Decoding the new social security code

Saji Narayanan CK
President, Bharatiya Mazdoor Sangh

IT is delightful to note that even the last worker will be brought under a social security net of about 14 benefits through a new piece of legislation, "The Labour Code on Social Security, 2018". India has two of the largest social security laws in the world, ie ESI and EPF laws. But these are confined to the organised sector workers, whereas about 43 crore of the unorganised sector workers are outside the purview of any effective social security law.  

Benefits of the new code

The Prime Minister is to be the chairman of the apex council as recommended by the 2nd National Commission on Labour. The new code is architected in such a way that even after retirement, a worker will be entitled to many benefits. Even when employer defaults payment, the worker will continue to enjoy his benefits. A separate gratuity fund is proposed which will ensure payment of part of gratuity even when the establishment is in loss or the employer refuses to pay. The commission has proposed involving local bodies, like gram panchayats, in enrolling rural workers to any social security scheme. 

The code envisions 14 benefits to be provided to the workers. They include the six benefits available with ESI and then EPF, gratuity, pension, employer liability, invalidity benefit for non-job accidents, unemployment benefit and group insurance. 

The good news for contractual employees is that liability to pay the contribution vests also with principal employer and the employer can recover it from the contractor. Brothers and sisters  have been brought in the purview of dependants. For migrant workers and those who hop from one job to another, their social security account will be portable. Called ‘VIKAS’ (Vishwakarma Karmik Suraksha Khata), it is linked to the Aadhaar number of each worker. 

Finally, the workers are on the path of liberation from tension of unexpected calamities in life. But this historic and revolutionary legislation is contaminated with many anti-worker provisions. 

Some anti-worker provisions

An alarming proposal is that the existing central social security organisations like the ESI, EPF and six other central welfare schemes will be dismantled, and their funds and employees will go to the states. Such funds, running into lakhs of crores of rupees, will be divided among the state boards. The experience of states running ESI hospitals and medical facilities has been a matter of constant complaint. The Building Construction Workers' Welfare Law which is implemented by states has been a tragedy. States can be given a participatory role in managing the Central funds along with the Centre, but the funds should not be distributed to the states. 

While the government is contributing 1.16 per cent to the EPF pension fund at present, the new code exempts it from paying any contribution. Social sector spending by the government in India — at 1.68 per cent of the GDP — is one of the lowest in the world. A budget allocation of at least 10 per cent to the social security funds is needed. It is the government's duty to subsidise contribution in respect to unorganised sector workers who are unable to pay, as part of developmental concerns, specially of rural India. The contribution rate for self-employed — at 20 per cent — is also very high since a majority are low-earning rural people. 

Another objectionable aspect is opening up the social security sector to private parties in the new name of “intermediate agencies”. The hard-earned money of workers will be siphoned off to risky private investments, to pay high charges and premiums of private and multinational insurance companies. If ESI and EPF, which are run by boards, could work effectively without the help of private parties, why can’t the new organisation do so too? Private intermediate agencies are likely to show their predatory propensity.  

The proportion to be maintained regarding representation of trade unions, employer organisations and government mandated by the ILO is 1:1:2. Accordingly, ESI and EPF have 10 representatives each of trade unions and employers. But the new law proposes only two each to represent the trade unions and employers, with an army of bureaucrats and their advisors occupying seats in the apex Prime Minister's Council. Further, vice-chairmanship is reserved for a bureaucrat. The real beneficiaries should have a say in the running of their benefit schemes. ESI and EPF are performing well mainly because trade union representatives have a major role, because they carry the ground-level experiences, difficulties and realities to the apex body. The Building Construction Workers Welfare Law which was created later, failed in its working and the Supreme Court had to intervene in its implementation mainly because there is no apex tripartite body to monitor it. It has only an advisory tripartite body. So, an effective tripartite system is required to monitor labour institutions and make them fruitful.  

The law has created employer liability where the employer is still liable personally for some benefits, like occupational diseases, funeral benefit etc. This is against the spirit of its comprehensiveness. The worker will be compelled to run after the employer or other authorities in times of need.

The rate of administrative charges at present for EPF is 0.85 per cent and for ESI is 0.01 per cent, but the new code caps it at the high rate of 5 per cent. The code has an exemption regime for big firms, which will be an easy channel for corruption. 

Trade unions have made various suggestions to improve the new code.