Parl panel suggests introducing 'unemployment insurance' for unorganised sector in Code on Social Security report

With the Covid-19 pandemic leaving "millions of workers" without a job and pushing them to penury, a Parliamentary Standing Committee has recommended introducing 'unemployment insurance' for unorganised sector workers, saying the absence of this provision is the "biggest gap" in the proposed Code on Social Security 2019.

The report on Social Security Code adopted by the Parliamentary Standing Committee on Labour headed by senior BJD MP Bhartruhari Mahtab said such a provision would take care of "unprecedented labour market situations" like the job loss during the Covid-19.

In its report, the panel said it was "deeply concerned to observe that absence of a provision for unemployment insurance for the unorganised sector workers seems to be the biggest gap" in the arrangements for social security schemes.

"It, therefore, becomes imperative on the part of the Government to incorporate 'Unemployment Insurance, in the Code, as also recommended by the Second National Commission on Labour (SNCL), for the unorganised sector workers including BOCWs (Building and Other Construction Workers), Plantation workers and self-employed workers so that unprecedented labour market situations can be well taken care of," it said.

The mention of unemployment insurance comes against the backdrop of a large number of workers in the unorganised sector losing their jobs during the Covid-19 lockdown. The panel noted that this was recommended by the SNCL, which is contributory by three parties -- employees, employers and the government in an equitable manner.

The panel was also dismayed with the fact that the government left out tax-financed ‘unemployment allowance’ for the ‘unorganised workers’ or ‘informal workers’ despite the provision finding space in the previous two drafts.

Asked to state the reasons for excluding ‘unemployment allowance’ from the Code contrary to the recommendation of the SNCL, the Ministry said, “unemployment allowance is already provided for under the ESI Act. For the unorganized worker's basic social security has been taken care of in the proposed code.”

In its report on the Social Security Code, the last of the four Labour Codes examined by the Parliamentary Committee, it also recommended that the time limit of five years for payment of gratuity be reduced to continuous service of one year. The panel wanted that the provision should be extended to all kinds of employees, including contract labourers, seasonal workers, piece-rate workers and Fixed Term Employees and daily/monthly wage workers.

It was of the view that the provisions in the Code suggested that gratuity will be payable to an employee on the termination of his employment after rendering continuous service for not less than five years.

Keeping the warning of experts and stakeholders that the provision will be an incentive to employers to terminate employees before five years to deny them gratuity, the panel said that the reduction of eligibility year is necessary keeping in mind the nature of India's labour market where most workers are employed for a short duration period only.