailed record-keeping includes the maintenance of financial accounts related to employee compensation. Employers must keep accurate accounts of wages, bonuses, and any other financial benefits provided to employees. This ensures that all payments are documented, which is vital for various reasons, including audits, financial planning, and internal assessments of payroll practices. By having comprehensive records, employers can ensure that they meet their financial obligations accurately and on time, thereby minimizing the risk of disputes or grievances related to unpaid wages or benefits.
Moreover, employers must file returns within specified timeframes as determined by the appropriate government authorities. This aspect of the Code requires employers to be proactive in their reporting practices, submitting necessary documentation and financial information within the stipulated deadlines. Timely filing is crucial for maintaining compliance and avoiding potential penalties or legal repercussions. It also aids government agencies in monitoring compliance with labor laws and ensuring that workers receive their entitled benefits, which enhances the overall integrity of the social security system.
SPECIFIC RECORD REQUIREMENTS
In addition to financial records, the Code stipulates that employers must maintain registers that provide essential information about the individuals employed within their establishments. These registers should include a variety of details, such as the employee’s name, age, gender, position, date of joining, and employment status. More critically, they should encompass comprehensive details about the wages paid to each employee, which includes the breakdown of basic pay, allowances, deductions, and any other forms of compensation.
This meticulous record-keeping is crucial for several reasons. It promotes transparency and accountability in the employment relationship, ensuring that both employers and employees have clear visibility over employment terms and compensation. In cases of disputes or grievances, such records can serve as vital evidence, helping to resolve conflicts efficiently and fairly. Furthermore, comprehensive records contribute to the protection of workers’ rights by facilitating the enforcement of labor laws and social security benefits.
COMPLIANCE AND ETHICAL CONSIDERATIONS
From a compliance perspective, maintaining accurate records is not just a legal obligation; it is also an ethical responsibility for employers. Adhering to these requirements demonstrates a commitment to fair labor practices and the well-being of employees. By fostering a culture of transparency and accountability, employers can build trust and loyalty among their workforce, which can translate into higher employee morale and productivity.
The mandate for employers to maintain detailed and comprehensive records under the Code on Social Security, 2020 is a foundational element of a fair and equitable labor market. It emphasizes the importance of transparency in employment relationships and sets the stage for effective enforcement of workers’ rights and social security benefits. By fulfilling these record- keeping requirements, employers not only comply with the law but also contribute to a more organized, trustworthy, and ethical work environment.
EMPLOYER LIABILITY
· The Code on Social Security, 2020, clearly delineates the obligations and liabilities of employers concerning employee wages and benefits. One significant provision is the explicit prohibition against employers reducing employee wages or benefits as a consequence of the obligations arising from the mandatory contributions outlined in the legislation. This safeguard is intended to protect workers from potential exploitation and ensure that they receive their entitled compensation, regardless of the employer’s financial obligations related to social security contributions.
· Furthermore, the Code establishes that employers will incur simple interest charges on any amounts that remain due after their specified due date. This provision emphasizes the importance of timely payments, as it incentivizes employers to fulfill their financial obligations promptly. The interest charges will accumulate from the due date until the payment is made, effectively placing a financial burden on employers who fail to comply with their obligations.
· In scenarios where an employer transfers ownership or control of an establishment—whether through sale, lease, or other means—the Code specifies that both the original employer and the transferee will be jointly liable for any outstanding dues related to contributions or cess until the transfer is completed. This joint liability ensures that the rights of employees are safeguarded even in the event of ownership changes. It holds both parties accountable for fulfilling their financial responsibilities, thereby preventing any lapses in compliance that could adversely affect employees’ entitlements to social security benefits.
· Overall, these provisions of the Code on Social Security, 2020, reflect a comprehensive approach to employer accountability, reinforcing the need for employers to maintain accurate records and uphold their financial commitments to employees. This framework aims to foster a more equitable work environment, ensuring that workers are protected and their rights are prioritized in the realm of social security.
XII. REPORTING REQUIREMENTS
Under the Code on Social Security, 2020, employers are required to notify designated career centers about any vacancies that arise within their establishments. This requirement aims to enhance employment opportunities and streamline the recruitment process, ensuring that job seekers are informed about available positions. The designated career centers serve as a bridge between employers and potential employees, facilitating a more organized approach to job placement and workforce development. By reporting vacancies, employers contribute to a centralized system that aids job seekers in finding suitable employment, thereby promoting transparency in the job market.
However, it is important to note that while employers must report these vacancies, they are not obligated to recruit individuals through these career centers solely because there are open positions. This provision allows employers to retain autonomy over their recruitment processes. They can choose to hire candidates through their preferred channels, which may include internal referrals, direct applications, or other recruitment platforms. This flexibility is crucial for employers who may have specific criteria or preferences in their hiring practices, enabling them to select candidates that best fit their organizational culture and job requirements.
Additionally, the Code outlines certain exemptions regarding this reporting requirement, particularly concerning the type of employment involved. For instance, jobs in agriculture are generally exempt from this obligation unless they pertain specifically to plantation-related work. This distinction acknowledges the unique nature of agricultural employment and the varying methods of recruitment that may be employed in this sector. By exempting agricultural jobs from the general reporting requirement, the Code recognizes the traditional practices and local dynamics inherent in agricultural hiring, where recruitment often occurs through informal networks rather than formal channels.
Overall, the provisions related to reporting vacancies reflect an effort to enhance employment services and support the broader goals of workforce development. By mandating reporting to career centers, the Code aims to improve job accessibility for individuals seeking employment while still allowing employers the freedom to manage their recruitment processes as they see fit. The exemptions provided for specific employment types further illustrate the Code’s sensitivity to the diverse nature of the labor market, ensuring that regulations are tailored to fit the unique characteristics of different sectors.
XIII. OFFENCES AND PENALTIES
The Code outlines various offences related specifically towards non-compliance with its provisions alongside corresponding penalties:
| Offence | Punishment |
| Failure by employer(s) to pay contributions | Imprisonment up to three years; minimum one year if employee contributions were deducted but unpaid |
| Failure(s) related to maternity benefits | Imprisonment up to six months or fines up INR 50k |
| Failure(s) related specifically towards gratuity | Imprisonment up one year or fines up INR 50k |
Additionally:
· Subsequent offences incur harsher penalties including increased imprisonment terms.
· If committed by companies—individuals responsible within those companies may also face liability.
CONCLUSION
The enactment of the Code on Social Security represents an ambitious effort towards modernizing India’s labor laws by consolidating multiple existing regulations into one comprehensive framework aimed at enhancing social security coverage across all sectors. By addressing gaps inherent in previous legislation while introducing new provisions tailored specifically towards contemporary employment realities—this new code seeks not only protect worker rights but also promote compliance among employers navigating an evolving economic environment.
The Code on Social Security, 2020 signifies a pivotal advancement in the evolution of social security laws in India, aimed at addressing the complexities and challenges faced by the modern workforce. By consolidating various legislations, it provides a more streamlined framework for social security, enhancing the protections available to a broader spectrum of workers, including gig workers, contract labourers, and inter-state migrants. Key reforms such as the inclusion of contract labour within the definition of ‘employee’ and the provisions for voluntary coverage reflect the government’s recognition of the changing nature of employment in today’s economy.
However, the implementation of these reforms presents challenges, particularly for small businesses and employers, who may face increased financial obligations and administrative complexities. The decision to limit public consultation during the drafting process has left some industry concerns unaddressed, which may hinder the overall effectiveness of the Code. As the government moves forward with these initiatives, it will be crucial to ensure that the needs of both employers and workers are balanced, fostering an environment that encourages compliance while safeguarding workers’ rights.
Ultimately, the success of the Code will depend on its effective execution and the ongoing dialogue between the government, employers, and the workforce. By addressing the diverse needs of the Indian labour market, the Code has the potential to significantly enhance the social security landscape, promoting not only economic stability but also social equity in the years to come.
The Code 2020 represents a significant initiative by the Indian government to consolidate and streamline social security laws. However, the consolidation process has raised concerns, particularly among employers. Many hoped that the government would reconsider the stipulation that wages must constitute at least 50% of total remuneration, as this directly influences the calculation of social security contributions. Additionally, including contract labour within the definition of ‘employee’ may pose challenges for small businesses, potentially leading to increased financial responsibilities. Concerns have also been voiced regarding provisions for fixed-term employment, as extending certain benefits to these workers might deter businesses from offering such contracts, which are typically intended for short- term needs.
BIBLIOGRAPHY
· Government of India. (1979). Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979. https://clc.gov.in/clc/acts-rules/inter-state- migrant-workmen
· Government of India. (1972). Payment of Gratuity Act, 1972
https://clc.gov.in/clc/sites/default/files/PaymentofGratuityAct.pdf
· Government of India. (1996). Building and Other Construction Workers’ Welfare Cess Act, 1996. https://clc.gov.in/clc/acts-rules/building-and-other-construction-workers
· Government of India. (2008). Unorganized Workers’ Social Security Act, 2008. https://labour.gov.in/sites/default/files/unorganised_workers_social_security_act_200 8.pdf
· Government of India. (2020). Code on Social Security, 2020. https://labour.gov.in/sites/default/files/ss_code_gazette.pdf
· Government of India. (1948). Employees’ State Insurance Act, 1948. https://labour.gov.in/sites/default/files/theemployeesact1948_0.pdf
· Government of India. (1961). Maternity Benefit Act, 1961. https://clc.gov.in/clc/acts- rules/maternity-benefit-act
· Government of India. (1955). Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955. https://labour.gov.in/wageboard/working-journalists-and-other-newspaper-employees- conditions-service-and-miscellaneous