Overview

The Code on Social Security, 2020 is one of the four labour codes enacted to consolidate and rationalise India’s labour laws. It integrates nine existing social security legislations into a single framework with the objective of expanding social protection across the workforce.

The Code seeks to extend social security coverage beyond the formal sector to include unorganised workers, gig workers, and platform workers, reflecting the changing nature of employment in India.

Objectives

The Code aims to:

• Provide universal and comprehensive social security coverage
• Include unorganised, gig, and platform workers within the formal framework
• Simplify and harmonise multiple labour laws
• Ensure uniformity and transparency in wage and benefit calculations

Key Provisions

Recognition of Gig and Platform Workers
The Code legally defines gig workers, platform workers, and aggregators for the first time. It mandates aggregators to contribute 1 to 2 percent of their annual turnover to a social security fund, subject to a cap of 5 percent of payments made to workers.

Expansion of ESIC Coverage
The Employees’ State Insurance Corporation coverage is extended across the entire country, removing the earlier restriction of notified areas.
Establishments with fewer than ten employees may opt in voluntarily with mutual consent.
Coverage is made mandatory for hazardous occupations and extended to plantation workers.

Uniform Definition of Wages
The Code introduces a standard definition of wages, including basic pay, dearness allowance, and retaining allowance.
At least 50 percent of total remuneration must be considered as wages for the purpose of calculating social security benefits such as gratuity and pension, ensuring consistency across sectors.

Gratuity for Fixed-Term Employees
Fixed-term employees become eligible for gratuity after one year of continuous service, reducing the earlier requirement of five years.

National Database for Unorganised Workers
The Code provides for the creation of a national digital database (NDUW) to register unorganised workers and capture their employment and skill details, facilitating targeted delivery of benefits.

Merits

• Expands social security coverage to include both organised and unorganised workers
• Recognises new forms of employment such as gig and platform work
• Introduces a uniform wage definition, improving transparency in benefit calculations
• Promotes digitisation through a national database for better policy targeting

Demerits and Concerns

• Lack of clarity regarding the funding mechanisms of social security schemes
• Absence of universal coverage, as eligibility still depends on establishment size thresholds
• Voluntary coverage for smaller establishments may limit effective inclusion
• Implementation challenges due to the scale and diversity of the workforce

Conclusion

The Code on Social Security, 2020 represents a significant step toward modernising India’s labour welfare framework by recognising new forms of employment and expanding coverage. However, its effectiveness will depend on clear funding mechanisms, robust implementation, and movement towards universal social protection.