Labour pains: Draft social security code has little to offer

| Updated on September 30, 2019

It merely clubs together existing schemes in the organised sector, failing to simplify labour laws, reforms and workers’ entitlements

The third draft on the Code on Social Security, 2019 falls short of its stated aim to “amalgamate, simplify and rationalise” the relevant provisions of eight existing central labour laws. It merely clubs together existing schemes in the organised sector, while skirting ambiguities over the basic criteria for availing social security benefits — such as the minimum number of employees in an organisation and length of service. Besides, there are some basic structural and conceptual flaws. First, there is no uniform definition of “social security”, nor is there a central fund. The corpus is proposed to be split into numerous small funds creating a multiplicity of authorities and confusion. Second, it is not clear how the proposed dismantling of the existing and functional structures, such as the Employees’ Provident Fund Organisation (EPFO) with its corpus of ₹10 lakh crore — which will be handed over to a government-appointed central board — is a better alternative. Third, crucial categories such as “workers”; “wages”; “principal-agent” in a contractual situation; and “organised-unorganised” sectors have not been clearly defined. This will continue to impede the extension of key social security benefits such as PF, gratuity, maternity benefits, and healthcare to all sections of workers. Finally, there is no commitment on the government’s part to contribute to the listed social security measures, even as the Code is clear about employee and employer contributions.

It is heartening to welcome aboard large sections of the workforce — “gig workers” such as those working in taxi aggregate companies like Uber and Ola. But how exactly the government proposes to facilitate their access to PF or medical care is not clear. What’s more, in these cases, the nature of the relationship between the company and the working staff, and hence the obligations, is not defined. If employers in the unorganised sectors are expected to foot the bill for EPFO contributions, that will substantially hike the cost of doing business.

Existing benefits for unorganised workers have failed to materialise for similar reasons. For instance, construction workers have not been able to avail of the Building and Construction Workers’ Cess Fund effectively, owing to the Fund’s failure to register them. While the Fund has been in existence for over 22 years, less than three crore workers have been registered with all the State welfare boards put together. Official estimates alone put the figure of total construction workers at over five crore; unions estimate these numbers at about 10 crore. It is a similar situation for almost all other welfare schemes run for the unorganised workers by the Central or State governments. The draft Code merely cuts and pastes the relevant sections of the existing statute without specifying how these issues are to be addressed. The government should address long-pending structural issues and deliver on its promise to actually simplify the existing labour laws.

Published on September 30, 2019

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