Sheena Ogra , Anirudh Agarwal
January 30, 2023
To reform the archaic labour and employment law legislations pertaining to social security, the Central Government has enacted the Code on Social Security, 2020 (“Code”) with an aim to extend the social security benefits to maximum workforce working in either the organized or the unorganized sectors.
The Code has repealed the following 9 (nine) major labour law legislations: (i) The Employee's Compensation Act, 1923; (ii) The Employees' State Insurance Act, 1948; (iii) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952; (iv) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; (v) The Maternity Benefit Act, 1961; (vi) The Payment of Gratuity Act, 1972; (vii) The Cine-Workers Welfare Fund Act, 1981; (viii) The Building and Other Construction Workers' Welfare Cess Act, 1996; and (ix) The Unorganized Workers' Social Security Act, 2008.
This article provides a comparative analysis of the key changes introduced under the Code except these acts i.e., The Cine-Workers Welfare Fund Act, 1981 and The Building and Other Construction Workers' Welfare Cess Act, 1996, with the current labour law framework and its impact on the employment ecosystem of India.
Furthermore, education is introduced as one of the suitable welfare schemes for unorganized workers to be framed by the Central Government. Moreover, a social security fund has been established by the Central Government for social security and welfare of the unorganised workers, gig workers and platform workers wherein, aggregators have to contribute to the fund ranging from 1 % (one percent) to 2% (two percent) of the annual turnover of every such aggregator. For ease of reference, the term ‘aggregator’ means a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider.
Under the Code, the liability for compensation to the employee by the employer has been increased which also includes an accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty. Such accident shall be deemed to have arisen out of and in the course of employment if nexus between the circumstances, time, and place in which the accident occurred and his employment is established. This provision does not exist in the erstwhile legislation.
Under the Code, enhanced and stringent penalties have been imposed upon the employer for non-complying with the provisions stipulated under the Code. As an effective deterrent, the quantum of fines levied on the employer has been increased in matters pertaining to (including but not limited) the following: (i) failure to pay contributions; (ii) fails to pay amount of gratuity; (iii) fails to provide maternity benefit to a woman; (iv) fails or refuses to submit any return, report, statement or any other information; (v) fails to pay any amount of compensation to which an employee is entitled; (vi) obstructs Inspector-cum-Facilitator to discharge his duties and fails to produce on demand by the Inspector-cum-Facilitator any register or document in his custody; and (vii) dishonestly makes a false return, report, statement or information to be submitted.
Moreover, compounding of offences has been introduced under the Code which are broadly applicable to the offences relating to EPF and ESIC and other such offences as stipulated under the provisions of the Code. For instance, in case of an offence punishable with fine only, compounding is allowed for a sum of 50% (fifty percent) of the maximum fine and in case of an offence punishable with fine and imprisonment less than 1 (one) year, compounding is allowed for a sum of 75% (seventy five percent) of the maximum fine.
By amalgamating the 9 (nine) major labour law legislations into 1 (one) Central Labour Code, the Government aims at promoting the ease of doing business and further, streamline and simplify the labour law related procedures. The conscious efforts taken by the Indian Government will inevitably help boost the economy comprising of small to medium sized enterprises and eliminate the fear of unrealistic labour law compliances and improve the formal employment conditions.
It is interesting to note that the changes brought about in the Code are both employer and employee centric with the objective towards balancing the rights of both the employer as well as the employee. Under the Code, several new concepts have been introduced such as the fixed term employment, career centres, revised the definition of the term ‘wages’ with specified inclusions and exclusions therefore, making it uniform across all the 4 (four) codes. However, having a uniform definition for wages will inevitably impact the employers regarding the calculation and pay in terms of statutory benefits and amounts. Furthermore, the concept of prior opportunity before prosecution has been introduced which will allow some time to the employer to rectify the non-compliances. Moreover, social security benefits will be extended to unorganised workers, gig workers and platform workers who had been left out due to the restricted applicability of the erstwhile labour legislations.
The Code also empowers the Central Government to frame suitable welfare schemes and formulate social security fund to provide social security benefits to the unorganised workers, the gig workers and the platform workers who were earlier not covered by the labour law legislations in India. Such progressive steps by the Indian Government is the need of the hour, not only to ensure that the social security benefits are rightfully extended to the vulnerable workers across all the sectors but also to protect them from any discriminatory practises and exploitation. The Code also makes Aadhaar registration on the Shram Suvidha Portal mandatory for the workers across all sectors to receive the social security benefits. However, this could surface new challenges for the Indian Government and have far reaching implications for many workers who still do not possess Aadhaar cards and hence, will be devoid of such benefits.
Lastly, stringent penal provisions coupled with significant rise in the amount of the fines being imposed have been prescribed under the Code for violation and non-compliance of its provisions which would act as an impetus for the employers to comply with the provisions of the Code, thus, ensuring social security benefits to workers.
Considering the need for uniformity in the labour law framework in India, the codification and reformation exercise of such archaic labour law legislations under 1 (one) Central Code by the Indian Government is a step in the right direction. It would be interesting to note as to how the central rules and regulations coupled with the respective state rules are formulated and implemented and further observe, whether the same are consistent with the implementation of the Code or not to achieve the desired objectives.
In 2023, one of the key priorities of the Indian Government will be the implementation of the Labour Codes which is delayed time and again. In the meanwhile, the employers are advised to brace themselves with the impact of the vital changes which will be brought about by the implementation of the Code pertaining to the compensation structure and the benefits and accordingly revise the existing policies and the employment contracts to ensure that there are no disputes or discrepancies in future once the Codes are made effective.
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