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Draft Social Security Code 2019

Draft Social Security Code 2019

Tag:GS 3 || Economy || Structure of the Indian Economy || Labour & Unemployment

 What is the issue?

  • The third draft of the 2019 Social Security Code aimedat amalgamating, simplifying and rationalizing the related provisions of the central labor laws.
  • The draft Code merely clubs the relevant sections of the existing statute without specifying how these issues are to be addressed.
  • The code fell short of the stated purpose.

Key highlights of the draft

  • Insurance, PF, life cover for unorganized sector employees: The central government shall, from time to time, devise and inform appropriate welfare schemes for unorganized workers on matters relating to life and disability coverage, health and maternity benefits, old age protection, and any other benefits as defined by the central government.
  • EPFO and ESIC corporation: The corporate body will be the pension, insurance and income saving bodies like EPFO and ESIC. The head of such organizations may not be the labor minister, labor secretary, central PF commissioner or general manager of ESIC by definition.
  • Benefits for Gig Workers: ‘ Central Government may, from time to time, formulate and notify appropriate social security schemes for gig workers and platform workers, ‘ and such schemes would include issues such as ‘ life and disability coverage, ‘ ‘ health and maternity benefits, ‘ ‘ old age protection ‘ and ‘ any other benefit as determined by the Central Government.’
  • Maternity Benefits: According to the other provisions of this Code, every woman is entitled to and is responsible for the payment of the maternity benefit at the rate of the average daily wage for the duration of her actual absence, that is, the period immediately preceding the day of her delivery and any period immediately after that day.
  • The Code on Social Security, 2019 once in place will merge eight exiting labour laws including Employees’ Compensation Act, 1923; Employees‘ State Insurance Act, 1948, Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952; Maternity Benefit Act, 1961; Payment of Gratuity Act, 1972; Cine Workers Welfare Fund Act, 1981; Building and Other Construction Workers Cess Act, 1996 and Unorganized Workers‘ Social Security Act, 2008.

Flaws in the draft

  • This merely brings current organized business schemes together.
  • Ambiguity over the basic criteria for social security benefits, such as the total number of employees in a company and the length of service, has been avoided.
  • The basic structural and conceptual flaws in the code are,
    • No uniform” social security”
    • There’s no central account. It is proposed that the corpus be divided into numerous small funds which generate a multiplicity of authorities and confusion.
    • It is uncertain how a better alternative is the planned abolition of current and operational systems, such as the Provident Fund Organization of Employees (EPFO).
    • No clear definition of main categories such as jobs, salaries, the principal-agent in a contractual situation; and industries that are “organized-unorganized.”
    • This will continue to obstruct the extension to all parts of employees of main social security benefits such as PF, gratuity, maternity benefits, and healthcare.
    • There is no government obligation to contribute to the social security programs mentioned, even though the Code is explicit about contributions from employees and employers.

What is unclear?

  • It is heartening to welcome aboard large sections of the workforce such as those working in taxi aggregate companies.

But it is not clear how exactly the government is planning to promote access to PF or medical care.

  • The nature of the relationship between the company and the employee, and therefore the obligations, is not defined in these cases.
  • If employers in the unorganized sector are expected to pay the EPFO payment bill, the cost of doing business will be substantially higher.

Failed examples

  • For similar reasons, existing benefits for unorganized workers have not materialized.
  • For example, construction workers were not registered by the 22-year-old Building and Construction Workers ‘ Cess Fund.
  • They were not able to make effective use of the fund.
  • The Fund is registered with less than 3 crore employees and all State welfare boards are set up.
  • Official estimates: Over 5 crore construction workers.
  • Unions’ estimate: Over 10 crore construction workers.
  • Almost all other welfare schemes administered by central or state governments for unorganized workers are in a similar situation.

Way forward

  • Comprehensive healthcare and a quality education program will tap into social security, enhance earnings from work-life, and enhance next-generation earning potential. Rethinking social security in ways that are comprehensive, if not unorthodox, would be useful.
  • It should mandate the gig workers to buy insurance and save for old age, perhaps by automatically deducting a fraction of the payments received into their bank accounts into insurance/pension accounts, say, in the National Pension System.
  • The government should address long-term structural issues and simplify the existing labour laws.


  • Social security is a necessity for all workers, but the present draft is still very tentative and does not specify whether there will be wage security, life insurance, medical facility for all or not.
  • Social security should include worker retraining, not just unemployment allowance.
  • Social security should help elders deploy their skills to match the demand anywhere in the world.

 Mains moel question

  • What is the significance of the Draft Social Security Code? Explain