The Code on Social Security, 2020 represents a significant reform in India’s labour welfare framework, aimed at ensuring comprehensive and inclusive social protection for all sections of the workforce, the government said on Saturday.
It consolidates nine existing social security laws into a single, streamlined framework that extends coverage to organised, unorganised, gig, and platform workers alike, an official statement said.
“A standardised definition of “wages” across all labour laws for social security purposes to be followed. As per the Code, the definition of “Wage” includes basic pay, dearness allowance (DA), and retaining allowance, if any,” it said.
If other pay-outs such as bonus, house rent allowance, conveyance allowance, overtime allowance, or commission exceed 50 per cent of the total remuneration (or such percentage as notified by the Government), the excess amount will be added back to wages.
“This will increase the wage amount and, in turn, enhance the value of social security benefits such as gratuity, pension, and leave salary, which are linked to wages,” the statement said.
By bringing diverse labour laws under one umbrella, the Code seeks to simplify compliance, enhance efficiency, and expand access to benefits such as life and disability insurance, health and maternity care, provident fund, and gratuity.
It also introduces digital systems and transparent facilitation mechanisms to strengthen implementation and support both employers and employees, the statement said.
Under Section 53 of the code, the Government has reduced the eligibility requirement for gratuity for Fixed Term Employees (FTEs) from five years to one year. In cases where the employee completes one year of continuous service, gratuity shall be applicable on proportionate basis.
For the first time in the country, social security benefits have been extended to unorganised, gig and platform workers under Sections 113 and 114 of the Code on Social Security, 2020. The code also addressed the gap and includes the definition of aggregator (digital intermediary). This will benefit such workers directly.
The Code covers measures to extend welfare benefits to a large domain of workers.
These measures include Establishment of a National Social Security Board,
Provision for State Unorganised Workers Social Security Board,
and Creation of a Social Security Fund and Section 13 has also been envisaged for entrustment of additional functions to social security organisations , for future requirements.
Establishment of a National Social Security Board to advise the Government for formulating and monitoring suitable schemens for different sections of workers in the unorganised , gig and platform sectors.
Provision for State Unorganised Workers Social Security Board that will advise the state governments about suitable schemes for unorganised workers, gig and platform workers, covered under Section 6(9).
Creation of a Social Security Fund based on contributions from the Central & State Governments , collected from Corporate Social Responsibility, fines collected due to compounding etc. This fund will be used to provide benefits such as life insurance, disability cover, health and maternity benefits, and provident fund schemes for these workers.
The Employees Provident Fund & Miscellaneous Provisions Act, 1952, valid for the establishments mentioned in Schedule 1 of the Act, has been removed under the code.
Now, the Code on Social Security, 2020 extends the coverage of the Employees’ Provident Fund (EPF) with the provisions applying to all establishments that have 20 or more employees, regardless of the type of industry.
More workplaces and workers will be covered under the Provident Fund system, allowing a larger number of employees to receive social security benefits like retirement savings. Since the applicability issue is resolved, it shall reduce litigation.
The Government will build a National Database of Unorganised Workers to make it easier to design and deliver social security benefits for specific worker groups.
All unorganised, gig, and platform workers will have to register themselves on a National Portal, post which each worker will receive a Unique Identification Number. Verified through Aadhaar, it will be valid across the entire country.
This will ensure that workers, especially migrant workers, can carry their benefits with them even if they move to another place for work.