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Overview: Code on Social Security, 2020

India has a number of central and state legislations that concern labour and employment. There is no single consolidated employment code – currently, employer obligations stem from a variety of central and state laws. In 2019 and 2020, the Indian Parliament has approved the enactment of four labour codes which will subsume and consolidate all existing labour legislations in India – concerning wages, social security, health and safety and industrial relations. The Code on Social Security, 2020 (“Code”) is one such legislation, and seeks to subsume and repeal nine Central labour legislations relating to social security. The Code seeks to consolidate laws relating to social security and aims to extend social security to all employees and workers both in the organised sector or the unorganised sector. However, the Act does not merely consolidate the previous legislations, but provides for additional protections and provisions. It has enhanced the coverage, extended the benefit to all workers in the organised and unorganised sectors, and introduced concepts that provide maximum benefits under minimum governance.


Schedule I of the Code provides the threshold applicability for schemes. It provides a map of different thresholds for schemes that were previously covered under 9 different Acts. The Central Government can amend the First Schedule and hence fix the thresholds accordingly. It further mandates registration for eligible establishments. The Code introduces a number of new and/or amends the existing definitions such as aggregator, career centre, gig workers and platform workers, etc. The definition of social security encompasses the measures of protection afforded 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 Code. ‘Employee’ has been given a wide definition – to include any person 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. However, persons that are deemed to be apprentices engaged under the Apprentices Act, 1961 are excluded from the purview of this definition. Moreover, the Code has distinguished employees according to wage ceilings and/or their scheduled employments for the purposes of determining their eligibility to various social security benefits.


The Code provides for the establishment of several bodies for the administration of social security schemes, which are to be called Social Security Organizations. These schemes shall include the provident fund schemes, pension fund schemes and insurance schemes for gig workers, platform workers and unorganized workers. The Code has also changed the threshold of the Employees' Provident Fund Scheme to every establishment in which 20 or more employees are employed. Further, the Central Government may establish a provident fund where the contributions paid by the employer to the fund shall be 10% of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contractor). The employee's contribution shall be equal to the contribution payable by the employer in respect of him. This threshold can be increased through notification to 12% for both employers and employees of certain establishments. The Code allows for voluntary registration under Employee State Insurance (“ESI”) if the employer and majority of the employees agree and allows for the extension of the ESI scheme to any hazardous occupation irrespective of the number of employees employed. A limitation period of 5 years has been provided for in the Code for recovering of past dues from employers. The Code has also fixed different thresholds with respect to eligibility for gratuity of permanent and fixed term employees. Such gratuity is payable to employees hired directly or through a contractor.


Most notably, under the Code, a social security fund will be set up to provide welfare benefits such as pension, medical cover, and death and disablement benefits to all workers, including gig workers, platform workers, and unorganised workers by aggregators. Aggregators coming under specified categories will be obligated to contribute towards the social security fund for gig workers. Additionally, the Code requires all records and returns to be maintained electronically. Reviewing the key changes brought in by the Code, one can conclude that it focuses on (i) enhanced coverage; (ii) digitisation; (iii) enhanced penalties to ensure enforcement and (iv) seeks to establish uniformity with the other 3 Codes. As the implementation will be in gradual phases, it remains to be seen whether it will indeed help elevate the status of employees vis-à-vis their employment benefits in the country.


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