What is the Code on Social Security?

Definition

The Code on Social Security, 2020 consolidates nine existing social security legislations into a single comprehensive code. It covers provident fund, employee state insurance, gratuity, maternity benefit, employee compensation, building workers’ welfare, and unorganized workers’ social security. It notably extends social security coverage to gig workers and platform workers for the first time.

Detailed Explanation

The Code on Social Security represents India’s most ambitious attempt to universalize social security coverage. By merging nine separate Acts, it creates a unified framework for delivering retirement benefits, healthcare, maternity support, disability coverage, and welfare provisions to India’s diverse workforce.

The nine subsumed Acts include the EPF and Miscellaneous Provisions Act (1952), ESI Act (1948), Employees’ Compensation Act (1923), Employment Exchanges (Compulsory Notification of Vacancies) Act (1959), Maternity Benefit Act (1961), Payment of Gratuity Act (1972), Cine Workers Welfare Fund Act (1981), Building and Other Construction Workers’ Acts (1996), and the Unorganized Workers’ Social Security Act (2008).

For employers, key changes include alignment of the wages definition with the Code on Wages (basic at 50% minimum), potential expansion of EPF and ESIC coverage thresholds, simplified compliance through a single registration system, and new obligations related to gig and platform worker welfare. The Code introduces the concept of “aggregators” (platforms like ride-hailing and delivery apps) who must contribute a prescribed percentage of their annual turnover toward social security funds for gig workers.

The gratuity provisions under the Code align with the Payment of Gratuity Act but incorporate the new wages definition, potentially increasing gratuity liability for employers. Fixed-term employees are entitled to pro-rata gratuity regardless of tenure, a significant change from the current five-year requirement.

A Social Security Fund is proposed for unorganized workers, gig workers, and platform workers, funded through government contributions, aggregator contributions, and possibly worker contributions. The National Social Security Board and State Social Security Boards will administer these schemes.

Key Rules

• Nine existing social security laws are consolidated into one Code
• Gig workers and platform workers are included in social security coverage for the first time
• Aggregators must contribute 1-2% of annual turnover toward gig worker social security
• The wages definition aligns with the Code on Wages (50% basic wage threshold)
• Fixed-term employees qualify for pro-rata gratuity regardless of service duration
• A single registration system replaces multiple registrations under different Acts
• Social Security Boards at national and state levels will administer schemes for unorganized workers

How TMS Helps

TMS is preparing clients for the Code on Social Security through impact analysis covering EPF, ESIC, gratuity, and maternity benefit obligations. We model the financial impact of the new wages definition on statutory contributions and help restructure compensation frameworks. For clients engaging gig and platform workers, we provide advisory on aggregator contribution requirements and compliance structures.

Related Terms

• Labour Codes 2020
• Provident Fund (EPF)
• ESIC
• Gratuity