Social Security laws and implementation thereof

Study Notes

Social Security laws and implementation thereof

Learning Objectives:

At the end of this chapter, you will be able to:

 Know about the social security legislation and implementation in India

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Social Security laws and implementation thereof

Social Security Laws and implementation of the laws

Indian social security laws are designed to give families and people facing a range of hazards
and vulnerabilities a safety net and social protection. Numerous government organisations,
initiatives, and plans are involved in the implementation of social security laws. Here is a summary
of India's social security laws and how they are put into practise:

The social security system in India is made up of numerous plans and initiatives that are dispersed
throughout numerous laws and rules. But keep in mind that just a small part of Indian population
is covered by the country's centralised social security system.

Additionally, unlike in some other countries, the social security system in India entails lump sum
employer liabilities in addition to insurance premium payments into government coffers.

The following are key social insurances are often covered under India's social security
programmes:

1. The Factories Act of 1948, a well-known social security regulation in India, governs
working conditions in all categories of manufacturing businesses that fall under the
category of "factory."

The Factories Act of 1948 has the following major components.

 To supervise the hiring of women, kids, and young people, as well as to protect the health
and safety of employees while they are on the job.
 To ensure, among other things, that proper working hours, leave, and overtime are
observed.

2. Employees' Provident Fund Act of 1952 establishing the Employees' Provident Fund
and other provisions:

The Ministry of Labour and Employment's Employees' Provident Fund Organisation (EPFO)
provides superannuation pension and family pension in the event of a worker's passing while on
the job. Out of India's 400 million workers, only roughly 35 million had access to official social
security in the form of old-age income protection by the year 2019. 26 million of these 35 million
workers are part of the Employees' Provident Fund Organisation, which also includes government
employees, PSU employees, military personnel, and private sector workers.

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Social Security laws and implementation thereof

Businesses with at least 20 employees may use the EPFO's programme. When an employee
earns up to INR 15,000 per month, contributions to the Employees' Provident Fund (EPF) Scheme
are required for both the employer and the employee, and optional when they earn more. If an

employee's pay is higher than this, the employer's contribution is only due for the first INR 15,000
of that employee's income. The payment rate for both the employee and employer is capped at
10% for establishments with less than 20 employees or those that satisfy other requirements as
specified by the EPFO.

The Employees' Provident Fund Organisation oversees three schemes:

The Employees' Provident Fund Organisation (EPFO) is created by this Act to manage social
security programmes for workers in the organised sector. It consists of the Employees' Pension
Scheme (EPS), Employees' Deposit-Linked Insurance Scheme (EDLI), and Employees'
Provident Fund (EPF). These programmes, which offer life insurance, disability benefits, and
retirement benefits, are funded by both employers and employees.

3. On April 1, 2017, the Maternity Benefit (Amendment) Act, 2017, which increased some
of the major benefits required under the previous Maternity Benefit Act of 1961, went into
effect. The revised law extends paid maternity leave for the first two children to organised
sector women for a total of 26 weeks, up from the previous 12 weeks. The third kid is
eligible for a 12-week maternity leave. India currently ranks third in the world for the length
of maternity leave, behind only Norway (44 weeks) and Canada (50 weeks).

4. According to the Payment of Gratuity Act of 1972, businesses with 10 or more staff
members are required to give employees who have been with a company for five years or
more an additional 15 days of salary for each year of service.

However, if an employee has been fired from their employment for any reason, the employer has
the right to refuse to give them a gratuity. In such a forfeiture situation, a termination order detailing
the allegations and the employee's wrongdoing is required.

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Social Security laws and implementation thereof

5. The Employees' State Insurance (ESI) Act of 1948 established a fund to pay for medical
expenses for workers and their families, cash benefits during sickness and pregnancy,
and monthly payments in the event of death or disabling conditions for those employed in
factories and other establishments with 10 or more employees. (As of March 31, 2019,
there were about 130 million ESI beneficiaries, and over 120,00,000 factories and
commercial buildings were included.)

Hotels, stores, theatres and previews, restaurants, newsstands, and road-motor transport
operations are now included in the ESI scheme's coverage. Private educational and healthcare
organisations with ten or more employees are now included in the programme. Only specific
states and union territories are affected by this.

In the event of any unlucky circumstances at work, the ESI system provides benefits to both the
workers and their dependents. Employees or workers working in the aforementioned categories
who earn up to INR 21,000 per month (or INR 25,000 per month in the case of a disabled person)
are eligible for this social security programme under the ESI Act.

6. In cases of work-related injuries that end in death or incapacity, the employer is required
by the Employee's Compensation Act of 1923, formerly known as the "Workmen's
Compensation Act of 1923," to give compensation to the employee or their family.

Additionally, those who work in certain occupations run the danger of developing certain illnesses
that are peculiar and specific to their jobs. An employee who contracts an occupational disease
is considered to have been injured while on the job, and the employer is responsible for covering
related medical expenses. Parts I and II of Schedule I of the Employee's Compensation Act
enumerate injuries that result in permanent whole and partial disability, while Parts A, B, and C of
Schedule III of the Employee's Compensation Act specify occupational disorders.

The wage amount taken into account in the Employee's Compensation Act of 1923 calculations
was modified by the central government in the year 2020. Calculating compensation is based on
the circumstances of the occupational disability:

(a) Death, whichever is greater of 50 percent of the monthly wage times the pertinent component
or INR 120,000.

(b) Complete and permanent disability

whichever is greater: 60 percent of the monthly wage times the pertinent factor, or INR 120,000.

Schedule IV of the Employee's Compensation Act lists the relevant computation factor.

Governmental organisations at the national, state, and municipal levels are involved in the
implementation of social security laws in India. The EPFO, ESIC, and several state-level
authorities are among the organisations in charge of implementing and managing the social

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Social Security laws and implementation thereof

security programmes. They gather contributions from both employers and employees, keep track
of everything, distribute benefits, and make sure all pertinent rules and regulations are followed.

The successful implementation of social security regulations in India still faces obstacles,
nevertheless. Limited coverage, ignorance, cumbersome procedures, insufficient financing, and
difficulties reaching the unorganised sector are a few of these obstacles. The coverage and
efficacy of social security programmes in India are being improved through expanded outreach,
technology-driven projects, and policy reforms in order to solve these issues.