As part of reform initiatives, in December 2019, the Labour Minister for India introduced the Social Security Code Bill, 2019 ("Social Security Bill") in the Lok Sabha. The bill proposes setting up a social security fund to provide welfare benefits to all workers. This update looks at the key amendments to the Social Security Bill.

Background

The Indian labour ministry is working towards consolidating its 44 labour laws into four codes -- on wages, industrial relations, social security and safety, and health and working conditions -- in order to improve ease of doing business in India whilst safeguarding interests of workers.

The Social Security Bill itself will replace nine social security laws in India, including the Employees' Provident Fund Act, 1952, the Maternity Benefit Act, 1961, and the Unorganised Workers' Social Security Act, 2008.

Under the Social Security Bill, a social security fund will be set up to provide welfare benefits such as pension, medical cover, and death and disablement benefits to all workers, including gig workers, platform workers, and unorganised workers.

The Bill has now been referred to the Parliamentary Standing Committee on Labour.

Key changes under the Social Security Bill

The Indian government may set up various social security schemes, including a provident fund, a pension fund, and an insurance scheme, for the benefit of workers. The government may also provide:

(a) sickness, maternity, and other benefits;

(b) gratuity to workers on completing five years of employment (or fewer than five years in certain cases such as death);

(c) maternity benefits to female employees;

(d) payment of tax (cess) by the employer for the purposes of social security and welfare for building and construction workers; and

(e) compensation to employees and their dependants in the case of occupational injury or disease.

Further, millions of employees may soon have the option of reducing their provident fund contribution (which is currently at 12% of basic salary) and therefore increase their take-home pay. Higher takehome is intended to boost consumption, and consequently, economic growth. The Bill, however, retains the employers' contribution at 12%.

In addition, specific social schemes will also be set up for gig workers, platform workers, and unorganised workers to provide various benefits, such as life and disability cover. The Social Security Bill defines gig workers as workers outside of the traditional employer-employee relationship. Platform workers are workers who access other organisations or individuals using online platforms and earn money by providing them with specific services, and unorganised workers include homebased and self-employed workers.

Key Takeaways

In advance of the Social Security Bill being passed, employers must be aware of the key changes (and in particular the obligation to make a contribution to the social security fund where necessary) and ensure that their internal policies and infrastructure are compliant. Further, companies dealing with gig workers, platform workers, and unorganised workers should assess whether, and if so, how, the Social Security Bill will impact their businesses.