Social Security Code

Learning Objectives
By the end of the class, students will be able to:
[Link] social security and explain its importance.

[Link] the key features of the Code on Social Security, 2020.

[Link] how the Code consolidates previous labour laws.

[Link] the real-life implications of the Code with an example.

What is Social Security
• ILO Definition: Social security is the protection that a society
provides to individuals and households to ensure access to health
care and to guarantee income security, particularly in cases of old
age, unemployment, sickness, invalidity, maternity, or loss of a
breadwinner.
• Need: Provides financial stability, ensures dignity of labour,
reduces poverty.
• During COVID-19 lockdowns, many workers without PF/ESI
support faced extreme distress, whereas organised sector
employees could use PF withdrawals and ESI medical facilities.
• It extends to the whole of India.
The Code on Social Security, 2020
• Is a code 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.
• The Social Security Code, 2020 brings unorganised sector, gig
workers and platform workers under the ambit of social
security schemes, including life insurance and disability
insurance, health and maternity benefits, provident insurance,
pension and skill upgradation, etc. The act amalgamates nine
central labour enactments relating to social security.
It consolidated

1. The Employees’ Compensation Act, 1923,

2. The Employees’ State Insurance Act, 1948,

3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959,

5. The Maternity Benefit Act, 1961,

6. The Payment of Gratuity Act, 1972,

7. The Cine Workers Welfare Fund Act, 1981,

8. The Building and Other Construction Workers Welfare Cess Act, 1996,

9. Unorganised Workers' Social Security Act 2008.

The bill received the presidential assent on 28 September 2020, and section 142 of the Act
has come into force on 3 May 2021.
What the Code does

•Consolidation: Merges 9 laws into 1 code.

•Coverage: Formal + informal sector, gig workers, platform workers.

•Simplification: Unified definition of employee and wages.

•Digitalisation: Aadhaar-based UAN (Universal Account Number).

 Employee
Code Definition:
Any person employed on wages
by an establishment, either
directly or indirectly (through a
contractor), to do skilled,
unskilled, manual, operational,
supervisory, managerial,
administrative, technical, or
clerical work.
 Employer
A person or organisation that
employs one or more workers
and is responsible for providing
social security contributions,
wages, and ensuring compliance
with the Code.
 Wages
Definition: All monetary remuneration
expressed in terms of money or capable
of being so expressed, including:
• Basic pay,
• Dearness allowance,
• Retaining allowance.
• Excludes: Bonus, house rent
allowance (HRA), conveyance
allowance, employer’s contribution to
PF, overtime, gratuity.
 Gig Worker
A person who performs work outside
the traditional employer-employee
relationship, earning income from
short-term, task-based, or project-
based work.

Example: A driver working with Uber

or Ola.
 Platform Worker
A type of gig worker who provides
services through an online
platform or digital marketplace.

Example: A Swiggy or Zomato

delivery partner.
 Unorganised Worker

A home-based worker, self-

employed person, or wage worker
in the unorganised sector who is
not covered by formal employment
benefits.

Example: Street vendors, domestic

workers, agricultural labourers.
 Social Security Organisation
Bodies created under the Code to
administer benefits.
Examples:
• EPFO (Employees’ Provident Fund
Organisation),
• ESIC (Employees’ State Insurance
Corporation),
• National Social Security Board for
Unorganised Workers.
 Universal Account Number (UAN)

A unique Aadhaar-linked number

that serves as a permanent identity
for workers across jobs and
facilitates portability of social
security benefits (e.g.,PF balance
remains accessible even after
changing jobs).
Benefits under the Social Security Code,
2020
• Employees’ Provident Fund (EPF)
• Employees’ State Insurance (ESI)
• Maternity Benefits
• Gratuity
• Social Security Schemes for Gig, Platform &
Unorganised Workers
 Employees’ Provident Fund (EPF)
1. A compulsory savings scheme for employees to ensure financial security after
retirement.
2. Contribution: Both employer and employee contribute (generally 12% each of
wages).
3. Benefits:Lump sum + interest at retirement.
4. Advance withdrawals allowed (e.g., during COVID-19 crisis, housing, marriage,
education).
5. Example: IT employees withdrawing PF corpus during layoffs in 2020 to sustain
families.
 PF Calculation for an IT Employee( Ananya)
•Employee Name: Ananya (IT professional • PF Contribution is at (12% Rule)

at Infosys) • Employee’s PF Contribution:

•Basic Salary + DA: ₹30,000 per month 12%×₹30,000=₹3,600

•HRA, bonus, other allowances: ₹15,000 • Employer’s PF Contribution (split into two parts):
(these are excluded from PF calculation, • PF Contribution: 8.33% of Basic (towards Pension Fund, capped at

since PF is only on Basic + DA) ₹15,000) and Remaining goes to Provident Fund.

•Total Gross Salary: ₹45,000 • Since Basic = ₹30,000 (above the ₹15,000 cap for pension),

calculation is: Pension Fund: 8.33%×₹15,000

• Remaining Employer Contribution: 3,600–1,250=₹2,3503 to PF

Total PF Savings per Month Employee Contribution = ₹3,600
Employer Contribution = ₹3,600 (1,250 + 2,350)
Total Monthly PF = ₹7,200
₹7,200 × 12 = ₹86,400 per year saved in Ananya’s PF account.
Employees’ State Insurance (ESI)

• Health & disability protection.

• Free medical care + wage replacement

(sickness, injury).

• Maternity benefit included.

• If a factory worker faces an accident then ESI

ensures the free treatment.
Application
• Applicability: Establishments with ≥10
employees (shops, factories, IT firms, hospitals,
etc.).
• Employee salary threshold: up to
₹21,000/month (₹25,000 for persons with
disability).
• Contribution: Employee: 0.75% of gross wages
• Employer: 3.25% of gross wages
• Total = 4%
HR’s Role in Calculation
Gross wages include:
• Basic salary
• Dearness allowance
• HRA
• Overtime
• Commissions
• Incentives
• Attendance bonus
These are excluded from wages:Annual bonus, gratuity,
retrenchment compensation, leave encashment.
 Calculation
• Name of the employee: Rohan

• Gross Monthly Wages: ₹20,000 (eligible up to <₹21,000)

• Calculate Employee Contribution

0.75% of ₹20,000 = ₹150

• Calculate Employer Contribution

3.25% of ₹20,000 = ₹650

• Total ESI Contribution

₹150 + ₹650 = ₹800/month

• Contributions deposited by 15th of the following month via ESIC online portal.

• Half-yearly returns to ESIC (April–September, October–March).

• Employees get a PeHchan card for medical services.

Benefits for Employees
1. Free medical treatment in ESIC hospitals for employee &
dependents.
2. Sickness benefit: 70% wages for 91 days/year.
3. Maternity benefit: 26 weeks paid leave.
4. Disability benefit (temporary/permanent).
5. Dependents’ benefit (in case of death due to employment
injury).
 HR Compliance Challenges

•Tracking employees crossing the ₹21,000 threshold (exit from

ESI).
•Migrant/temporary workers—difficult to register.
•Ensuring timely payments on ESIC portal.
•Employee awareness (many workers don’t use ESIC hospitals).
Maternity Benefits
1. 26 weeks paid leave.
2. Crèche facility if 50+ employees.
3. Work-from-home option post-delivery.
4. 12 weeks for 3rd child onwards.
5. 6 weeks for adoption (child below 3 months).
6. Work from home option (post maternity, if job allows).
 Infosys TCS
•Leave: 26 weeks paid maternity leave Leave: 26 weeks maternity leave, plus unpaid
(extended beyond legal requirement for
extension possible.
certain roles).
1. Special Programs:“Maitree” community for
•Additional Benefits:
•Infy Baby Care portal for parenting
women returning after maternity.
guidance. 2. Crèche tie-ups in metro cities.
•Flexible work-from-home policies. Gradual return-to-work options (reduced hours
•Special counselling for women rejoining
initially).
after maternity.
Accenture India
Wipro
• Leave: 26 weeks maternity leave.
• Leave: 26 weeks maternity leave.
• Beyond Law:
• Programs:
• Paternity leave: 8 weeks.
• “Women of Wipro” (WOW) network
• Adoption leave: 19 weeks.
for mentoring.
• Fertility treatment leave.
• Crèche facilities near campuses.
• Support: Employee Assistance
• Back-to-work program for smooth
Program (counselling, childcare reintegration.
support).
 Ashok Leyland (Automobile
Tata Steel (Jamshedpur Plant) Manufacturing, Chennai)
• Offers 26 weeks of maternity leave • Provides maternity leave as per the
with pay. Act.
• Provides crèche facilities within • Special medical support through in-
factory premises.
house occupational health centres.
• Has a “Return to Work” program for
• Nursing breaks allowed during work
women after childbirth.
shifts.

TVS Motors (Hosur Plant, Tamil Nadu)

•Paid maternity leave (26 weeks).
•Additional transport and flexible shift options for
expecting mothers.
•Factory crèches for young children of workers.
Gratuity

1. A lump sum payment given by employer to employee

as a reward for long and continuous service.
2. Governed by the Social security code 2020
3. Applies to factories, mines, plantations, shops, and
establishments employing 10 or more workers.
4. Payable on:
1. Superannuation (retirement).
2. Resignation (after completing 5 years).
3. Death/disablement (no 5-year minimum required).
 Gratuity Calculation
Gratuity=Last Drawn Salary×15×Years of Service÷26
Where:
1. Last Drawn Salary = Basic + Dearness Allowance (DA).
2. 15 = 15 days’ wages per year of service.
3. 26 = 26 working days in a month (Act assumes 4 Sundays off).
4. Maximum gratuity payable = ₹20 lakhs (raised from ₹10 lakhs
earlier).
5. This ceiling applies to both factories and offices.
 Example

•Shymalika Ghosh (working in a steel

1. 20,000 ÷ 26 = 769.23 (per day wage).
factory in Jharkhand).
2. 769.23 × 15 = 11,538.45 (15 days wage).
3. 11,538.45 × 12 = ₹1,38,461 (gratuity payable). •Basic + DA = ₹20,000 per month.

•Years of Service = 16 years.

•Retirement in 2026.
Coal India Limited (CIL) – Factory Mines Workers

• Workers with 20–30 years of service often receive

gratuity between ₹10–15 lakhs on retirement.

• Example in 2019, a Jharkhand CIL worker retired after 25

years with Basic + DA = ₹28,000.
• Gratuity = 28,000×15×25÷26=₹4,03,846

• Paid in lump sum at retirement along with PF settlement.

HR Role in Factories for Implementation

1. HR maintains attendance + payroll records for Basic + DA (since gratuity

is calculated only on that).
2. On separation, HR checks:
• Service duration (≥5 years unless death/disablement).
• Eligibility under Gratuity Act.

3. HR submits Form I (gratuity claim) and processes payment within 30 days;

else 10% simple interest is payable for delay.
Forms for filling gratuity submission
1. Form I → Employee/nominee applies to employer (HR) for gratuity.
2. Form L → Employer issues notice of payment.
3. Form M → Employer issues notice of rejection (if any).
4. Form R → Appeal form (if dispute).
• HR calculates gratuity amount (using last drawn Basic + DA).
• If payable → HR issues Form L (Notice of Payment) to employee. Payment
must be made within 30 days (via cheque, DD, or bank transfer).
• HR (on behalf of employer) must report to the Controlling Authority under
Payment of Gratuity Act (generally, the Labour Commissioner / Assistant
Labour Commissioner of the region).
• Employee can also file a direct claim with the Controlling Authority.
Bonded Labour

A system where a person is forced/bonded to work to repay a

debt or loan, often with no fair wages and no freedom to leave.
• Debt is inherited or exaggerated.
• Worker cannot leave the job until “debt” is cleared (sometimes
lifelong).
• Exploitative and coercive in nature.
• Example: A brick kiln worker forced to work for years because
of a small loan taken from the kiln owner.
• Law in India: Bonded Labour System (Abolition) Act, 1976 –
abolishes bonded labour, cancels such debts, and mandates
rehabilitation.
Bonded Labour & SS code

1. Bonded Labour is prohibited absolutely under the Bonded Labour System (Abolition) Act,
1976 (still in force).
2. The Social Security Code, 2020 does not provide separate provisions for bonded
labourers, but:
3. If a rescued bonded labourer is registered as an unorganised worker then they
can access welfare schemes (health, insurance, pension, maternity).
4. Central & state governments can frame special welfare schemes for vulnerable groups,
which may include rescued bonded labourers.
5. In practice: Rehabilitation and social security for bonded labourers comes through
schemes like the Central Sector Scheme for Rehabilitation of Bonded Labourers, 2016
(cash compensation, skill training, housing, health).
Child Labour

The employment of children below the legal working age in

economic activities that are exploitative, hazardous, or interfere
with their education and childhood.
• Children below 14 years are prohibited in all occupations.
• Children between 14–18 years (adolescents) are prohibited
in hazardous industries (mines, chemicals, etc.).
• Example: Children working in garment factories, roadside
eateries, or hazardous industries like fireworks.
• ILO Standards: ILO Convention 138 sets a general minimum age for
employment, requiring countries to set a national minimum age
for work, not less than the age of completion of compulsory
schooling and at least 15 years old. ILO Convention 182 calls for
the immediate elimination of the worst forms of child labour,
which includes slavery, trafficking, child prostitutionConvention 138
(Minimum Age) & Convention 182 (Worst Forms of Child Labour).