Social Security Code enacted by the government in the Monsoon Session of 2020 has disappointed many, including its erstwhile supporters. DR. K.R. SHYAM SUNDAR and RAHUL SURESH SAPKAL examine the implication of the Social Security Code and unravel its many facets.
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The eventual Social Security Code (SSC) gazetted on September 29, 2020, is a much-diluted version of its earlier somewhat comprehensive draft presented before the Parliament in 2018. The 2018 draft was comprehensive as it sought to cover, though inadequately, major components of social security. It was dumped probably due to heavy criticisms from all quarters especially from employers and trade unions. We must assess SSC in the light of its Preamble, the critical reviews and recommendations of the Parliamentary Standing Committee (PSC), and the ILO instruments on social security.
The Preamble of the Code reads: “An Act to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors (sic) and for matters connected therewith or incidental thereto.” (emphasis added).
Nine Concepts of Social Security
The ILO Social Security (Minimum Standards) Convention, 1952 (ILO-SSC), which is its flagship instrument on social security, envisages nine components of social security (SS), like medical care, sickness benefit, unemployment benefit, old-age benefit, employment injury benefit, family benefit, maternity benefit, invalidity benefit, and survivors’ benefit.
The concern here is that notifications in the future should not lead to narrower coverage of crucial and substantive clauses on the so-called grounds like “financial situation in the country” or probably “in the public interest” as has been happening in the recent past
Even though the Convention provides for ample flexibility to the ratifying countries to implement the clauses of it gradually, though surely, only 59 countries have ratified it and it does not include India.
Issues Concerning the Preliminaries of SSC
The government did not honour several recommendations of the Parliamentary Standing Committee. Even though the Ministry of Labour and Employment or the government agreed to PSC’s recommendation that SSC should ideally “highlight the importance of social security in the lives of workers and emphasise it as a right…” the Code does not reflect this thrust.
Not Addressing Genuine Concerns
On the other hand, SSC did not address at all the genuine concerns of both PSC and some stakeholders with regard to the stipulation of a definite timeline for enforcement of various provisions in the SSC.
The government has also brushed aside other important recommendations concerning the preliminaries of SSC. For example, Section 152 in the SSC empowers the central government to amend the schedules through the executive order, viz. “notification” – while dynamism and flexibility considerations as the PSC noted are essential sweeping powers that cannot be conferred on the government.
The concern here is that notifications in the future should not lead to narrower coverage of crucial and substantive clauses on the so-called grounds like “financial situation in the country” or probably “in the public interest” as has been happening in the recent past (see Supreme Court’s order quashing Gujarat government’s amendment of Factories Act to extend hours of work among others).
The two basic questions that arise in the context of the Preamble and the ILO Convention are, viz. one, does SSC cover “all employees and workers either in the organised or unorganised or any other sectors”?; two, does it cover adequately or otherwise the nine components laid down by ILO-SSC?
They lend uncertainty even to the business firms and hence do not enable ease of doing business. The other ambiguity-lending clause, viz. “as may be prescribed”, etc. continue to exist in the Code despite PSC’s objections to it – in fact, a PDF search shows 123 times’ of occurrence of it, though not all are untenable and would be legitimately left to the rule-making process.
The two basic questions that arise in the context of the Preamble and the ILO Convention are, viz. one, does SSC cover “all employees and workers either in the organised or unorganised or any other sectors”?; two, does it cover adequately or otherwise the nine components laid down by ILO-SSC?
The SSC has retained the existing thresholds in case of employees’ provident fund (EPF), employees’ state insurance (ESI, i.e. medical insurance), gratuity, maternity benefit, employees’ compensation for occupational injuries and diseases though with refinements (i.e. removing the schedules for applicability of say EPF or areas for ESI) which makes assessment of coverage of establishments and employees or persons difficult.
Misleading Terms
For example, in case of gratuity, every factory, mine, oilfield, plantation, port, and railway company and every shop or establishment employing ten or more employees will have to pay it subject to clauses in the SSC. The usage of “every factory” is misleading because factory according to Section 2(32) in SSC covers factories using power and employing ten or more employees and those not employing the power and employing 20 or more employees (the term “employee” is used in the SSC because the term “worker” is not defined in it unlike in the Occupational Safety and Health and working Conditions Code (OSHWCC), 2020 where both are defined).
On the other hand, in the OSHWCC the respective thresholds are 20 and 40 [Section (2) (w) (i) (ii)]. Further, for the purposes of registration (Chapter II) in OSHWCC, factory covers those employing 10 or more workers [Section (2) (v) (ii)] notwithstanding the aforementioned section.
However, ESI will be applicable to every establishment carrying on to-be-notified hazardous or life threatening occupation and oddly though to gig and platform workers (G&PW). The general threshold for almost all the social security components included in SSC save that for EPF is generally ten workers/employees/persons.
It is not clear whether the agricultural workers, the domestic workers (though included under wage workers), and the bidi workers for example are included under the rubric of the unorganised workers as there are no explicit definitions of these akin to those concerning home-based worker, self-employed or G&PW.
We must discuss here coverage of ESI and EPF to understand where we stand and we propose to go as stated by the government. The ESI Corporation (ESIC) with higher legislative coverage (ten or more persons) registered during 2017-18 (the latest available report on its website), 3.43 crores insured-persons or family units and 13.32 crores beneficiaries while EPF Organisation (EPFO) during 2016-17 (the latest available report on its website) with narrower coverage (20 or more employees) had 4.12 crores of contributing members and 10.57 crores with Universal Account Number (UAN) who made a single contribution and 19.34 crores members with some balance in their PF accounts.
However, the government hopes that the SSC which will apply throughout the country will increase the coverage of ESIC “from existing [as in March 2020] 3.49 crore families to 10 crore families” and the number beneficiaries would be “around 30 crore.”
Will Take Ages to Reach the Target
Given the historically slow growth rates of coverage by ESIC it would take at least a decade if not more to reach the figures stated by the government, though one must presume it has not factored in, the growth rate of the workforce and of the population (hence families and beneficiaries). Our back of the envelope calculations, assuming status-quo in every sense (i.e. linear), show that it would take around twenty years or more to reach the levels mentioned by the government.
SS for the unorganised workers will cover the unorganised sector and the unorganised workers and the neither-here-nor-there category of G&PW – the latter is because while SSC extends them ESI which is meant for organised sector they are also clubbed with the unorganised workers in Chapter IX which is primarily meant for enumeration of clauses relating to SS benefits for the unorganised workers.
The lawmakers did not cure this anomaly concerning G&PW’s status even after PSC’s recommendation to do so. Like many clauses in the Codes, our intelligence is tested as here! It is not clear whether the agricultural workers, the domestic workers (though included under wage workers), and the bidi workers for example are included under the rubric of the unorganised workers as there are no explicit definitions of these akin to those concerning home-based worker, self-employed or G&PW.
Struggle of ASHA Workers
Of course, the anganwadi and ASHA workers have been stridently, though in vain, battling for “worker-identity” status (see Suchita Krishna Prasad and Karan Peer’s excellent article on this issue) which the government mechanically and even insensitively denying notwithstanding the yeomen services rendered by them in creating and sustaining human capital and during the COVID-19 times and spaces. They were applauded but are being denied social security.
ASHA Workers demand minimum wages. Source: Deccan HeraldThe lawmakers notwithstanding the political considerations could have used the stupendous work done by the National Commission on Enterprises in the Unorganised Sector (NCEUS) including the draft laws for social security and working conditions for agricultural and unorganised non-agricultural workers contained in its report on ‘The Conditions of Work and Promotion of Livelihoods in the Unorganised Sector, 2007’- the NDA government not surprisingly has studiously avoided mentioning NCEUS or using its reports which used sound and comprehensive data to support its propositions and recommendations unlike the Second National Commission on Labour (SNCL), 2002 anywhere in its legislative processes.
They (ASHAs) were applauded but are being denied social security.
There are problems in estimating the coverage of social security or more broadly of social protection schemes and laws in India because they are numerous and they often overlap with one another in terms of coverage and sometimes a latter scheme would override the former though both would co-exist – e.g. the Central government introduced during 2015-16 Union Budget Atal Pension Yojana and in 2019-20 Interim Union Budget it introduced another scheme along the same lines, viz. Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM).
Social Protection Schemes Not Thought Out
It is time that the central government rationalizes the social protection schemes which are often populist and not-well-thought-out-schemes rolled out in the Union Budgets.
Further, oddly though SSC does not define ‘worker’ or ‘person’ and the definition of ‘employee’ used in Industrial Relations Code (IRC) is not the same as in SSC as it omits working journalists and sales promotion employees from the generic definition of employees and mentions them either separately or for some provisions, e.g. working journalists for gratuity [Section 53(1)] and for compensation for occupational diseases [Second Schedule, Entry (xlviii)].
We also must note here that wage workers or employees and self-employed will be included or excluded by “wage or salary ceilings” to be notified from time to time which delimits the coverage further. As recommended by PSC, the best practice concerning the wage/salary ceilings could be is to establish an automatic process of linkage with either consumption-income levels estimated by household surveys or the consumer price index (CPI).
Unemployment Allowance Omitted
In terms of components of SS, perhaps the grandest and the gravest failure of SSC is to completely omit unemployment allowance/insurance (UA/C) even though the definition of “social security” [Section 2(78)] does include income security against unemployment as a component.
The MoLE’s rather cryptic and even unhelpful response to PSC in this regard is instructive: “Unemployment allowance is already provided for under the ESI Act. For the unorganized workers basic social security has been taken care of in the proposed code.” Under the ESI, the Central government has extended a basic scheme since April 1, 2005 (amended later), viz. Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) and a temporary one introduced on a pilot-basis on July 1, 2018 for two years and now extended due to COVID for one more year, viz. Atal Beemit Vyakti Kalyan Yojana.
Unemployment Crisis Ignored
The RGSKY has performed poorly since its inception – between 2007 and 2017, only 10,728 unemployment claims were made, which gives an average claims of 975 a year. This bespeaks of the lack of appreciation of the magnitude of unemployment even after woeful experiences witnessed during COVID-19.
The SS components enumerated under Section 109 for the unorganised workers do not contain unemployment allowance though it mentions “skill upgradation” allowance which might be justified as a partial component of UA/C. But the MoLE’s argument that the “basic social security” proposed to be provided to the unorganised workers through SSC will take care of the income loss due to unemployment reflects lack of sensitivity on its part as the lawmakers even now contemplate “basic” SS. The “Partial [Partisan] State Failure” witnessed in terms of shockingly poor execution of laws concerning unorganised workers by both UPA and NDA governments thus far continues. We submit that this is the “natural state of the State” in a capitalistic economic system and more so during the neoliberal era.
Unwanted Deprivation
Hence the unorganised workers will be subjected to deprivation if they lose their income-earning opportunities as the State does not perhaps basis the fiscal conservatism does not propose anything more than “basic SS”. All including them will be left vulnerable against the vicissitudes of the market economy.
There are problems in estimating the coverage of social security or more broadly of social protection schemes and laws in India because they are numerous and they often overlap with one another in terms of coverage and sometimes a latter scheme would override the former though both would co-exist
The four Codes must be seen as a holistic exercise. Here, it is important to note that IRC has liberalised the thresholds for hire and fire from 100 to a minimum of 300, as the state governments would have to revise it upwards only. Further, it has retained the existing severance package of fifteen days’ of average pay per completed year of service and added a skill-reskilling allowance of a similar compensation (only for retrenchment and not for closure).
Together, this means, 30 days of compensation for retrenchment and fifteen days for closure [subject to be amended, see Section 80(8) in IRC]. This is less generous than the severance package offered by several state governments for both retrenchment and closure – e.g. Rajasthan offered three months’ pay as severance pay. In fact, the PSC though toyed with the idea of 45 days’ of compensation it eventually recommended 30 days only for retrenchment. Finally, the government has not responded positively to PSC’s exhortation to devise SS in accordance with ILO-SSC.
Limited Success
Thus, we see bewildering varieties of thresholds of establishments and other workplaces and employees, persons, workers for inclusion or exclusion. It is clear that SSC has achieved limited success in widening the existing SS coverage. More importantly, the tone and tenor of SSC and the utterances before the PSC by MoLE do not inspire confidence in us to think that SSC is on a journey towards universalising SS to all employees in the labour market. Perhaps, the government thinks so, but not reflected in action.
Social Security for the Unorganised Workers
Since SSC is known more for SS for the unorganised workers than for those for the organised sector workers. There are four issues with respect to SS apart from those noted above relating to the unorganised workers. One, we are not sure whether the unorganised workers will stand to receive under the benefits of the proposed scheme like family benefit, child care benefit, and survivors’ benefit. Two, Section 109(3) in SSC is a repeat of Section 4 of the Unorganised Workers’ Social Security Act, 2008 (UNSSWA) save for the addition of funding by corporates through corporate social responsibility (CSR) fund.
Mistake after Mistake
It is hard to understand as to why the government (any government for that matter as we argue it is a genetic Conservative State Failure) would repeat the same mistake – though it has the license to and in fact commits other mistakes as we have seen – even after the disastrous and poor performance of UNSSWA primarily because of the absence of concreteness on the funding of SS schemes in it. Nor does we have any clarity on the schemes to be extended to these workers and/or G&PW. The Code on these aspects suffers from uncertainty and a foggy vagueness even though they cover over 90 percent of the total workforce in India. The SSC uses “maybe” in place of the advised use of “shall be” – relating to the funding clause [see Section 109(3)].
Three, SSC talks of only toll-free numbers and “such facilitation centres as may be considered necessary from time to time” – the addiction to such vague clauses is inestimably shocking even astounding one’s sensibilities! – and does not include workers’ organisations of various types including civil society organisations (CSOs, even though SSC recognises CSOs for membership in the Boards formulated under it) for disseminating information on the schemes and facilitating registration of the unorganised workers under the Code and in welfare schemes.
Losing Sight
The lawmakers have lost sight of the grass-rootedness of the whole scheme of logistics which it had in its 2018 draft: “For implementing such a vast and universal registration system, the Panchayats and Municipal Bodies are given the task of registration of workers and entities. The State Boards will provide the necessary finance. For this purpose, Facilitation Centers shall be established so that registration can happen at the grassroots level.”
The Code on these aspects suffers from uncertainty and a foggy vagueness even though they cover over 90 percent of the total workforce in India.
Four, post-registration, the unorganised workers would be assigned a “distinguishable number to his (original sin!, not ours) application” [Section 113(2)] (emphasis ours). Where do these logistics lead to? Here the UNSSWA conceived well – Section 10(3) of it reads: “Every unorganised worker shall be registered and issued an identity card by the District Administration which shall be a smart card carrying a unique identification number and shall be portable” – but the governments (both UPA and NDA) lost the plot in terms of its implementation.
We submit that every worker, employee, or person, and not merely the unorganised, must be given a unique smart and portable identity card which is linked to Aadhar card and to a bank account that would enable maximisation of the benefits of the Jan Dhan scheme also. This triple identity linkage scheme would be advisable even essential for not only the provision of benefits under this or the other Codes for eventual COVID-19-like emergencies. Then, Section 142(1) providing for the establishment Aaadhar as Identity exercise will not be essential.
Universalisation of Social Security a Mirage
The SSC as we have only partially outlined here is not an ideal amalgam of nine laws. It does not offer much to be celebrated. To sum it up tersely: the Code does not appear to be on a journey to reach the goalpost of universalisation of social security in the near future. If the deficits-laced Code has been conceived by the government even after extensive consultations and even some advocates have found the Codes a little trying to comprehend, then somewhere something has gone wrong. Better legal minds, fine drafting hands (they are plenty in India), and a more sensitive political executive combined with due consultation with ILO by the government which possesses substantial expertise on labour laws to frame laws.
The lawmakers have lost sight of the grass-rootedness of the whole scheme of logistics which it had in its 2018 draft.
The UPA and now the NDA government have missed out on historic opportunities to sculpt a better and progressive legislative systems to at once enable ease of doing business to millions of business establishments and extend labour welfare to 500-million-odd workers and more to come.
But the good news is that the Labour Minister Santosh Gangwar is “open to suggestions”. Hopefully, he will listen to some sane voices raised in this and other outlets and be open to consult ILO even at this late stage?
(K.R. Shyam Sundar is a Professor at XLRI, Xavier School of Management, Jamshedpur and Rahul Suresh Sapkal is Assistant Professor, Tata Institute of Social Sciences, Mumbai. Views are personal.)
