The Social Insecurity Code

I. Introduction

Article 22 of the Universal Declaration of Human Rights of 1948, affirms that “everyone, as a member of society, has the right to social security”. This right is snatched away by the recent passage of the Code on Social Security, 2020 (CSS). The CSS may seem to increase coverage, but actually dilutes workers’ rights.

II. Attack on Federalism

The Code is also an assault on federalism. The definition says that the central government will continue to be the “appropriate government” even if tis share reduced to less than 50 percent in PSUs. The central government pursues its pro-corporate course of privatization but seeks to retain authority over their functioning at the expense of the State Governments.

III. Exclusions of The Unorganised

The current labour laws, by having minimum thresholds for applicability, leave out 80-90% of the unorganized sector workforce. The CSS has included ‘gig workers’ and ‘platform workers.’ However, absolutely no social security rights accrue to them by virtue of the CSS, apart from mandatory registration. In fact, the CSS says that the government ‘may’ frame schemes for the benefit of these categories of workers (as opposed to ‘shall’ in the 2008 Act). This approach is in stark contrast to the rights-oriented approach of older enactments such as the Inter State Migrant Workmen Act, which is also to be repealed by other labour codes. Similarly, the CSS allows the Government to set up a toll-free call centre or helpline or such facilitation centres as may be considered necessary from time to time, but does not mandate the same. The lack of a justiciable right is crucial in exposing the malafides of the government, which does not mandate any duties or provide any entitlements – no enabling provision has ever been required to frame a beneficial scheme.

The exclusion of rights is formalized further by definitions – for example, certain new categories of workers in the definition of ‘Building and Other Construction work’ appears to exclude workers employed in construction of buildings worth less than 50 lakhs. It is to be seen if it excludes vast number of construction workers from the ambit of coverage.

There are a number of other anti-labour definitional changes. For example, the definition of ‘contract employee’ looks like an easy escape for principal employers to escape liability for workers doing labour for them, by claiming that they are the regular employees of the intermediaries.

The foundational issue of universal coverage is not addressed by the Code, which maintains high coverage thresholds, resulting in exclusion. For example, EPF is applicable for establishments with 20 or more employees, ESI for 10 or more persons, gratuity for shops with 10 or more employees.  Resultantly, there is exclusion of those mass of workers working in micro-establishments, who remain unorganized and deprived of statutory protections.

IV. Opt-Out for Employers

The Code also allows the government to permit the employer to opt out of EPF compliance if the Central Provident Fund Commissioner is satisfied that there is an agreement between the employer and majority of the employees to this effect. This is highly dangerous when unequal power relations are taken into account. For example, the Supreme Court held that non-payment of minimum wages would amount to forced labour irrespective of any agreement with the worker, who may be forced by economic compulsion to agree to such terms. But, on the contrary, the Code says the employer can opt out if there is an agreement. This is against settled principles that the minimum mandatory legal obligations of employers cannot be contracted out or opted out of.


The definition of which components of wages will be used for the purpose of calculating contributions under ESI has been changed, though the interest rate remains the same. Previously, through a number of judgments of courts across India, several components that were considered to be part of wages for calculation are now excluded. The effective wage for calculation of contribution becomes less, thus resulting in a reduction of liability on the employer. Moreover, the employers are given concession by reducing their share which is yet to be prescribed. Even these amounts that go into the fund can then be used in manners yet to be prescribed.

VI. Dilution of rights and Cess

While the CSS retains the payment of cess by builders and others, it provides for a self-assessment by the employer of cess, payment of this amount, and filing of a return. There is no mechanism to test the correctness of the self-assessed amount itself if the return matches. Moreover, the rate of cess and also the interest to be paid for delay are drastically reduced.

VII. Workers Representation

Representation of workers themselves is also tainted, with worker representatives being nominated by the Central Government (See for example, gig workers representatives in section 114 of the Act). In today’s context of a crony corporate government, such a provision is bound to result in a lack of real representation for workers. The Draft Rules show a similar lack of commitment towards real representation – for example, in respect of the constitution of NSSB for unorganised Workers, the Rules uses the term, ‘may’ seek nomination and makes it a mockery. The failure to make adequate representation of workers mandatory is a very serious issue.

VIII. Impact on Women Workers

Rights of women workers are also impacted by the CSS, for example, section 72. This provision says the Inspector / Facilitator ‘may’ pass orders on a complaint on maternity benefit or leave. The repeated use of the word ‘may’ to do away with binding duties on the part of state officials reduces rightful claimants to supplicants.

Another example is that it mandates only one women in a 15 member of Building and other Construction Workers' Welfare Board. This is a highly tokenistic attitude, which can only undermine any efforts towards real fairness in representation of women.

Finally and crucially, the mandate for equal pay for men and women has been denied by the CSS. Several components of wages are excluded from being paid equally for men and women, including HRA and other allowances and payments. This effectively legitimizes the payment of differential and discriminatory wages to women workers. We must note that the manner in which this has been done clearly indicates that this is a conscious and intentional assault on the rights of women to equality and equal pay.

IX. Inspector-cum–Facilitators

A large portion of compliance and implementation of the Act rests on the shoulders of ‘Inspector-cum–Facilitators’ who may be appointed by the Central Government. Their job is not to initiate action against violation but to give an opportunity to employer. So even if an employer has wilfully committed an offence, the Code legitimises his escape, free of cost, at the expense of the worker. Moreover, in effect, the inspection mechanism is dismantled because it is regulated only electronically based on system logic and not based on regular monitoring of violations and action based on complaints.

X. Reduced Penalties

Penalties for offences by employers have been drastically reduced. Some offences for which imprisonment has been removed, and only fines up to Rs. 50,000 (with no minimum fine), have been imposed, includes deduction of employer’s contribution from employees, illegal reduction of wages, failure to pay compensation, etc. Effectively, the relevant authority has been given discretion to let off the employer who loot the wages of their workers.

XI. At the Whims and Fancies of the Government

Moreover, the CSS gives massive scope for government to set down substantive law by leaving major issues to be prescribed by the government. In the CSS alone, the words “as may be prescribed” are used as many as 123 times! The CSS includes a power to exempt any establishment from any or all of the provisions of the Code or the scheme framed through a notification. In fact, in respect of EPF, the CSS gives the power to retrospectively exempt any class of establishment having regard to its financial position or other circumstances of the case. In effect, any of the beneficial provisions that the government proclaims to have maintained in the Code can be done away with through delegated legislation.

XII. The Pandemic and the Code

The attitude of the Government in pushing the Labour Codes through at a time when our country is in the middle of a public health crisis is condemnable. It uses the pandemic to push through various anti-people moves – including the farmer laws, the proposal to amend EIA requirements, the MHAs Committee for Reforms in Criminal Laws and others.

Not surprisingly, the CSS is even self-serving when it comes to the pandemic – it permits dispensation of prior publication of rules and regulations in circumstances of epidemic, pandemic or disaster. It also allows the Central government to defer or reduce PF and ESI contributions of employers and employees.

XIII. In Lieu of Conclusion

The entire scheme of the CSS is to preen about higher coverage while consistently negating rights of workers. While this note has looked at some aspects, there are a whole lot of issues that are not covered. Through small changes in terminology, substantive rights of workers have been done away with.

The CSS and the other 3 labour codes must be specifically viewed in the current political context of the the government’s attempt to create a law-less society and a fascist state. Workers are one category of persons who are now facing oppression through laws along with several other sections including farmers, religious minorities and other dissenting voices. There is a pressing need for a strong people’s movement against the current dispensation, with the repealing of anti-worker labour codes as one of the demands. π