Social Security Code, 2020

Social security code, 2020

Meaning:

Collective medical and old-age benefits are provided by the employer and the government in the form of provident funds, insurance, pensions, maternity benefits, gratuity, etc.

It guarantees social well-being for them in return for the contribution that they would have made to the economy.

For this eight central kaws have been merged together to form the social security code, 2020 ( for organized sector only).

However, the code does have some major shortcomings :

It keeps most of the informal workers from the ambit, who contributes 91% of the total workforce. Therefore it would be better than the security code is undiversified for it to produce a better outcome.

Although the code allows the respective state governments to come up with their own scheme for the unorganized sector workers, there is a lot of ambiguity and confusion with regard to the overlap on the jurisdiction and the responsibility of the central and the state government. 

It mandates online registration since most of the workers are in the unorganized sector and lack digital literacy because of the wide digital divide in the country and lack of internet connectivity that keeps a majority of the workforce away from these benefits.

Example: Back in 2008, many state governments have brought out their own version of the unorganized sector security code act but even though it has been 13 years since it has been enacted a large number of the informal workers are still outside the ambit of the act because of several hurdles and entry barriers which prevent the workforce from the unorganized sector from accessing these schemes.

Lack of awareness, since most of the workers, are unaware of such schemes and therefore are not able to grasp the details of these schemes.

Lack of Inter-state coordination, most of the workers migrate from one state to another in search of employment and hence require a high degree of inter-state coordination to provide the benefits of these schemes and they shall require the creation of a basic framework/ structure by the central government. The social security code 2020 doesn't address these requirements.

Restriction of threshold on number of these employees based on which the benefits become applicable to certain companies.

Examples:

• Maternity benefits are not universal (even in the new code) and it is applicable to only organizations which employ more than 10 workers. 

• Benefits of Employee Provident Fund (EPF) is applicable to only those workers who are employed in organizations that have more than 20 workers on their payroll.

•  Gratuity benefits are available in only those organizations which employ more than 10 workers.

Many small companies/ businesses in the unorganized sector will be left out and since the majority of one economy comprises such units, a large part of the country's workforce will get left out from these benefits.

These problems that existed in the previous central laws and the new uniform code were supposed to iron out these problems and reduce such entry barriers in order to make the scheme in the benefits universal.

The government should remember that India’s population is going to age soon as the demographic dividend will start to fall in the next 15 years and as the population ages the requirement of basic healthcare, pensions, and insurance becomes all the more important and especially now more so considering how the pandemic has disrupted the economy and healthcare system. 

Therefore it is important for the government to scale up the security code benefits and make them universal considering the central government hardly spends 1% of the GDP on public health.