Labour Code on Social Security 2018: Frequently Asked Questions | Labour Law News

Labour Code on Social Security 2018: Frequently Asked Questions


FAQs of the Draft Social Security Code 2018

FAQs of the Draft Social Security Code 2018

The Ministry of Labour and Employment has released a set of frequently asked questions on the draft labour code on Social Security 2018 as below.

Q1: What are the lacuna in present day social security system in India?

The biggest lacuna is that it 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 other issue is large scale fragmentation: there are multiplicity of laws, policies, schemes and agencies. The existing wage and number thresholds creates perverse incentives for the employers to shy away from joining the system thus resulting in artificial exclusions and distortions in the labour market.

Q2: How does the proposed code address these issues?

To begin with, the Labour Code on Social Security aims to simplify, rationalize and consolidate the hitherto fragmented laws into one consolidated law which will be easier in terms of comprehension, implementation and enforcement. However, what we are proposing goes much beyond mere amalgamation. We are aiming for universal social security. The code follows a rights based approach which is very much aligned to the spirit of our Constitution. We believe that social security is every worker’s right.

Q3: The other codes that are being drafted by the ministry are based on the recommendations of 2nd NCL. What about this code?

The Code also has its inspiration in the Report of the Second National Commission on Labour (2002) and many other studies and reports on social security policies. We have also drawn our inspiration from UN SDGs of the 2030 Sustainable Development Goals Agenda. Expert technical assistance was also obtained from the International Labour Organization also to guide the policy framework in the right direction.

Q4: What is meant by universalization here?

The Code aims at universalization of Social Security and as such the definition of employee covers all kinds of employment including a part time worker, casual worker fixed term worker, piece rate/commission rated worker, informal worker home-based worker, domestic worker and seasonal worker. 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- I Exclusions and this schedule would be gradually pruned to expand the coverage.

Q5. What is the role of Central Board in Management of Funds?

Under the provisions of the Draft Code, any current surplus in a Fund, if any, is to be transferred by the State Boards to the Central Board for professional management of investment of the Scheme

Funds. This is to ensure that economies of scale may be utilized to the maximum possible extent and good return could be fetched on the investment.

The Central Board has been provided the responsibility to manage the investment of the Funds mentioned above on behalf of the States in accordance with the investment pattern notified by the Central Government.

The amount so transferred to the Central Board continues to vest in the State Board, and The Central Board is also obliged to remit to the State Boards, from time to time, such amounts from the State’s Scheme Fund or Gratuity Fund being managed by it, as may be required by the State Board to meet the Scheme obligations.

Q6. What is the system of Registration in the Code?

The code requires all (active) workers to be registered under the Universal Registration system envisaged in the Code. The Registration will be Aadhar based and the Registration protocols will be decided by the Central Board – for universal applicability and portability of registration. However, actual registration in the field will be performed by Local Bodies (i.e. Gram Panchayats / Municipal bodies), under supervision of the State Boards, in order to provide door-step services. In addition, the Code enables the State Boards to have PPP arrangements to provide facilitation centers for registration services. The Code also requires State Boards to conduct proactive surveys of workforce to facilitate registration.

Q7. What is meant by deactivation of workers’ registration?

This provision is intended to cover situations wherein a worker has not engaged in any such form of work either as an employee or non-employee wherein he falls within the provisions of this code and as such no contribution is payable by or on behalf of such person for that period. The minimum period for which a person needs to work in a particular year to entitle him to be classified as a worker and avail benefits under this code is to be decided by the National Council. The code does intend to cover all the workers but the intention of this provision is to ensure that only such persons who work for a minimum period as specified would be classified as workers. Any period wherein the worker is out of work on account of employment injury, sickness or maternity is considered as work and the provisions of deactivation do not apply to such cases.

Q8. What happens if the employer fails at their obligation to register the worker?

As such, the obligation to register a worker falls on the employer, except for own-account worker, who needs to register himself. The Draft code prescribes penalties for employing an unregistered worker beyond a specified period. However, if the employer fails to register the worker within the specified time period, the worker has been provided with the facility of registering himself under the provisions of the code.

Q9. Why does the Code specify categorization of workers upon registration?

The funding of social security under the Code is a combination of Employer / employee funded and Taxpayer funded. For workers belonging to poorest socio-economic category, the draft Code envisages the Social Security be taxpayer funded. Therefore, there is a need to scientifically classify and identify such workers who belong to poorest socio-economic category. The Code envisages a system of classification of workers based upon socio-economic parameters that will be scientifically designed and notified in the Rules. Workers, at the time of registration will provide

data (about their socio-economic parameters) and based on this, the categorization will be automatically determined.

Q10: Do you think that poor class of workers will be able to afford the contribution for social security?

Under this code, Social Security benefits are a funded by a combined system of State (taxpayer) funding, employer funding and worker funding. The code therefore proposes following structure for contribution:

➢ If a worker is an employee/non- employee belonging to Socio Economic Category-IV, the rate of contribution would be NIL. The Contribution in respect of such workers would be paid by the Government and routed through the Contribution Augmentation Fund(s).

➢ If the worker is an employee not belonging to Socio Economic Category-IV, the rate of Contribution would be 12.5 percent of wage or wage ceiling whichever is lower.

➢ If the worker is a non-employee belonging to Socio Economic Category III the rate of contribution would be 20 percent of national minimum wage notified by the Central Government.

➢ If the worker is a non-employee belonging to Socio Economic Category I or Socio Economic Category II, the rate of contribution shall be –

20 percent of the higher of

(i) monthly income or wage ceiling whichever is lower, or

(ii) national minimum wage notified by the Central Government,

Therefore, workers belonging weaker socio-economic status are provided social security through tax-payer funded system. Remaining workers, who themselves (or wih their employers) can afford to pay for their social security, shall make contributions, from which, the social security benefits shall be provided.

Please click the link below to download complete FAQ’s

Code_-on-Social-Security_FAQ-6-3-18.pdf (76 downloads)

Source : MOLE

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