The Code on Social Security, 2020 is an important piece of legislation aimed at amending and consolidating the laws relating to social security to extend social security to all employees and workers, whether in the organized, unorganized, or any other sectors and for matters connected therewith or incidental thereto. Our article titled, ‘The Code on Social Security, 2020: Key changes’ lists out the changes that organizations need to note and ensure compliance with.

Definitions under the Code on Social Security, 2020

A new category of worker has been included in this code:-

• Gig Worker: Gig worker” means a person who performs work or participates in a work arrangement and earns from such activities outside of the traditional employer-employee relationship.
• Gig workers are in independent arrangements, freelancers, and workers who are employed on project-based work and short-term work. Most commonly, platform-based work where workers earn money by providing specific services, including food delivery services.
• “Platform worker” means a person engaged in or undertaking platform work.
• “Platform work” means a form of employment in which organizations or individuals use an online platform to access other organizations or individuals to solve specific problems or to provide specific services in exchange for payment.

There is no major difference between gig workers and platform workers. This is the first time in India that application-based assignments performed by many workers are recognized as an employee-employer relationship.

The definition of wages has been revised

As per the Code on Social Security, 2020, “wages” means all remuneration, whether by way of salaries, allowances, or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes:

• Basic pay
• Dearness allowance
• Retaining allowance (if any)

But does not include —

• Any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment
• The value of any house accommodation, or the supply of light, water, medical attendance, or other amenities, or of any service excluded from the computation of wages by a general or special order of the appropriate Government
• Any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon
• Any conveyance allowance or the value of any traveling concession;
• Any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment
• House rent allowance
• Remuneration payable under any award or settlement between the parties or order of a court or Tribunal
• Any Overtime allowance
• Any commission payable to the employee
• Any gratuity payable on the termination of employment
• Any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment, under any law for the time being in force.
• The first part now includes all salary components expressed in terms of money and are capable of being so expressed, like basic salary, all reimbursements, all allowances, and all benefits.
• The second part of the definition provides specific exclusions like:- Bonus payable under any law, conveyance allowance, house rent allowance, overtime allowance, house accommodation, supply of light, water, medical attendance, other amenities/services excluded by a general or special order of the appropriate government, commission, contribution to provident fund/pension, any sum paid to defray special expenses, gratuity, retrenchment compensation, remuneration payable under any award or settlement between the parties.
• The third part of the definition provides that the total excluded components should not exceed 50% of the total remuneration. The third part of the definition provides a limit as the definition very clearly specifies the list of exclusions so anything that is paid to the employees other than the exclusion would be covered and within this specific exclusion the limit cannot be more than 50%.

Impact: As of now HRA is a part of minimum wages and with the implementation of the code HRA will not be part of minimum wages, which will imply the EPF contribution.

Key Changes to the Employees Provident Fund Scheme

• Major reforms in the Employees Provident Fund Scheme include the incorporation of a limitation period of five years for initiation and two years for concluding inquiries.
• Aadhaar-based registration is mandated.
• All establishments having 20 or more workers come under the purview of EPF, earlier it was applicable only on those establishments included in the schedule. 
• Systems have been designed to cover the category of self-employed workers or any other category under the purview of the EPF scheme.
• The penalty amount has been increased from 10,000 to 1,00,000 and imprisonment of one to three years is levied for the deduction of employee contribution from salary and non-depositing.
• Subsequent failure to pay contributions attracts imprisonment of two to five years and a fine of three lakh rupees.

Key Changes to the Employee’s State Insurance Scheme

• If the employer and majority of employees agree, then voluntary registration has been allowed under the code and the ESI scheme will be applicable. Further, the government can extend the ESI scheme to any hazardous occupation also even if a single employee is employed.
• The Facility of ESI would be available in all 740 districts.
• Gig workers and unorganized sectors will also be able to link with ESIC.
• Plantation workers will also fall under the purview of ESI.
• If any employer fails to pay ESI contributions, even then ESI has to pass on the benefits to the employee, which ESIC can recover from the employer to the extent of the capitalized value of the benefit, net of any payment of contribution amount, interest and damages payable by the employer.

Key Changes to the Provisions Regarding Gratuity

• Permanent employees would be eligible for gratuity after completion of five years as presently exists under the Act, while fixed-term employees will have no such criteria, such employees will be paid based on their tenure of employment with one organization. Code has fixed different thresholds concerning eligibility for gratuity of permanent and fixed-term employees.
• The threshold gratuity period for working journalists is reduced from five years to three years.

Key Changes to Employment Information and Monitoring Requirements

• Employers and job seekers looking for vocational guidance, career counseling, or self-employment are required to register with career centers.
• All establishments except some exclusions like agriculture, domestic service, employment of less than ninety days, etc are required to notify the vacancies career centers electronically or otherwise.
• Filing returns by the employer to the concerned career center.

Maternity Benefit

Every woman is entitled to a medical bonus of up to Rs 3,500 where pre-natal confinement and post-natal care are not provided by the employer whose upper limit can be amended by the Central government up to Rs 20000/-. This upper limit of Rs 20000 has been removed under the code.

Key Changes to Employee’s Compensation Act, 1923, Building and Other Construction Workers, The Unorganized Workers’ Social Security Act (2008), etc.

• Creation of social security boards for unorganized workers.
• Coverage of gig workers, platform workers, and unorganized workers under the ambit of the social security scheme.
• Code to expand the sources of the funds for schemes to include funds from corporate social responsibility or any other source as may be specified in the scheme and also contains enabling provision for constituting the special purpose vehicle for implementation of schemes for unorganized workers.
• Bill also makes the provisions for registration of all three categories of workers – gig workers, platform workers, and unorganized workers.
• Contribution from an aggregator will be at a rate notified by the government, which can fall between 1-2% of the annual turnover of the aggregators. However, the maximum limit of such contribution is fixed at 5% of the amount paid or payable by an aggregator to gig workers and platform workers.

General Change

• Renaming the designation of Inspector as Inspector cum Facilitator who is expected to supply information and give advice to employers and workers concerning the most effective means of complying with the provisions of the proposed Code.

Corrida Legal is equipping companies with processes for ensuring due compliance through audits and implementation and this article provides the precise set of key compliances under the Code on Social Security, 2020.

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