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Regulatory Alert - Ministry of Labour and Employment issues draft Code on Social Security (Central) Rules, 2020 for public consultation

14 December 2020


Hon’ble Finance Minister, while placing the Union Budget 2019, had announced a proposal to streamline multiple labour laws into a set of four labour codes. Pursuant to the said announcement, following labour codes have been issued:

  • Code of Wages, 2019 (Presidential Assent received on 8 August 2019)
  • Industrial Relations Code, 2019 (Presidential Assent received on 28 September 2020)
  • Code on Social Security, 2020 (Presidential Assent received on 28 September 2020)
  • Occupational Safety, Health and Working Conditions Code, 2020 (Presidential Assent received on 28 September 2020)

The Code on Social Security, 2020 has amalgamated following 9 existing labour laws:

  1. The Employees Compensation Act, 1923;
  2. The Employees Provident Fund and Miscellaneous Provisions Act, 1952;
  3. The Employees State Insurance Act, 1948;
  4. The Maternity Benefit Act, 1961;
  5. The Unorganized Workers’ Social Security Act, 2008;
  6. The Payment of Gratuity Act, 1972;
  7. The Employees Exchange Act, 1959;
  8. The Building and Other Construction Workers Cess Act, 1996; and
  9. The Cine Workers Welfare Fund Act, 1981.

Recently, Ministry of Labour and Employment released the Code on Social Security (Central) Rules, 2020 (Draft Rules) for public consultation. The deadline for submitting the comments is 27 December 2020. We at BDO India have summarised key areas of the Draft Rules hereunder:

Key Highlights

  • Draft Rules provide for operationalization of provisions relating to Employees' Provident Fund Organisation (EPFO), Employees’ State Insurance Corporation (ESIC), gratuity, maternity benefit, social security and cess in respect of building and other construction workers, social security for unorganised workers, gig workers, platform workers freelancers and home-based workers. Including rules elaborating computation mechanism, method of payment, assessments etc. under certain chapters.
  • They provide for single electronic registration of an establishment, including cancellation of the registration in case of closure of businesses. Also, it provides for auto cancellation of registration in case of non-compliance is made against the registration number.
  • AADHAAR-based registration of building and other construction workers on the specified portal of the Central Government /State government /State Welfare Board including self-registration by unorganised workers, gig workers and platform workers.
  • Creation of a social security fund for extending these benefits to workers in the unorganized sector has been proposed.
  • Building workers migrating intra-state shall be entitled to get benefits in the State where they are currently working, and the onus to uphold the benefits lies with Building Workers' Welfare Board of that State.
  • The rate of interest for delayed payment of cess has been reduced from 2 per cent every month or part of a month to 1 per cent, under the Chapter relating to Building and other Construction Workers.
  • Under the existing rules for building and construction sites, the Assessing Officer has the power to visit a site and provide directions that could potentially terminate construction work for a period. Such power for indefinitely stopping of construction work has been proposed to be withdrawn.
  • Unlike existing provisions of gratuity, it also stipulates the gratuity benefits to fixed-term employees with certain relaxations on minimum service.
  • Employers would have to provide crèche facility in every set-up where 50 or more female employees are ordinarily employed. Also, such facility needs to be located within the organization or at a reasonable distance from the establishment, so that it is easily accessible to the women employees, including those working from their homes.
  • Guidelines for filing a combined annual return by employers have been prescribed.

BDO comments

The Code on Social Security, 2020 attempts to extend social security benefits like maternity leave, gratuity, health insurance, old age protection etc. to workers in India’s thriving unorganized sector.

It remains to be seen whether any separate guidelines would be notified to give more clarity on EPFO rules for wage ceiling limits, international workers etc.

While the Government has invited opinion on the Draft Rules from various stakeholders, it would be interesting to see how the gamut of all the laws synergize.

We at BDO India are keenly monitoring these developments and are hopeful that refurbished laws would be simplified, unifying and inclusive for all.