The Social Security Code, 2020 (“SS Code“) has been passed by both houses of the Parliament and received Presidential assent on September 28, 2020. The SS Code has been enacted to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors. The SS Code has vital provisions with respect to social security benefits to workers including gig workers and this article aims to summarize some of the important provisions introduced by the SS Code.
Key Definitions under the SS Code
Aggregator: “Aggregator” has been defined as a digital intermediary or a market place for a buyer or user of a service to connect with the seller or the service provider.
Employee: “Employee” has been defined as any person (other than an apprentice engaged under the Apprentices Act, 1961) employed on wages by an establishment, either directly or through a contractor, to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, whether the terms of employment be express or implied. The employee of definition may vary for different chapters under the SS Code based on the quantum of wages such an employee earns.
Gig Worker: “Gig Worker” under the SS Code has been defined as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.
Platform Work: “Platform work” has been defined as 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 and a “platform worker” has been defined as a person engaged in or undertaking Platform Work.
Social Security: “Social Security” under the SS Code means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed, under the SS Code.
Unorganised Sector: “Unorganised Sector” means an enterprise owned by individuals or self-employed workers and engaged in the production or sale of goods or providing service of any kind whatsoever, and where the enterprise employs workers, the number of such workers is less than ten (10).
Unorganised Worker: “Unorganised Worker” means a home-based worker, self-employed worker or a wage worker in the Unorganised Sector.
Benefits to Gig Workers and Platform Workers
The SS Code currently does not provide for any specific Social Security to be provided to Gig Workers and Platform Workers, however it provides the right to the Central Government and State Government to notify schemes for such workers related to life and disability cover, health and maternity, provident fund, employment injury benefit, housing etc1. The SS Code mandates that the schemes may be funded through a combination of contributions from the central government, state governments, and Aggregators. The Central and State Government along with such schemes shall also prescribe the records that are required to be maintained in relation to such Gig Workers and Platform Workers.
The SS Code also mandates that every Unorganised Worker, Gig Worker or Platform Worker is required to be registered, subject to the fulfilment of the following conditions:
(a) he has completed sixteen (16) years of age or any other prescribed age; and
(b) he has submitted a self-declaration containing information prescribed by the Central Government.
Every eligible Unorganised Worker, Gig Worker or Platform Worker is to make an application for registration along with prescribed documents including Aadhaar number and such worker shall be assigned a distinguishable number to his application. Whether such schemes would be applicable to all Unorganised Workers, Gig Workers and Platform Workers irrespective of the quantum of salary earned by them, will depend on the final form of the schemes introduced by the State or Central Government.
Employees' Provident Fund2
The SS Code has altered the applicability of the Employees' Provident Fund Scheme which now will be applicable to every establishment in which twenty (20) or more employees are employed. The Central Government may, establish a provident fund where the contributions paid by the employer to the fund shall be ten per cent (10%) of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor). The employee's contribution shall be equal to the contribution payable by the employer in respect of him. The Central Government, may, by notification, increase the contribution percentages to twelve percent (12%) for both employers and employees of certain establishments.
If any person being an employer, fails to pay any contribution under the SS Code or rules, regulations or schemes made thereunder, he shall be punishable with: (i) imprisonment for a term which may extend to three (3) years, but which shall not be less than one (1) year, in case of failure to pay the employee's contribution which has been deducted by him from the employee's wages and shall also be liable to fine of Rupees One Lakh (Rs. 1,00,000/-); or (ii) which shall not be less than two (2) months but may be extended to six (6) months, in any other case and shall also be liable to a fine of Rupees Fifty Thousand (Rs. 5,000/-).
The SS Code has fixed different thresholds with respect to eligibility for gratuity of permanent and fixed term employees. Gratuity shall be payable to eligible employees by every shop or establishment in which ten (10) or more employees are employed, or were employed, on any day of the preceding twelve (12) months. Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five (5) years, on his superannuation; on his retirement or resignation; on his death or disablement due to accident or disease; on termination of his contract period under fixed term employment. However, a continuous service of five (5) years shall not be necessary where the termination of the employment of any employee is due to death or disablement or expiration of fixed term employment. For every completed year of service or part thereof in excess of six (6) months, the employer shall pay gratuity to an employee at the rate of fifteen (15) days' wages. The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government. Gratuity under the SS Code is payable to employees hired directly or through a contractor.
If any person fails to pay any amount of gratuity to which an employee is entitled to, he shall be punishable with imprisonment for a term which may extend to one (1) year or with fine which may extend to Rupees Fifty Thousand (Rs. 50,000/-), or with both.
Employees State Insurance
The SS Code allows for voluntary registration under the Employee State Insurance if the employer and majority of the employees agree. Further, the Government has the power to extend the Employee State Insurance Scheme to any hazardous occupation irrespective of the number of employees employed. The SS Code also provides for coverage of Gig Workers and Unorganised Sectors under the Employee State Insurance Scheme. The employer shall pay in respect of every employee, whether employed by him directly or through a contractor, both the employer's contribution and the employee's contribution. Neither the employer nor the contractor shall be entitled to deduct the employer's contribution from any wages payable to an employee or otherwise to recover it from him.
Maternity benefits shall be applicable to every shop or establishment in which ten (10) or more employees are employed, or were employed, on any day of the preceding twelve (12) months; and such other shops or establishments notified by the appropriate Government. No employer/ nor woman can knowingly employ a woman/work in any establishment during the six (6) weeks immediately following the day of her delivery, miscarriage or medical termination of pregnancy. A woman shall be entitled to maternity benefit if she has actually worked in an establishment of the employer from whom she claims maternity benefit, for a period of not less than eighty (80) days in the twelve (12) months immediately preceding the date of her expected delivery. The maximum period for which any woman shall be entitled to maternity benefit shall be twenty-six weeks (26) of which not more than eight (8) weeks shall precede the expected date of her delivery. However, the maximum period entitled to maternity benefit by a woman having two or more surviving children shall be twelve (12) weeks of which not more than six (6) weeks shall precede the date of her expected delivery.
If any person is in contravention of the provisions of maternity benefits or dismisses, discharges, reduces in rank or otherwise penalizes a woman employee or fails to provide any maternity benefit to which a woman is entitled to, he shall be punishable with imprisonment for a term which may extend to six (6) months or with fine which may extend to Rupees Fifty Thousand (Rs. 50,000/-), or with both.
The SS Code will subsume various existing labour laws in India. The SS Code has widened the coverage by including the unorganised sector, fixed term employees and gig workers, platform workers etc., in addition to contract employees. It will be therefore very important for establishments to assess the implications and revisit the compliance requirements under the SS Code, once it is brought into effect.
1 Section 109 of the SS Code.
2 Section 16 of the SS Code and Chapter III of the SS Code.
3 Chapter V of the SS Code.
4 Chapter VI of the SS Code.
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.