RSTV IAS UPSC – Draft Social Security Code

  • IASbaba
  • October 9, 2019
  • 0
The Big Picture- RSTV
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Draft Social Security Code


TOPIC: General Studies 2

  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes
  • Issues relating to development and management of Social Sector/Services relating to Human Resources

After years of deliberations, the union government has finally circulated the draft social security code, a key labour law proposal that seeks to amalgamate a clutch of existing laws and proposes several new initiatives including universal social security for unorganized sector workers and, insurance and health benefits for gig workers including the Ola and Uber drivers. Besides, it also proposes corporatization of existing organizations like EPFO and ESIC headed by people other than the labour minister.

  • The Employee Provident Fund Organisation (EPFO) and Employee State Insurance Corporation (ESIC) be subsumed under a central body with a corporate-like structure.
    • Though it proposed to extend the coverage of provident fund and ESI to temporary workers, it did not outline a comprehensive scheme that would provide social security cover to all.
    • The draft has merely proposed to amalgamate legislations pertaining to provident fund, pension, medical insurance, maternity benefits, gratuity and compensation.
  • Insurance, PF, life cover for unorganized sector employees:

The draft code says the “Central Government shall formulate and notify, from time to time, suitable welfare schemes for unorganised workers on matter relating to life and disability cover; health and maternity benefits; old age protection; and any other benefit as may be determined by the central government”.

    • States may also formulate and notify suitable initiatives for unorganized workers, including schemes relating to provident fund, employment injury benefit, housing, educational scheme for their children, old age and funeral assistance.
    • Bulk of India’s labour force is in informal sector and a move looks forward looking but most of key initiatives it suggest may be the decision of the states with little contribution from the centre. 
    • There may be unorganized sector social security boards at the centre and state levels.
  • Benefits for Gig workers:

Millions of gig workforce in India, often referred as lonely in the workplace, may soon get life and disability insurance, health and maternity benefits among others as the union government is formulating a labour code that propose such provisions.

  • Maternity Benefit:

The draft says subject to the other provisions of this Code, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence, that is to say, the period immediately preceding the day of her delivery, and any period immediately following that day.

For the purposes of this sub-section, ―the average daily wage means the average of the woman’s wages payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she absents herself on account of maternity, subject to the minimum rate of wage fixed or revised under the Code on Wages, 2019.

  • Existing labour laws that the code will merge:

The Code on Social Security, 2019 once in place will merge eight exiting labour laws including Employees’ Compensation Act, 1923; Employees‘ State Insurance Act, 1948, Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952; Maternity Benefit Act, 1961; Payment of Gratuity Act, 1972; Cine Workers Welfare Fund Act, 1981; Building and Other Construction Workers Cess Act, 1996 and Unorganized Workers‘ Social Security Act, 2008.

Criticisms: It has little to offer

  • There is no uniform definition of “social security”, nor is there a central fund. The corpus is proposed to be split into numerous small funds creating a multiplicity of authorities and confusion. 
  • It is not clear how the proposed dismantling of the existing and functional structures, such as the Employees’ Provident Fund Organisation (EPFO) with its corpus of ₹10 lakh crore — which will be handed over to a government-appointed central board — is a better alternative.
  • Crucial categories such as “workers”; “wages”; “principal-agent” in a contractual situation; and “organised-unorganised” sectors have not been clearly defined. This will continue to impede the extension of key social security benefits such as PF, gratuity, maternity benefits, and healthcare to all sections of workers. 
  • There is no commitment on the government’s part to contribute to the listed social security measures, even as the Code is clear about employee and employer contributions.
  • The Bill welcomes aboard large sections of the workforce — “gig workers” such as those working in taxi aggregate companies like Uber and Ola. But how exactly the government proposes to facilitate their access to PF or medical care is not clear. What’s more, in these cases, the nature of the relationship between the company and the working staff, and hence the obligations, is not defined. If employers in the unorganised sectors are expected to foot the bill for EPFO contributions that will substantially hike the cost of doing business.

Existing benefits for unorganised workers have failed to materialise for similar reasons. For instance, construction workers have not been able to avail of the Building and Construction Workers’ Cess Fund effectively, owing to the Fund’s failure to register them. While the Fund has been in existence for over 22 years, less than three crore workers have been registered with all the State welfare boards put together. Official estimates alone put the figure of total construction workers at over five crore; unions estimate these numbers at about 10 crore.


Social security should include worker retraining, not just unemployment allowance. It should help/mandate the gig workers buy insurance and save for old age, perhaps by automatically deducting a fraction of the payments received into their bank accounts into insurance/pension accounts, say, in the National Pension System. Social security should help elders deploy their skills to match the demand anywhere in the world.

Comprehensive healthcare and a quality education system would plug into social security, improving work-life earnings and enhancing the earning capacity of the next generation. It would be useful to rethink social security in holistic, if unconventional, terms.

Connecting the Dots:

  1. What is the significance of Draft Social Security Code? Exaplain
  2. Draft a Social Security Code looking at the current Indian scenario.

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