The Code On Social Security and their application

Presentation by Vinay Kumar Singh 1
The Code On Social Security
(36 of 2020)

Objective
To amend and consolidate the existing labour laws relating to
social security with the wider goal of extending social security benefits to
all employees and workers irrespective of belonging to the organised or
unorganised sectors and for the matters connected therewith or incidental
therto.
The Code on Social Security, 2020 brings, within itself the self-employed
workers, home workers, wage workers, migrant workers, the workers in the
unorganised sector, gig workers and platform workers for the purpose of
social security schemes, including life insurance and disability insurance,
health and maternity benefits, provident fund.

• The code consolidates the following Nine acts:
1. The Employee’s Compensation Act, 1923
2. The Employee’s State Insurance Act,1948
3. The Employees' Provident Funds and Miscellaneous Provisions Act 1952.
4. The Employment Exchanges (Compulsory Notification of Vacancies) Act,1959
5. The Maternity Benefit Act 1961
6. The Payment of Gratuity Act, 1972
7. The Cine-Workers Welfare Fund Act,1981
8. The Building and Other Construction Workers’ Welfare Cess Act 1996
9. The Unorganised Workers’ Social Security Act,2008.

The Code on Social Security was Passed by both the Houses of
Parliament received the assent of the President on 28th
September ,2020.
The Code is applicable to whole of India Section 1 (4)

Basic Structure of the Act
• The Act Contains 164 sections, 14 Chapters and 7 schedules.
• Schedule 1 - Application of Provisions
• Schedule 2 - Who are employees Third provision to Sec 2(26)
• Schedule 3 - List of Occupational Diseases
• Schedule 4 - List of Injuries
• Schedule 5 - Any Scheme framed u/s 15may provide for matters
• Schedule 6 - Factors for W/O Comp. Amount in case of PD and Death
• Schedule 7 - Classification of Aggregators

Important definitions
• Section 2(2) Aggregator as the digital intermediary or a market place for a buyer or user of a service to
connect with the seller or the service provider.
• The Aggregators listed under Schedule VII are
1. Ride sharing services
2. Food and grocery delivery services
3. Logistic services
4. e-Market place (both market place and inventory model) for wholesale/ retail sale of goods and/or
services (B2B/B2C)
5. Professional services provider
6. Healthcare
7. Travel and hospitality
8. Content and media services and
9. Any other goods and services provider platform.

• Section 2(35) defines "Gig worker" to mean a person who performs
work or participates in a work arrangement and earns from such activities
outside of traditional employer-employee relationship.
• Section 2 (61) defines ‘Platform worker’ to mean a person engaged in or
undertaking platform work
• Section 2(60) defines the ‘platform work’ to mean a work arrangement
outside of a traditional employer-employee relationship in which
organizations or individuals use an online platform to access other
organizations 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.

Social Security Fund
The Code mandates setting up of Social Security Fund both at Central
and state level.
Section141 (1) describes that here shall be established by the Central
Government a Social Security Fund for social security and welfare of
the unorganized workers, gig workers and platform workers.
The major source of the fund will be the amount collected by way of
composition of offences under the Code on Social Security, 2020 and
any other sources as prescribed.

Points to ponder
The Code intends to cover everyone whether in the organised sector or unorganised
sector through application of social security benefits for organised sector and social
security schemes for unorganised sector.
• The application for Provisions is consolidated in the First Schedule .
• There are also supplementary provisions in the Code which provides additional
application.
Once covered as a regular coverage, there is no coming back even if the threshold
count of the employees get reduced.
Voluntary coverage in case of PF and ESI when the regular coverage is not applicable
and there is an exit also possible in this case. But such exit cannot be made within 5
years and also when the regular coverage is achieved after the voluntary coverage and
before the exit.

• Central provident Fund Commissioner (CPFC) can permit voluntary coverage under Sec 1(5) of the Code
on Social Security, 2020.
• Move out option is available and Rule 3 Procedure is to be followed.
• Both the situations are based on agreement between employer and majority of employees.
• A 60 days time limit is provided under the Code on Social Security, 2020 to decide on the same. Or else
there is a deemed provision (application is deemed as permitted) applicable.
• No such application (opting in/ opting out) shall be made by the employer of the establishment before
five years of such coverage under provisions of Chapter III of the Code on Social Security, 2020.
• No such application shall be entertained unless the employer has furnished all statutory returns, paid
all statutory dues under the Code on Social Security, 2020 and submitted a self-certification to that
effect along with the application.
• As far as the chapter on ESI (Chapter IV) is concerned, application of the same kind, is to be decided
upon by the Director General of Corporation. (Rule 3 applies) .Here too, 60 days time limit is provided
for decision (Sec 1(7) & proviso is applicable in this context)

Employee count for coverage
There is an express Provision that all the employees are counted for coverage whether
they are covered or not considering their wage or salary levels.
Applicability Of PF for establishment having 20 or more employees and in case of ESI 10
or more employees is counted.
In case of ESI there are some changes
This is not applicable for establishments carrying hazardous, life threatening occupation.
A single employee is sufficient for coverage.
Employer of Plantation can get it covered voluntarily by giving willingness to ESI
cooperation.
As ESI sets 10 or more employees for the coverage this also applies to factories earlier
the factories without the aid of power had a possibility of coverage only when they
crossed 20 or more employees due to definition of factory.

• Wage Ceiling for applicability of Provident fund and ESI will continue , what
will be the new wage ceiling is not set yet. Will be notified by the central
Government at the time of Implementation of the code.
• Responsibility of the principal employer towards the contract labour is the
same but contractor is also included as the employer definition bestowing
more responsibility on him.
• The new wage definition is going to increase the employer costs as PF ,
Gratuity, EL, Bonus will increase.
• New definition is required for actuarial valuation of Gratuity and Leaves and
appropriate provisions are necessary.

Gratuity
• Application continued for all factories , mines, oilfield and plantation,
port and railway company, to every shop or establishment where 10
or more employees are employed or were employed on any day of
the preceding 12 months.
• Calculation of gratuity remains same. Fixed term employees will now
required to be paid gratuity on Prorate basis.

Maternity Benefit
• Application of maternity benefit continued to all factories ,mines or
plantation including establishments belonging to Govt.,to every shop
and establishment where 10 or more employees are employed or
where employedon any day of the preceding 12 months.
• All the provisions under maternity benefit act are continued.

Employee Compensation act
• Application of employee compensation provisions are limited to the
employees covered in the 2nd
schedule.

BOCW
• BOCW cess is applicable to every establishment which falls under the
building and other construction work.
• There are few additions like internet towers and the Central Government
retains the power to add other activities to the construction activities.
• The rate of the cess for the purpose of the welfare of building workers at
the rate of not exceeding 2% but not less than 1% of the cost of
construction is retained.
• There will not be reduction of collection charges while remitting to the
board as now the provisions are incorporated for self assessment instead of
deduction at source or by the local authorities while according permissions.

BOCW (Contd.)
• There are Certain exclusions like any building or other construction
work employing less than ten workers or where such work is related
to own residential purposes of an individual or group of individuals for
their own residence and the total cost of such work does not exceed
fifty lakh rupees.

• The concept of employment exchange has undergone change . New
concept “Career Centres” has evolved, with the new scope of career
counselling and vocational or self employment guidance in additionto
employment assistance.
• The employers having 20( which was 25 earlier) or more employees are
required to notify the vacancies.
• However the draft rules set these to 50 employees.
• In addition to the above, the employers are required to report certain
vacancies to career centre (regional)and certain other vacancies to career
centre (central) at 15 days and 40 days before the last date for receipt of the
applications from the prospective candidates, respectively.

• The aggregators like Ola, Uber, Swiggy, Zomato all these kind of employers will have
an additional impact of social security cost at the rate not exceeding 2% but not less
than 1% of annual turnover..
• This is expected to be fixed by the Central Government on the implementation of the
code.
• Sec 114(4) provides for the contribution to be collected from Aggregators. As per the
Code, they will have to contribute 1 to 2 per cent of their annual turnover for social
security which will not exceed 5% of the amount paid or payable by an aggregator to
gig workers and platform workers.
• Rule 51(3) of the Code on Social Security, 2020 discusses on the nuances about the
same

Penalties
• There are graded penalty system for violations under the Code
• Penalty ranges from 50k to 3 lakhs
• Imprisonment varies from 6months to 3 years
• Provisions are incorporated to decriminalize the first time offences.
• 50% of the maximum fine provided for the offence in case of an
offence punishable with fine only.
• 75% or 3/4 of the maximum fine provided for the offence in case of
an offence punishable with imprisonment for a term which is not
more than one year and also with fine.

• Repeat offence within 3 years cannot be compounded.
• Prosecution of the employer will not happen without offering the
prior opportunity to comply with the provisions.
• Moreover, the approval of the Government is necessary for the
Inspector cum facilitator to initiate the prosecution on the employer

• Identity of the beneficiaries or members under the code or his family
members or dependents to register and to avail benefits is required to
be established through the Aadhaar – Section 142
• Section 142 came into force on 3/5/2021.
• The foreign employees in India are also required to obtain and submit
for establishing their identity through Aadhaar numbers becoming
resident as soon as possible- First proviso to section 142(1)
• The resident means an individual who has resided in India for a period
of one hundred and eighty two days or more in the twelve months .

• Immediately preceding the date of application for enrolment as per
section 2(v) of the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act 2016.

Power of central govt.to defer or reduce ESI & PF Contributions
in the event of Pandemic ,endemic and national disaster-
Section 144
• The Central Govt.retains the power to reduce or defer the
contributions inder chapter III and IV for a period upto three months
at a time for whole of India or part thereof in the event of Pandemic,
endemic or national disaster.
• Central Government has retained the power to prescribe rules and
implement the provisions for national application.
• It is mandatory for every covered establishment to register under the
code.

Employer is to maintain records and registers containing particulars such as:
• number of days for which work performed by employees;
• number of hours of work performed by the employees;
• wage paid;
• leave, leave wages, wages for overtime work and attendance;
• employees identification number, by whatever nomenclature it may be called;
• number of dangerous occurrences, accidents, injuries in respect of which compensation has been
paid by the employer and the amount of such compensation relating to Chapter IV and Chapter
VII, respectively;
• statutory deductions made by employer from the wages of an employee in respect of Chapter III
and Chapter IV;
• details as to cess paid in respect of building and other construction work;
• total number of employees (regular, contractual or fixed term employment) on the day specified;
• persons recruited during a particular period; (xi) occupational details of the employees; and
• vacancies for which suitable candidates were not available during the specified period.

The employer is mandated to:
• display notices at the workplaces of the employees in such manner
and form as may be prescribed by the appropriate Government;
• issue wage slips to the employees, in electronic forms or otherwise;
and
• file such return electronically or otherwise to such officer or authority
in such manner and during such periods as may be prescribed by the
appropriate Government.

The Code On Social Security and their application

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