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An Experts’ Insight into the Code on Social Security, 2020

An Experts’ Insight into the Code on Social Security, 2020

An Experts’ Insight into the Code on Social Security, 2020

Most of the Indian Labour laws have been archaic in nature and the experts were constantly asking for a new law that can consolidate these different laws and also provide a single law for companies to work under. This had led the Government of India to come up with the new Social Security codes last that would not only encompass all the existing laws but also move away from the age-old norms set in those laws. Thus, the Code on Social Security has been touted as a major reform in the Indian employment sector.

The Code on Social Security, 2020 (SS Code) was introduced last year to consolidate and amend the existing social security laws. The goal of the codes is to extend the social security cover to every worker of organized, unorganized, and other employment sectors. These codes were passed in the Lower House of Parliament (Lok Sabha) on 22 September 2020 and were passed from the Upper House of Parliament (Rajya Sabha) on 23 September 2020.

SS Code amalgamates all the relevant provisions of nine central labor laws related to social security to further simplify and rationalize them. The code is yet to receive assent from the President and can be only implemented by Central Government after it gets the nod of the president. After the assent, the Government may implement the code via a notification.

What were the Acts that SS Codes will Subsume?

  • Employees’ Compensation Act, 1923.
  • Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
  • Employees’ State Insurance Act, 1948.
  • Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959.
  • Payment of Gratuity Act, 1972.
  • Maternity Benefit Act, 1961.
  • Cine- Workers Welfare Fund Act, 1981.
  • Unorganized Workers’ Social Security Act, 2008; and
  • Building and Other Construction Workers Welfare Cess Act, 1996.

Features of the Code on Social Security 2020

  • All employers on whom these new codes are applicable must register themselves as prescribed by the Central Government.
  • SS Code will be applicable to every entity but will be subject to a minimum threshold of employees working with it.
  • Employers will be liable to pay 10% of the employee wages as a contribution to the Provident Fund.
  • Every establishment must maintain records of employees related to work hours and wages paid. They must also give them proper wage slips.
  • Employees shall also be liable to contribute the same percentage of wages to their PF accounts.
  • There will be a social security cess of 1-2% of the cost of construction of the building which will be paid by the construction employer. The terms “building and construction work’ have been defined to reduce any ambiguity related to the terms.
  • The Government can apply a 12% contribution rate from the employee’s basic wage to the Provident Fund.
  • For Employees State Insurance Fund, the code makes it mandatory that every employee needs to be insured by the company.
  • The contribution to the ESIC will contain a contribution from both the employer and the employee.
  • Employees’ contributions will be paid by deductions in the gross salary.
  • If the employer fails to contribute their part, the ESIC may still give the benefits to the employees and recover the capitalized value of contribution paid to the employee from his employer later.
  • Maternity benefits to the female workforce in a mine, a factory, a manufacturing plant, shops (with more than 10 workers), or any other govt./private establishment.
  • Various ambiguous terms like “Gig Worker”, “Unorganised Workers”, and “Platform Workers” have been defined to ease out bringing unorganized sector workers under the umbrella of social security.
  • Women workforce will be entitled to maternity leave of up to twenty-six weeks where not more than eight weeks from the twenty-six should precede the expected delivery date.
  • The governments (Central and State) must frame the welfare schemes of unorganized sector workers.
  • It will be mandatory for companies to publish vacancies in the career center of their official website before filling the position up.
  • The Central Government may also come up with any specific ESIC scheme specially for unorganized sector workers.

Is taking Assistance from Experts Necessary?

The new norms may seem far from implementation as of now to some employers but the reality is it could be done in this financial year, i.e. 2021-22. As indicated by the norms of the codes, an employer must register with the Central Government for working under this code. Now understanding the various points of this code and how it is subsuming various other laws under it could be really complex and hard to understand for corporate owners. Also, the new registration process for such could also take time.

Considering all the points mentioned above, it will be beneficial for companies if they go on to work with some reputed legal firm to get a clear understanding of this code. A company can simply outsource their task related to registering for the code and other works to the legal firm and focus on their main work. Legal firms have a clear understanding of the code and thus, they can assist the companies to easily sail through the registration and implementation process related to the code.

To Summarize…

So that brings us to the end of this piece, where we gave you information related to the main changes brought by the new Code on Social Security 2020. The new codes are aimed at bringing essential social security to every employer of the country be it working in an organized sector or unorganized sector. This will definitely help in the improvement of the quality of life for many small-wage workers. The code will also help both Central and State Governments in the implementation of their welfare schemes for small wage workers. In the end, we can only say that this could be welcome reform that India needed, and it will be there to see its long-term effects on the lives of employees in the Indian working sectors.

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