Code On Social Security, 2020

I. INTRODUCTION

With the intent of simplifying and consolidating labour laws, the

2 National Commission on Labour recommended the rationalisation
nd

of existing labour laws into 4 to 5 groups. In pursuance of the

recommendation, the Code on Social Security, 2020 ("Social
Security Code" or "Code") received the assent of the President on 28
September 2020.

The Code aims to regulate the organised / unorganised (or any

other) sectors and extend social security benefits, during sickness,
maternity, disablement, etc. to all employees and workers across
different organisations.

The Code undertakes to integrate nine existing labour laws relating

to social security into one integrated Code.
II. COVERAGE AND APPLICABILITY

The Code applies to everyone on wages in an establishment,

irrespective of occupation.

Earlier, under the Payment of Gratuity Act, 1972, the term "wages"
included "all emolument which is earned by an employee while on
duty or leave in accordance with the terms and conditions of his
employment and which are paid or are payable to him in cash and
includes dearness allowance but does not include any bonus,
commission, house rent allowance, overtime wages and any other
allowance".

Under the Social Security Code, the term "wages" includes all kinds
of remunerations capable of being expressed in monetary terms
including basic pay, dearness allowance, and retaining allowance.
However, it does not include any overtime compensation, house
rent, conveyance allowance, gratuity upon termination, or any
retrenchment compensation.

The Code shall have an overriding effect over anything inconsistent

in any other law or the terms of any award, agreement, or contract
of service, whether it was made before or after this Code came into
force.
III. CODE ON SOCIAL SECURITY: STRUCTURE AND PROCEDURE

The Code deals with social security organisations, employees'

compensation, provident fund, gratuity, Employees' State Insurance
Corporation, social security for construction workers, unorganised
workers, gig workers, and platform workers.

Every establishment shall mandatorily obtain registration under this

Code, including the establishments already registered under any
Central Act. Workers under different categories shall be required to
register under applicable Chapters in the Code. Further, any
business in the process of closure shall apply for registration
cancellation under this Code.

With the intent to increase the authenticity of the Code, any

employee or worker employed in the unorganised sector must
establish their identity through aadhar numbers for seeking benefits
available under the Code.

The Code has also included provisions for the establishment of

several boards that would administer and enforce different schemes,
such as State Building Workers Welfare Boards, National Social
Security Board, State Unorganised Workers' Social Security Board,
etc.

IV. SCHEMES

Under the Code, the Central Government shall, by notification,

frame different schemes for employees such as the Employees'
Provident Fund Scheme, Pension Scheme, Deposit Linked Insurance
Scheme, etc. The contributions under the different schemes are as
follows:

Applicability of Chapters under the Code

Chapt Chapter Applicability

er Name

No. Existing Legislations Social Security

 Code

Employee Every factory and Every

s' other establishment establishment with
III
Provident employing 20 or 20 or more
Fund more employees. employees.

Every
establishment with
10 or more
employees, other
Employee
than seasonal
s' State All factories other
employees.
IV Insurance than the seasonal
Corporati factories.
It shall also apply to
on
establishment
which conducts
hazardous
occupation.

Every factory, Every

plantation, port, oil establishment
field, employing 10 or
V Gratuity
mine, and the more employees on
railway company. any day of the

Every shop or preceding 12

establishment which months. The
employed 10 or more Chapter shall also
employees on any apply to every
day of the preceding shop, factory,
12 months. oilfield, mine,
railway company,
plantation, and
 port.

Applicable to every
establishment
Every establishment
including
including mine,
Government
factory, and
institutions.
plantation, and to
every establishment
Maternity It shall apply to
VI wherein persons are
Benefit every shop or
employed for the
establishment
exhibition of
which employs or
equestrian,
employed 10 or
acrobatic, and other
more employees in
performances.
the preceding 12
months.

To a certain class of
Applicable to the
employers for
Employees' employers and
payment of
VII Compensati employees to
compensation to
on whom Chapter IV
their employees for
does not apply.
injury by accident.

Social
Security
and Cess in
Applicable to every
respect of Every building and
VIII building and
construction work.
Building and construction work.
Other
Constructio
n Workers

IX Social Every worker Applicable to the

 Security for unorganised sector,
employed in the
Unorganise gig workers, and
unorganised sector.
d Workers platform workers.

Applies to career
Employmen
centres, vacancies,
t
persons seeking
XIII Information -
career centre
and
services, and
Monitoring
employers.

V. EMPLOYEES' STATE INSURANCE

The Employees' State Insurance Fund shall be set up for payment of

benefits, medical treatment, and attendance to the insured person,
travelling and compensatory allowances, pension, leave and joining
allowances, and payment of contributions to the Government,
among other costs that shall be defrayed by the Employees State
Insurance Corporation for administration.

The Code uniformly extends its coverage under the Employees'

State Insurance to all establishments employing 10 or more persons
and to plantation workers voluntarily. As per the Employees' State

Insurance Act 1948, the legislation was implemented as per the

notification released by every State. However, under the Code, the
Central Government may also extend the applicability to
establishments which engage in hazardous occupations. The
responsibility under this Chapter rests on the employer for
registering their employees with the Employees' State Insurance
Corporation, for payment of the contributions and for releasing the
benefits to the workers. The Code provides an option to
establishments employing less than 10 employees for voluntary
membership under the Employees' State Insurance.

The insured persons under the Code shall receive benefits like
periodical payments in case of sickness, miscarriage, or sickness
due to pregnancy, disablement, and medical treatment. Dependents
of an injured or deceased employee are entitled to receive such
benefits under the Code.

VI. GRATUITY

Earlier, under the Payment of Gratuity Act, 1972, gratuity was

payable to employees for rendering 5 years of continuous service on
their superannuation, retirement, or death. It is applicable to
employees who work on a fixed term basis and any such event as
notified by the Central Government. Continuous service shall imply
3 years of service for working journalists and other newspaper
employees.

Continuous service of 5 years is not mandatory for employees

working on a fixed-term basis. Instead, such employees shall be paid
gratuity on a pro-rata basis. It is a positive step for employees who
work on a term basis of employment.

While the threshold of the gratuity amount payable to an employee

is yet to be decided by the Central Government under the Code, the
earlier gratuity amount under the Payment of Gratuity Act, 1972
was set at INR 20,00,000.

VII. OTHER BENEFITS

Maternity Benefits

o Every woman employed in an establishment shall be entitled to

receive maternity benefits at the rate of average daily wage for
the period of her
o To receive the benefits, such woman should have worked for at
least 80 days in 12 months immediately preceding the date of
her expected
o The maximum period for maternity benefits can be up to 26
o If no pre-natal confinement and post-natal care is provided by
the employer, then such woman shall also be entitled to a
medical bonus of INR 3,500 from her

Employee Compensation
 o Workers are entitled to compensation from the employer for
cases involving fatal accidents, bodily injury, or death during
the work
o Accidents or occupational hazards for which employees are
liable, have been listed out in the third schedule of the
o The amount of compensation provided is equal to 50% of the
deceased employee's monthly wages which is multiplied to
relevant
o For employees with permanent total disablement or 60% of the
monthly wages of the injured employee multiplied by relevant
factors which is determined by the Central

VIII. BUILDING AND OTHER CONSTRUCTION WORKERS

Cess is a tax that is levied for the promotion and development of

social services. Under the Code, cess is levied to secure funds for
the welfare and social security of workers. It shall be levied on the
employer, at rates specified by the Central Government.

The levy and collection of cess for building and construction workers
have been charged under the Code at a minimum of 1% and a
maximum of 2%. However, unlike the Building and Construction
Workers Welfare Cess Act, 1996, the Social Security Code
differentiates itself by implementing a process for self-assessment
on cess, previously done by government officers.

IX. UNORGANISED, GIGS AND PLATFORM WORKERS

The Code has distinguished itself from the Unorganised Workers

Social Security Act, 2008 ("UWSSA") by creating a distinction
between 'unorganised workers', 'gigs', and 'platform workers'. To
that end, the Code elaborates on the framing of schemes which
includes 'education' for unorganised workers and 'creche' for gigs
and platform workers under its coverage, unlike the UWSSA.

Such schemes may be 'wholly' or 'partially' funded by the State

Government and other sources, including corporate social
responsibility funds. Proper records of the Schemes under this
Chapter shall be maintained by the authority notified by the
appropriate Government. To be eligible under the Code, a worker
must satisfy two requirements: (a) completion of 16 years of age;
and (b) submit a self-declaration certificate in the manner
prescribed by the Central Government. Additionally, the State
Government may provide a helpline facility for unorganised workers,
gigs, and platform workers to assist them in registration and avail
information relating to the social security schemes.

X. COMPLIANCES UNDER THE CODE

File returns for such period as prescribed by the appropriate

Government.

Maintain records and registers containing information regarding

persons employed, finance and accounts in a uniform manner,
muster roll, wages, and such other particulars and details.

XI. LIABILITY OF EMPLOYERS

The Code states that the employer shall not reduce an employee's
wages or the total amount of benefits to which he is entitled
because of his obligation to pay any contributions required under
this Code. Further, the employer shall be liable to pay simple
interest on the amount due under this Code from the due date till
the date of payment at a rate as may be notified by the Central
Government from time to time.
The Code also states that when an employer transfers his
establishment by sale, gift, lease, licence, or in any other way, the
employer, and the transferee will be jointly and severally liable to
pay the amount due for any liabilities, cess, or any other amounts
payable under this Code till the date of such transfer. However, the
liability of the transferee shall be limited to the value of the assets
obtained by him through such transfer.

XII. REPORTING OF VACANCIES TO CAREER CENTRES

Under the Code, for filling up any vacancies, the establishments will
be required to report such vacancies to career centres, from such
date as specified in the notification issued by the appropriate
government. However, the employer shall be under no obligation to
recruit any person through career centres, merely because a
vacancy has arisen. Such reporting of vacancies to career centres
shall not apply to employment like agriculture (private sector
establishment) except employment in plantation, domestic service,
staff of Parliament, or any State Legislature, employment for a term
of fewer than 90 days, a non-governmental establishment with less
than 20 employees, etc.

XIII. OFFENCES AND PENALTIES

Offence Punishment

If any person being an Imprisonment for a term

employer fails to pay any which may extend to 3
contribution under this Code: years:

· which shall not be less than

1 year and a fine of INR
1,00,000 if the employee's
contribution has been
deducted from his wages
and not paid by the
employer; and
 · which shall not be less than
2 months but may be
extended to 6 months and a
fine of INR 50,000, in any
other case.

If any person is an employer:

· Fails to provide any maternity

benefit;

· Fails to produce any register

or document on demand by
inspector-cum-facilitator;

· Fails to pay the cess for

building workers;
Imprisonment for a term
· Dishonestly makes a false which may extend to 6
return, report, statement, or months or with a fine which
information for submission; may extend to INR 50,000,
or both.
· Obstructs any inspector-cum-
facilitator or other officer of a
competent authority in the
discharge of his duties; and

· Dismisses, discharges,
reduces in rank, or penalises a
woman employee in
contravention of the provisions
of this Code.

If any person being an Imprisonment for a term

employer fails to pay any which may extend to 1 year
amount of gratuity: or with a fine which may
extend to INR 50,000, or
 both.

If any person being an

employer:

· Deducts or attempts to
deduct any part of the
employer's contribution from
the wages of an employee;

· Reduces the wages or any

Fine which may extend to
privilege admissible to an
INR 50,000.
employee in contravention of
this Code;

· Fails to submit any return,

report, statement, or
information;

· Fails to pay any compensation

to an employee;

· Fails to send a statement to

the competent authority as per
Chapter VII (Employee's
Compensation);

· Contravention of any
provision of this Code for which
no special penalty is given;

· Obstructs executive officers in

exercising their functions;

· Fails to comply with the

condition subject to which
exemption from the provisions
of this Code by the appropriate
 government; and

· Fails to pay administrative or

inspection charges.

In case of any subsequent offence, the penalty will be imprisonment

for a term which may extend to 2 years and with a fine of INR
2,00,000. However, where such subsequent offence is regarding
failure by the employer to pay any contribution, charges, cess,
maternity benefit, gratuity, or compensation as per this Code, the
penalty will be imprisonment for a term which may extend to 3
years, but which shall not be less than 2 years and with a fine of INR
3,00,000.

If the offence is committed by a company, then every person who at

the time of the commission of the offence was the in-charge and
responsible for the conduct of the company, will be responsible and
deemed to be guilty.

The content of this article is intended to provide a general guide to

the subject matter. Specialist advice should be sought about your
specific circumstances.