SS Code and illusory goal of universal social security

SS Code and illusory goal of universal social security

SS Code

Trade unions are up in arms against the Social Security (SS) Code proposed by the Centre which merges and repeals 15 existing laws on social security. Trade unionists who had fought for several of these existing laws lament, “Our baby is being killed in front of our eyes”. But, what have the several fragmented social security laws achieved until now? 

It is necessary to acknowledge that there are a multiplicity of laws, policies, schemes and agencies on social security. Thresholds on the number of workers and ceilings on wages for determining eligibility for benefits exclude a large number of workers. Each scheme provides piecemeal benefits, that too for specific sectors only.  There are multiple schemes with overlapping and varying quanta of benefits. While some are contribution-based, others are non-contributory.  Studies say that only about 5-6% of unorganised workers are currently enrolled for social security benefits.

It is a curious anomaly indeed if trade unionists daily lament this poor status of affairs but say in the next breath, “Our labour laws are fine as they are, nothing should be changed”. They hence reject the SS Code, without however offering better alternatives.

The Code has proposed several salutary changes to address the current deficiencies in social security laws. It promises to merge, simplify, rationalize and consolidate the fragmented labour legislations and schemes on social security; create a single-window structure for its administration; empower local bodies for facilitation and delivery of service; provide universal registration of workers, cover them under basic schemes uniformly across the country; and provide a portable social security account.

True, all these are desirable changes, but given that this government is prone to sloganeering and showcasing alleged good intentions while actually working counter to these very aims, one cannot be wary enough of the government’s real intent. Unionists say the whole idea behind the Code is to provide ‘ease of doing business’ to corporates, not to enhance the welfare of workers. 

While the SS Code claims to cover every worker, it keeps the power to fix the threshold for eligibility under the Code with the central government. The Centre can add any entity or category of workers to the excluded list. So, universalisation may become just a myth. One remains sceptical in this regard as the previous government actually attempted to change the definition of a ‘factory’ by raising threshold levels so that more workers would be excluded from the benefits than earlier! One needs to also recall that the Centre, in its recently passed Wage Code, fixed the national floor wage at Rs 178, which would actually trigger a race to the bottom by states which currently have much higher wages.

A problem with the Code is that it has merged the organised and unorganised sectors and prescribed a common architecture for registration, payment of contributions, etc. This is an attempt to formalise the informal sector with a mere stroke of the pen, as was done under GST, without paying heed to the particular constraints faced by the informal sector in following formal sector procedures. 

The Code foresees monthly deduction of 12.5% of wages as each worker’s contribution and corresponding payment of 17.5%, plus 2% towards gratuity, as employer’s contribution to the state’s SS Fund, and monthly filing of returns.  Do employers in the informal sector have the capacity to adhere to these requirements?

However, simpler compliance provisions, allowing employers to file returns annually and pay a contribution as a percentage of their annual turnover, prescribed as an option to some employers, could have been the mode suggested for all informal sector employers. Or, alternatively, continuing the many extant cesses and adding fresh ones on uncovered sectors would have been the easier way of collecting employers’ contributions for unorganised workers. The Code keeps the option to impose cesses open, without making them mandatory.

No contribution from govt

The Centre will not be making any contribution of its own to the SS Fund, except for providing social assistance to the elderly. Given the low earnings of unorganised workers, the government needs to provide its share to the SS Fund. But the Code says that the government ‘may’ ask states to contribute a share only for low-income workers through a Contribution Augmentation Fund. Madhya Pradesh’s law for unorganised workers provides its contribution by imposing an additional duty on stamp duty, additional tax on motor vehicles tax, etc.

The SS Code claims that it covers all the nine types of social security benefits prescribed in ILO Convention 102, and expatiates at length on gratuity, maternity benefits, pension, etc. It is not clear, however, whether these will be provided mandatorily as a ‘minimum social floor’ of benefits, as recommended by the ILO, or whether these will be provided only when schemes are devised in this regard. Also, sickness benefit and medical care are to be restricted only to low-income workers and notified areas respectively. Further, nowhere is there a mention of the quantum of these benefits. So, the promise of all nine types of social security or even a minimum social floor of benefits may remain just a dream. There is also no reference to mandatory childcare, education, housing, marriage and funeral assistance. These are left to the states to devise. 

The provision requiring State Boards to transfer surpluses in their SS Fund to the Central Board for “professional investment” is seen by unionists as a device of the Centre to gain control over the vast social security funds. Unionists also feel that the licensing of ‘Intermediate Agencies’ in the fields of fund management, service delivery, etc., reveals that privatisation of the management of social security funds is the real, hidden aim of the Code. 

Therefore, whether the noble goals enunciated are achieved or they remain illusory remains to be seen.

(The writer is Executive Trustee of CIVIC Bangalore)