Authored by: Raj Ramachandran and Rakki K
Towards the larger intent to facilitate ease of doing business in India, particularly in respect of labour-related compliances, the Government of India has been working towards consolidating 44 central labour law legislations into four basic Labour Codes. One of the Codes was introduced in the Lok Sabha almost a year ago by the Ministry of the Labour and Employment, viz. the Code on Social Security, 2019 (“Code”). The draft Code proposes to replace nine legislations relating to social security.
The Code consolidates (i) The Employees Compensation Act, 1923, (ii) The Employees State Insurance Act, 1948, (iii) The Employees Provident Fund and Miscellaneous Provisions Act, 1952, (iv) The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959, (v) The Maternity Benefit Act, 1961, (vi) The Payment of Gratuity Act, 1972, (vii) The Cine Workers Welfare Fund Act, 1981, (viii) The Building and Other Construction Workers Cess Act, 1996, and (ix) The Unorganized Workers’ Social Security Act, 2008.
A key aspect covered in the Code is the setting up of a social security fund, or funds, to provide welfare benefits (pension, medical cover, and health and death and disability benefits) to all workers, including gig workers, platform workers, and unorganized workers. Some of the salient features of the Code are to provide for filing of a single return, electronically or otherwise, by the employer and to make Aadhaar mandatory for registration of a member/beneficiary/ any other person to register or for receiving benefit.
The term ‘wages’ as defined in the Code has a widened scope. As per the Payment of Wages Act, 1948, the term ‘wages’ means all remuneration expressed in monetary terms, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment, or of work done in such employment, and includes house rent allowance. While the definition of ‘wages’ is quite similar under the Code, 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. Further, where an employee is given any remuneration in kind by his employer, the value of such remuneration in kind that does not exceed 15 percent of the total wages payable to him is deemed to form part of the wages of such employee. This apparently implies that wages for social security benefits will be at least 50 percent of overall compensation.
The Code has also introduced initiatives for enhancing the social security of unorganised workers (any home-based worker, self-employed worker, or wage worker). including schemes relating to provident fund, employee injury benefit, housing, educational scheme for their children, old age assistance and funeral expenses. Currently, the Unorganized Workers’ Social Security Act, 2008, does not provide for e-registration of unorganized workers. However, the Code requires the unorganised workers to submit certain declaration based on which he/she is registered.
Various bodies to administer EPF, EPS, ESI, and EDLI schemes and initiatives for unorganised workers and building workers are proposed to be set up. Currently, ‘gig’ workers do not fit in the definition of ‘employee’ or ‘worker’, and the extant labour law has no provisions that govern gig workers with the consequence that such workers cannot claim any benefits such as minimum wages, overtime and leave pay which are allowed to typical employees. The Code, however, specifically defines gig workers as persons who earn their living from wage-based tasks outside of the traditional employer-employee relationship. Further, under the Code, gig workers are provided with benefits for health and maternity and insurance cover for life and disability.
It is also proposed under the Code that any scheme notified by the Central Government for unorganised workers can also be funded from any source, including a corporate social responsibility fund within the ambit of the Companies Act, 2013. It should be noted that the threshold for the penalties and/or punishment have been increased under the Code, and it is expected that this measure will act as a deterrent going forward.
Most of the provisions of the Code are in sync with the current legislation. It will be interesting to see how the Code is adopted and implemented now that several legislations have been consolidated into one. Given the current pandemic and the various compliances employers have to adhere to under the different labour legislations in India, the Code should have a positive impact if brought into force without delay. Awareness of the key changes under the Code coupled with a willingness by employers to tailor their policies and infrastructure to comply with the revised legislation are expected to provide basic social security to the hitherto neglected unorganised workers while fostering business growth.
—Raj Ramachandran and Ms Rakki K are Partners at J. Sagar Associates. The views expressed are personal.
First Published: IST