In social security rejig, 15 laws may merge into a ‘labour code’
The Modi government is working to radically overhaul India’s social security system for workers, from pensions to healthcare, by combining 15 current laws into a so-called single “labour code”, in a move that seeks to help both employers and employees, although labour unions have already expressed skepticism about the plan.
According to the draft of the ‘Labour Code on Social Security, 2018, version 2.1’, a copy of which has been seen by HT, a key feature of the social security code is that all provisions related to social security, such as the Employees’ Provident Fund and Miscellaneous Provisions Act and the Employees’ State Insurance Corporation Act, will be bundled into a single social security code and codified into law.
Legislations to be replaced by the Act include The Maternity Benefit Act and the Unorganized Sector Social Security Act . Since labour is part of the Constitution’s concurrent list, whereby states and the Centre have joint jurisdiction, the consent of the states will be needed for this.
This reform is part of a larger plan to rationalize 44 Central Labour Acts by using their relevant portions to frame four labour codes – the Code on Wages, Code on Safety and Working Conditions, Code on Industrial Relations and the Code on Social Security. Firms have often cited the complexity of these laws as something that doesn’t make it easy to do business, and have claimed that while originally designed to protect workers, the laws actually end up doing the opposite.
While the Code on Wages Bill 2017 was introduced in the Lok Sabha in August 2017 and referred to the Standing Committee on Labour, the code on social security is currently undergoing pre-legislative consultations.
The draft code on social security recommends “a functional integration” or merging of the EPFO, the state-run retirement fund manager, and the ESIC, which offers health security to organised sector workers, into one system. The code provides for a three-tier administrative structure, with representations from government, workers and employers. At the federal level, the code proposes a national social security council headed by the prime minister for overall regulation. In states, a state board of social security will implement all social security schemes.
The aim is to gradually universalise social security. Currently, only 17% of the workforce is covered by social security benefits.
“About 60% will pay for their social security. For the remaining 40%, it will be funded by taxpayers’ money,” a government official said, requesting anonymity. Under the code’s provisions, companies with over 100 employees can run their own provident funds, as they can do now.
While provident fund and health benefits will be completely decentralized through the state boards, the investment functions of the EPFO will continue to be run centrally so that there are economies of scale on investments, the official said.
The government has been discussing its plan with unions that aren’t convinced the changes are necessary. “During the consultations, we have opposed the plan to dismantle the EPFO and ESI as these are unique organisations,” said Prabhakar Banasure, who is on the EPFO’s board and a member of the Bharatiya Mazdoor Sangh, affiliated to the RSS. Job creation was a focal point of the BJP’s election campaign and criticism of its failure to create jobs has dogged it
Modi: ”If we look at numbers for employment, more than 41 lakh formal jobs were created from September 2017 to April 2018 based on EPFO payroll data. According to a study based on EPFO data, more than 70 lakh jobs were created in the formal sector last year.
Now, you know that informal sector constitutes around 80% of all jobs. We also know that job creation in the formal sector can have a spinoff effect on job creation in the informal sector too.
In just one year, 48 lakh new enterprises got registered. Will this not result in more formalisation and better jobs?
More than 12 crore loans have been given under Mudra (micro loans). Is it unfair to expect that one loan would have created or supported means of livelihood for at least one person?
More than one crore houses have been constructed in the last one year; how much employment would this have generated? If road construction has more than doubled per month, if there is tremendous growth in railways, highways, airlines, etc, what does it indicate?”
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