"Our baby is being killed before our very eyes," lament unionists who had fought for the Building & Other Construction Workers' Act for over a decade. They and many other trade unions are protesting against the Social Security (SS) Code proposed by the Centre, which merges and repeals 15 existing laws on social security.

Existing laws have failed

One can understand their feelings but what has been achieved through the B&OCW Act, or the myriad other splintered social security laws, some more than a century old? An amount of Rs.70,000+ crores, from the collection of cesses and interest earned by the B&OCW Welfare Boards, is lying mostly un-utilised while the miserable condition in which workers and their children live on construction sites is plainly evident to all. Every day, there are complaints from workers about the meager and delayed registration of workers. Year-long waits for delivery of benefits are so rampant that the Supreme Court had to step in to prod governments into action.

A MGNREGA site. Pic: Ministry of Rural Development, Government of India 

The Unorganised Workers' Social Security Act, passed in 2008, has also been a non-starter, with poor registration of workers, practically no funds earmarked, and no schemes formulated under the law.  Domestic workers in Karnataka, for instance, have been moving heaven and earth to merely get ID cards under this Act, leave alone any benefits.

It is necessary to acknowledge that the existing laws and schemes have failed to cover most of the workers in the unorganised sector and have failed to provide meaningful benefits. There is large scale fragmentation: there are multiple laws, policies, schemes and agencies to implement them. There is no mandatory registration of workers. There is not even a minimum social floor of benefits, let alone all the nine benefits mentioned in the International Labour Organisation Convention 102 on Social Security. Each scheme provides a single benefit, that too in a specific sector alone. There are multiple schemes with overlapping benefits and the benefits too vary with each scheme.

This is simply not a workable situation. These deficiencies were analysed in detail by the ngo CIVIC Bangalore in its document, "A Dysfunctional Law on Social Security" and an Alternative Bill on Social Security was submitted by it to the Karnataka government.

Expanding coverage, and simplifying access

As the SS Code correctly points out, "The biggest lacuna is that it (current law) leaves almost 90 percent out of the folds of any social security. Unorganized sector workers are largely excluded. The schemes have very limited outreach. The existing wage and number thresholds create perverse incentives for the employers to shy away from joining the system thus resulting in artificial exclusions and distortions in the labour market".

Academicians point out that the latest Periodic Labour Force Survey (PLFS) of 2017-18 released in May 2019 shows that 49.6 per cent of the workforce is not eligible for any social security benefit. In the case of informal sector workers, the Ministry of Labour and Employment's statistics on Employment in Informal Sector and Condition of Informal Employment of 2015 shows that 69 per cent were not eligible for any social security benefits.  Such workers get no medical facility or family welfare support. Even after the passage of the Unorganised Workers' Social Security Act a decade ago, very few (about 5 to 6 per cent) are believed to have been enrolled for social security benefits.

It is paradoxical if unionists daily lament this poor status of affairs but want no new legislation. To say, "our labour laws are fine as they are, nothing should be changed", and to reject the Code without offering better alternatives, is inexplicable.

The SS Code draws inspiration from the 2nd National Commission on Labour (NCL) Report of June 2002, which had recommended that the existing set of labour laws relating to social security should be grouped into a single Social Security Code. The Code has voiced several, needed salutary changes to address the current deficiencies in the various laws: "Provide universal social security cover to all kinds of employment; merge, simplify, rationalize and consolidate the fragmented labour legislations and schemes on social security; create a single-window decentralized structure for administration of social security; empower local bodies and Panchayats for enforcement, facilitation and delivery of service; provide a portable (Aadhar-linked) Social Security Account".

The fine print

In the current government, there has been an abundance of sloganeering and showcasing of good intentions in fulsome language while working contrary to these aims in the fine print, and therefore one cannot be wary enough of its intentions. While the SS Code espouses universalisation and claims to cover every worker, it keeps the power to fix the threshold for eligibility under the Code with the Central government. Hence, its effectiveness will depend on where the threshold for eligibility will be fixed: to establishments with ten workers or 100? 

The thresholds matter greatly. The previous NDA government had proposed to amend the Factories Act, 1948 to make it applicable to factories employing 20 or more workers with power, and those employing 40 or more workers without power - up from the current figures of 10 and 20 workers respectively.  This would actually remove thousands of workers from the purview of the standards and safety provisions of the law so that more workers would be excluded from the benefits than earlier.

As regards eligibility under the SS Code, its Schedule 1 currently provides for exclusion only of regular government servants, and contractual employees of government from its applicability. But as the Code says, "The universalization, however, does not mean that all the workers proposed for coverage under the code would be covered from Day 1, as the code provides the flexibility of progressive extension of coverage. Those categories of workers who are initially not covered would be included in “Schedule-1 Exclusions” and this schedule would be gradually pruned to expand the coverage. 

By this, however, the Centre can add any entity or category of workers to the excluded list of Schedule-1 and then choose not to prune the list, so that universalisation may become just a myth. There is enough evidence to suggest that this may happen; one needs to only recall that while claiming to cover every worker with a national minimum wage in its recently passed Wage Code, the Centre fixed the national minimum wage at Rs. 178 which would actually trigger a 'race to the bottom' in States which currently have much higher minimum wages.

The details matter - for good as well as bad

The 2nd NCL suggested correctly that "Area-based schemes appear to be eminently suitable for application to the workers in the unorganised sector, who are too numerous to be covered under occupation-based schemes”.  Hence the Code says, "...infrastructure of local bodies (i.e. panchayats and municipal bodies) can be used for providing registration of both workers and entities, grievance redressal services .... and in administration of the social security system". The State Boards are to provide the necessary finances for this, so te local bodies can establish Facilitation Centers to register workers, and appoint Samajik Suraksha Mitras to explain to workers what their rights and eligibility for benefits are.

A problem that one can foresee with the Code is that it has merged the organised and unorganised sectors and prescribed a common architecture for registration, payment of contributions, etc. Trade unions fear that the merger of organisations and funds for the organised (EPFO, ESIC) with that of the unorganised sectors would lead to cross subsidisation, and harm the interest of the former. There should have been distinctly separate provisions for formal and informal sectors by fixing the threshold for defining the unorganised sector in the law itself, they contend. The more formal extant procedures should have continued only for the organised sector employers.  

CIVIC's alternative bill recommends three separate institutions for providing social security to unorganised workers: (1) a State Unorganised Workers' Health Insurance Authority for management of the health insurance fund for providing health care, sickness benefit, family care and maternity benefits, in lieu of ESIC; (2) a State Life-cum-Pension Fund Authority to manage Life-cum-Disability-cum-Pension Fund, in lieu of EPFO; and (3) an Unorganised Workers’ Unemployment Insurance & Skill Training Fund Authority to manage unemployment and skill training insurance fund.

The Code foresees deduction of 12.5 per cent contribution at source from every worker's wage, and a 17.5 per cent corresponding payment of employers' contribution plus 2 per cent for gratuity to the States' SS Funds. In case of owner-cum-workers of an enterprise, there is no employer, and hence a single contribution from the worker himself (maximum 20 per cent of income) is prescribed. There are exemptions for the poorest works, and some other details pertaining to different situations. However, while all this presumes that the workers will be categorised properly, the norms for such classification have not been prescribed!

Under the new code, every employer and contractor will be obliged to maintain registers and deliver returns every month to the State Board providing details of the employees in respect of whom contributions become due. This is an attempt to formalise the informal sector with a mere stroke of the pen as was done under GST, without paying heed to the particular constraints faced by the informal sector in following formal sector procedures.

Do employers in the informal sector, whose casual workers may work just for a few days with them, have the capacity to maintain such detailed records and file them every month? Simpler compliance provisions, such as those prescribed for households employing domestic workers - who are allowed to make a single annual contribution - should have been the preferred mode for all unorganised workers.

A glaring deficiency is seen in the fact that the government will not be making any contribution to the SS Fund, except for those who are in no position to make their own contributions. Considering that 93 per cent of workers are in the unorganised sector and earn less than, say, Rs. one lakh per annum, expecting wage workers to pay up to 12.5 per cent of their wages, or up to 20 per cent by owner-cum-workers, would keep them all away from even registering themselves. Trade unionists point out that 65% of the GDP is produced by the unorganized sector workers. They demand that 3% of the revenue earned by the government from the unorganised workers’ labour needs to be set aside as government contribution towards their social security.

The Code provides for a statutory universal registration of workers and entities. The Registration of a worker is a one-time activity. The Code claims that all the workers (organised or un-organised) shall be covered under the same set of Basic Schemes implemented uniformly across the country and that it would cover all the nine types of social security benefits described in the ILO Convention 102.  A single contribution would need to be made by the employer and empIoyee and there would be no need to contribute separately to individual schemes.

The Code dwells at length on the following benefits:  gratuity, maternity benefits, pension, dependents’ and disability benefits.  It is not clear, however, whether these will be provided mandatorily as a ‘minimum social floor’ of benefits as recommended by the ILO, or whether one will have to wait for schemes to be devised in this regard. Also, sickness benefit, a mandatory provision under ILO, is to be restricted to persons falling below a certain socio-economic level and medical care too is to be restricted to notified areas only.  The Code only says that it “endeavours to provide Sickness Benefit and Medical Benefit to all category of workers as per prescribed contributory conditions”. Also, contrary to usual practice, nowhere is there a mention of the quantum of these benefits.

There is also no reference to ‘Extended Social Security Benefits’ such as child care allowance for a child under three years of age who is not in municipal day care, financial aid to students for pre- and post‑school education, housing allowance for low‑income households for rented homes, housing benefit for construction of house, skill development allowance, marriage and funeral assistance, etc. These are left to the States to devise as per their wish.  So the promise of all nine or even a minimum social floor of benefits may remain just a dream.

The Code proposes an overarching regulatory body, the National Social Security Council headed by the Prime Minister. Unionists point out that only two representations to workers and employers among 'an army of bureaucrats' will lead to centralisation of decision-making power. They emphasise that the ILO mandates the proportion of representation of trade unions, employer organisations and government to be maintained at 1:1:2. Currently, ESI and EPF have 10 representatives each of trade unions and employers.

Will any of this actually happen?

All in all, the SS Code lays out an array of wishful benefits, but there is no firm commitment in the provisions to actually provide them. What should have been spelt out as binding legislation which actually compels the government to provide the benefits, is left to the whims and fancies of executive power of the Central government.

The late T.S.Sankaran, a labour law expert and former Additional Secretary, Ministry of Labour, had written on the UWSS Act: "Surely, the Parliament is ... obliged to build into the law what constitutes appropriate and adequate social security for this vast mass of unorganised workers and their dependents, what eligibility criteria, if any, ought to be prescribed, what will be the scale of benefits that the workers and their families are entitled to receive and under what conditions, what will be the funding arrangements that must be put in position to meet the cost of social security and so on.  Instead of doing all these and more, what our Parliamentarians are content with is to enact a law which enables the Central and State Governments to do whatever they deem expedient."  His words ring true about the SS Code as well.