Laboured exercise

KR Shyam Sundar | Updated on January 27, 2018


Draft social security code lacks clarity

The Unorganised Workers’ Social Security Act, 2008 did not meet the aspirations of these workers and is not even an apology for a social security system for unorganised workers.

The Draft Labour Code on Social Security and Welfare published in April 2017 for public comments seeks to address these grave shortcomings and attempts to conceive of a universal social security cover in a ‘Single Code’ by merging all existing schemes and laws.

India’s Constitution and some of the ILO Conventions on social security provide a framework for development of a social security system. The central labour laws provide for social security such as maternity benefit, accident and disablement compensation, provident fund and gratuity, but these cover at best around 8 per cent of the workforce in India.

Unorganised workers, though huge in number, have been ignored for long and it is only ironically in the post-globalisation period that they have entered into policy debates.

In a way, the Code is a welcome move as it covers employees and non-employees including domestic workers, farm workers, self-employed of all types, and so on. But there are many loose and bad constructions in the Code; for example, it defines “woman” as an “employee who is a woman in the context of maternity benefit under this code”; “monthly income” has not been defined.

It inadvertently legalises “oral contract” by defining it as an attribute of informal worker. But there are more serious concerns.

The Code starts on a bad note as the preamble to it states that it seeks to “Simplify, rationalise, consolidate, and amend the laws relating to social security of workforce so as to make them less complex for easier comprehension, implementation and enforcement” and hence has nothing to say on the “substantive” aspects which normally would be the case for any law.

The canvas of coverage is vast and this gives rise to an apprehension over the capacity of the State to enforce this Code. Again, the Code does not define “social security” nor provide the components of social security and the percentage benefits under each component.

The Code will immediately be welcomed by the employers as it reduces the payroll tax to 17.5 per cent and subsidises the gratuity cost to 2 per cent (employers put it at 4-5 per cent) of total salary cost. There are huge concerns about the funds for delivering varieties of benefits that the Code talks about.

One fears that the burden will be shifted from the employers to the wage earning class through higher taxes. The coverage is huge and the contributions apart from organised sector employers and employees are difficult to realise, if not impossible.

The Code also envisages a huge administrative architecture, namely, the National Council, the Central Board, the State Board, an Executive Committee, a Standing Committee, and Central and State Advisory Committees.

The Code lists numerous functions for each body (some over-lapping) and bureaucratisation will be its greatest hazard. The tax mop-up required to support these bodies raises concerns.

The composition of these bodies needs a rethink; it omits employers or does not give adequate representation to unions. The top-down approach of this Code is a serious limitation. The law needs to be preceded by a fantastic and wide ranging dissemination and consultations exercises.

The writer teaches at XLRI, Jamshedpur

Published on May 01, 2017

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