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New labour code on Social Security has not been able to address overlapping definitions

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A slew of amended labour laws were pushed through the Rajya Sabha session which ended on Wednesday. India Legal has already published an analysis of the Farm Bills that have been passed. India Legal has also discussed, in two previous instalments, two labour codes – the Code on Industrial Relations and the Code on Occupational Safety, Health and Working Conditions. In this third and final tranche, we talks about the important points of The Social Security Code, 2020. In preparing this, we have taken the liberty to absorb resources from PRS.

By Priyanka Payal

A complete understanding of The Code on Social Security, 2020

Three of the four labour code bills (the Code on Wages, 2019 had been passed last year), that comprise the government’s flagship labour reforms, were passed by the Rajya Sabha on September 23, after they were introduced in the upper house on the same day. Introducing the laws in the upper house, junior labour minister Santosh Gangwar said the new labour reform laws will provide a “safe environment” for workers. “Social security benefits have also been added. This will be in sync with Prime Minister Narendra Modi’s resolve for universal social security,” he added. The bills were passed in the Upper House by voice vote amid boycott by the opposition over suspension of eight parliamentarians given their unruly behaviour.

The National Democratic Alliance (NDA) government has notified the three labour codes, passed by Parliament, after securing the nod of President Ram Nath Kovind on Monday.

The Social Security Code Bill, 2020, proposes a National Social Security Board which recommends the central government to formulate suitable schemes for different sections of unorganised workers, gig workers and platform workers.

The Code on Social Security, 2020 consolidates nine different central laws: The Employees Provident Fund and Miscellaneous Provisions Act, 1952, The Employees State Insurance Act, 1948, The Maternity Benefit Act,1961, The Building and other Construction Workers Cess Act, The Payment of Gratuity Act, 1972, The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959, The Cine Workers Welfare Fund Act, 1981, The Unorganized Workers’ Social Security Act, 2008, Employees Compensation Act, 1923.

Key features of The Code on Social Security, 2020

  • A notable feature of the Code is that it extends the protection of welfare measures to ‘gig workers’, ‘platform workers’ and ‘unorganized workers’. The 2019 Bill mandated social security for certain establishments, based on thresholds, such as the size of the establishment and income ceilings. The 2020 Bill states that the central government may, by notification, apply the Code to any establishment (subject to size-threshold as may be notified).  
  • The Standing Committee on Labour (2020) had examined the 2019 Bill with similar provisions and recommended that the Code should provide a framework for achieving universal social security within a definite time frame.It made several recommendations for expanding the coverage of establishments, employees, and types of benefits. These include: (i) re-considering establishment-size based thresholds and expanding the definition of “establishment” to include other enterprise categories such as agricultural and own account enterprises, (ii) expanding definitions of “employees” to include Asha and Anganwadi workers, and “unorganised workers” to include agricultural workers, (iii) creating a separate fund for inter-state migrant workers, (iv) introducing unemployment insurance for unorganised workers and (v) and re-introducing labour welfare funds for workers in certain industries such as iron ore mines and beedi establishments.  
  •  
  • Further, under the 2019 Bill, the government could notify schemes for unorganised sector workers (such as home-based and self-employed workers), gig workers, and platform workers. Gig workers refer to workers outside the traditional employer-employee relationship. Platform workers are those who access organisations or individuals through an online platform and provide services or solve specific problems. The 2020 Bill makes the following changes for such workers:
  • Social security funds for unorganised workers, gig workers and platform workers: The 2019 Bill empowered the central government to set up social security funds for unorganised workers, gig workers and platform workers. The 2020 Bill states that the central government will set up such a fund. Further, state governments will also set up and administer separate social security funds for unorganised workers. The 2020 Bill also makes provisions for registration of all three categories of workers – unorganised workers, gig workers and platform workers.   
     
  • National Social Security for gig workers and platform workers: The 2019 Bill provided for the establishment of a national and various state-level boards for administering schemes for unorganised sector workers. The 2020 Bill states that in addition to unorganised workers, the National Social Security Board may also act as the Board for the purposes of welfare of gig workers and platform workers and can recommend and monitor schemes for gig workers and platform workers. In such cases, the Board will comprise a different set of members including: (i) five representatives of aggregators, nominated by the central government, (ii) five representatives of gig workers and platform workers, nominated by the central government, (iii) Director General of the (Employees’ State Insurance Corporation) ESIC, and (iv) five representatives of state governments.
  • · Key Issues in the Code on Social Security, 2020

1. Purpose of the Bill

·  The NCL recommended that: (i) the social security system should apply to all establishments, (ii) the existing wage ceilings for coverage should be removed, and (iii) there should be a functional integration of the administration of existing schemes. Further, every employer and employee may make a single contribution for the provision of all the benefits, with a ceiling prescribed for such contributions. However, the Bill largely retains the current set up and does not fully implement these recommendations.

·  The Bill continues to retain thresholds based on the size of establishment for making certain benefits mandatory. Benefits, such as pension and medical insurance continue to be mandatory only for establishments with a minimum number of employees (such as 10 or 20 employees). All other categories of workers (i.e., unorganised workers), such as those working in establishments with less than 10 employees and self-employed workers may be covered by discretionary schemes notified by the government. This is similar to the current system where unorganised workers are governed by a different law (being subsumed by the Bill) under which voluntary schemes are notified for such workers. A large numbers of workers may continue to be excluded.  Note that the Periodic Labour Force Survey Report (2018-19) indicates that 70% of regular wage/salaried employees in the non-agricultural sector did not have a written contract, and 52% did not have any social security benefit.  

·  The Bill continues to treat employees within the same establishment differently based on the amount of wages earned. For instance, provident fund, pension and medical insurance benefits are only mandatory to employees earning above a certain threshold (as may be notified by the government) in eligible establishments.  

·  The Bill continues to retain the existing fragmented set up for the delivery of social security benefits. These include: (i) a Central Board of Trustees to administer the EPF, EPS and EDLI Schemes, (ii) an Employees State Insurance Corporation to administer the ESI Scheme, (iii) national and state-level Social Security Boards to administer schemes for unorganised workers, and (iv) cess-based labour welfare boards for construction workers. 

 
2. Provisions on gig workers and platforms workers are unclear 

The 2020 Bill introduces definitions for ‘gig worker’ and ‘platform worker’. Gig workers refer to workers outside the “traditional employer-employee relationship”. Platform workers are those who are outside the “traditional employer-employee relationship” and access organisations or individuals through an online platform and provide services for payment. The Bill also creates provisions for unorganised workers. An unorganised worker is defined as one who works in the unorganised sector, and includes workers 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. The Bill mandates different schemes for all these categories of workers. However, there may be some overlap between their definitions, according to PRS. 

Consider the example of a driver working for an app-based taxi aggregator. Here, there is no employee-employer relationship. For example, appointment letters are not issued, social security benefits are absent, work hours are not regulated by the employer, and the driver may choose to work for a competitor taxi aggregator. Therefore, the nature of the work involved may lie outside the purview of a ‘traditional employer-employee relationship’, making him a ‘gig worker’.  However, the driver is able to pursue this job only through an online platform. This would meet the definition of a ‘platform worker’ as well. Such a driver may also be an ‘unorganised worker’ as he may be self-employed. With such overlap across definitions, it is unclear how schemes specific to these categories of workers will apply.

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