New Labour Laws Explained (Part II) : The Code On Social Security 2020

The Code on Social Security 2020 was one of the three labour law bills passed by the Parliament last week.

In this part, we will discuss the Code on Social Security 2020, and the major changes brought by it.

The Code on Social Security, 2020

The Code consolidates nine different central laws :

1. The Employees Provident Fund and Miscellaneous Provisions Act, 1952
2. The Employees State Insurance Act Act, 1948
3. The Maternity Benefit Act,1961
4. The Building and other Construction Workers Cess Act
5. The Payment of Gratuity Act, 1972
6. The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959
7. The Cine Workers Welfare Fund Act, 1981
8. The Unorganized Workers' Social Security Act, 2008
9. Employees Compensation Act, 1923

The Code repeals the above enactments.

Gig workers, Platform workers, unorganized workers made eligible for welfare measures

A notable feature of the Code is that it extends the protection of welfare measures to 'gig workers', 'platform workers' and 'unorganized workers'.

The Code defines "gig worker" as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship (Section 2(35). This will cover those who work as delivery persons for online food delivery platforms, e-commerce sites etc.

'Platform worker' is a person who has a work arrangement outside of a traditional employer-employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for payment(Section 2(60)).

"Unorganised worker" means a home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by the Industrial Disputes Act, 1947 or Chapters III to VII of the Code(Section 2(86)).

The Code mandates that the Central Government should frame a scheme for the welfare of these classes of employees in relation to (i) life and disability cover; (ii) health and maternity benefits; (iii) old age protection; (iv) education; and (v) any other benefit as may be determined by the Central Government (Chapter IX).

Also, the State Governments are mandated to frame shceme for these employees in relation to (i) provident fund; (ii) employment injury benefit; (iii) housing; (iv) educational schemes for children; (v) skill upgradation of workers; (vi) funeral assistance; and (vii) old age homes

Every unorganised worker, gig worker or platform worker shall be required to be registered under the Code provided that the person has completed 16 years of age. Aadhaar number is mandatory for such registration.

Role of aggregators:

The Code states that schemes for gig workers and platform workers may be funded through a combination of contributions from the central government, state governments, and aggregators, who are listed in Schedule 7.

The Schedule lists nine categories including ride-sharing services, food and grocery delivery services, content and media services, and e-marketplaces. Any contribution from such an aggregator may be at a rate notified by the government falling between 1-2% of the annual turnover of the aggregators. However, such contribution cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.  

Definition of 'wages' revised : Section 2(88)

The Code says that all remuneration (in monetary terms), whether by way of salaries, allowances, or otherwise, would form part of wages and also includes basic pay, dearness allowance, and retaining allowance.

The components excluded for calculation of wages under the Code are bonus not forming part of remuneration, house rent (or the value of living accommodation), provident fund, commission to the employee, overtime allowance, and conveyance allowances, where the aggregate amount paid under these heads does not exceed 50 percent of the total remuneration being paid to the employee. the total excluded components should not exceed 50% of the total remuneration. The third part of the definition provide limit as the definition very clearly specifies the list of exclusions so anything which is paid to the employees other than the exclusion would be covered and within this specific exclusion the limit cannot be more than 50%.

Definition of 'inter-state migrant worker' expanded to include self-employed persons : Section 2(41)

Apart from a migrant worker recruited through a contractor, the defnition of 'inter-state migrant worker' includes a person who has come on his own from one State and obtained  employment in an establishment of another state.

The definition covers workers drawing wages not exceeding eighteen thousand rupees per month or such higher amount as may be notified by the Central Government from time to time.

EPF applicable to all establishments with 20 or more employees : First Schedule of the Code

The Code makes Employees Provident Fund Scheme applicable to all establishments having 20 or more employees. Under the EPF Act, only those establishments listed in the schedule having 20 or more employees were brought under the EPF scheme.

The contributions paid by the employer to the fund shall be ten per cent of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor), and the employee's contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten per cent. of the wages, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Code (Section 16).

Pre-deposit for appeal against EPF assessment

The Code provides for appeal against an order passed by any authority in regard to determination and assessment of dues and levy of damages relating to Employees' Provident Fund by an employer only after depositing with Social Security Organisation concerned, twenty-five per cent of the amount due from him as determined by the authority against whose order the appeal has been preferred;

Employees State Insurance 

ESI is applicable to every establishment in which ten or more persons are employed other than a seasonal factory.

Gig workers, unorganized sectors and plantation workers are also brought under the purview of ESI. 

Gratuity

Gratuity is made applicable to 

 (a) every factory, mine, oilfield, plantation, port and railway company; and

(b) every shop or establishment in which ten or more employees are employed, or were employed, on any day of the preceding twelve months; and such shops or establishments as may be notified by the appropriate Government from time to time.

 In the case of an employee employed on fixed term employment or a deceased employee, the employer shall pay gratuity on pro rata basis.

Construction works of less than Rs 50 lakhs exempted 

The definition of 'building and other construction works' does not include works having a total cost of construction exceeding Rs 50 lakhs, employing more than a certain notified number of workers(Section 2(6)).

Such constructions are therefore not subjected to the levy of cess for the social security of construction workers under Chapter VIII.

Application of Aadhaar : Section 142

Aadhaar number is made mandatory for availing benefits and services under the Code.

Power to defer application of the Code in the event of disaster, pandemic etc : Section 144

The Code empowers the Central Government to defer the application of the provisions of the Code for a period of three months in the event of a national disaster, pandemic or endemic.

Power to exempt : Section 143

The Code empowers the appropriate government to exempt any industrial establishment or class of industrial establishments from the provisions of the Code.

Also Read : New Labour Laws Explained (Part 1): Industrial Relations Code 2020

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