Code On Social Security, 2020

On 19^th September 2020 vide Bill No. 121 of 2020 the Code on Social Security, 2020 was introduced in Lok Sabha. Code on Social Security, 2020 has been introduced to amend and consolidate the laws relating to social security with the aim to extend social security to all employees and workers both in the organized or unorganized or any other sectors and for matters connected therewith or incidental thereto.

The new code has been a huge relief for many businesses and employers who have been complying with multiple laws at both the state and centre levels. The new code was a much-awaited change for all employers. The Code on Social Security, 2020, has repealed certain existing central labour laws as follows:

1. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
2. Payment of Gratuity Act, 1972;
3. Employees’ Compensation Act, 1923;
4. Maternity Benefit Act, 1961;
5. Employees’ State Insurance Act, 1948;
6. Workers Cess Act, 1996;
7. Cine Workers Welfare Fund Act, 1981;
8. Building and Other Construction and Unorganised Workers’ Social Security Act, 2008.

Key features of the Code

Employees’ Provident Fund

The Social Security Code has modified the applicability of the Employees’ Provident Fund Scheme. The PF scheme now will be applicable to every establishment in which twenty (20) or more employees are employed. The Central Government is empowered to establish a provident fund where the contributions paid by the employer to the fund shall be ten percent (10%) of the wages. The employee shall equally contribute.  The Central Government may increase the contribution percentages to twelve percent (12%) through a notification for both employers and employees of certain establishments.

 Consequences of failing to keep up with the provisions:

If an employer fails to pay any contribution as mentioned under the Social Security Code or rules, regulations or schemes made under this Code, 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 a fine of Rupees One Lakh (Rs. 1,00,000/-); or

(ii)           which shall not be less than two (2) months but maybe extended to six (6) months, in any other case and shall also be liable to a fine of Rupees Fifty Thousand (Rs. 50,000/)

Gratuity

Various thresholds with respect to eligibility for the gratuity of permanent and fixed-term employees have been fixed by the Social Security Code. Gratuity shall become payable to all who are eligible 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. Under the new code, gratuity is payable to employees hired directly or through a contractor.

Consequences of failing to pay gratuity:

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

Voluntary registration under the Employee State Insurance is allowed by the Social Security Code if the employer and majority of the employees agree. Further, the Government has been empowered by the Code to extend the Employees State Insurance Scheme to any hazardous occupation irrespective of the number of employees employed. The new Code has also made provisions for the coverage of Gig Workers and Unorganised Sectors under the Employees State Insurance Scheme. Whether employed by him directly or through a contractor, the employer shall pay in respect of every employee, 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 Benefit

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 the Maternity benefits shall be applicable.  The maternity benefits become applicable to such other shops or establishments as well that are indicated by the appropriate Government through a notification.

Consequences of failing to comply:

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.

Conclusion

The Social Security Code has repealed various existing labour laws in India and has widened the coverage by including the unorganized sector as well. It has also included fixed-term employees and gig workers, platform workers, etc., along with contract employees. It is very important for employers to assess and comply with the provisions of the new code.