Date : 27.3.2017.

Narendra Modi Government eyeing all-encompassing social security scheme; employers not to remit top EPF thereafter

The proposed social security code will be implemented by a three-tier administrative structure with tripartite representation from workers, employers and government. (Reuters)

The Narendra Modi government has drawn up a plan to bring workers of almost all categories — including those in the unorganised sector, the self-employed, part-time and casual workers and those earning below the “minimum wage” — under a robust, well-defined and comprehensive social security net. An Aadhaar-based compulsory registration system for workers, portable social security account for each worker and a regulatory structure headed by the prime minister himself as the head of a National Social Security Council (NSSC) would be the salient features of the plan, according to a labour ministry note reviewed by FE.

Under the proposed Labour Code on Security and Welfare, contributions from workers and employers will be supplemented by government outlays (as welfare funds) to create Social Security Funds (SSFs) in each state. These funds would be used to provide assorted benefits to workers such as pension, provident fund, group insurance as well as sickness and maternity benefits, with the government pitching in where the workers themselves are unable to contribute. “The idea is to amalgamate and rationalise various existing laws, amplify them and give every worker the ‘right’ to the benefits rather than a goodwill gesture or appeasement initiative,” an official source said.

Currently, social security supports like the EPFO and ESIC benefits are largely limited to the organised sector workers, who are less than a fifth of the country’s estimated total workforce of 48 crore.

The proposed code is in addition to the two other codes — one on industrial relations which seek to enhance the ease of doing business by relaxing the labour market rigidities, and the wage code, which proposes making minimum wage a statutory right and extending it to all employees, rather than those engaged in 51 “scheduled employments” as at present.

The proposed social security code will be implemented by a three-tier administrative structure with tripartite representation from workers, employers and government. The proposed PM-led NSSC at the apex level will be assisted by a boards at the central and state/UT levels. It will be the responsibility of the local bodies to register all categories of workers via Aadhaar. The portal social security account — Vishwakarma Karmik Suraksha Khata (VIKAS) — linked to Aadhaar will be opened for each worker, with the facility of transfer when she changes job.

Significantly, the increased cost of a wider social security cover will not fall much on the industry. Once employers start contributing to SSC, they will cease to provide funds to the EPF, EPS and ESIC.

Employers’ contribution to SSF will be limited at a maximum of 17.5% of wage – with a provision for reduced rates if a cess is levied on the industry concerned such as construction and mining – and 2% of wage for gratuity fund. Workers’ contribution in the organised sector will be 12.5% of the wage/monthly income.

In the case of unorganised sector workers, workers won’t have to contribute anything if the wage/monthly income is less than the minimum wage to be determined based on an asset-based criteria and welfare funds to be set up by the centre and state government will pitch in. If earning is less than wage ceiling but more than or equal to the minimum wage, the worker contributions will be 12.5% of the minimum wage and if the earning is more than or equal to the wage ceiling, then such contribution will be 12.5% of the wage. In case of the self-employed, the above contributions will be 20% of the respective amounts. Currently, employers contribute 8.33% of the basic pay to EPS, 3.67% to EPF and 4.75% to ESIC.

Even while enhancing the social security cover for workers, the Modi government, as reported by FE earlier, is also taking many industry-friendly measures. Among the major proposals are introducing fixed-term employment – which was made applicable in the textile and garment industries last year – in all the sectors, allowing units employing up to 300 people to retrench/lay off workers and/or close down without government approval, making trade unions with negotiating powers more representative, barring outsiders from being office-bearers of unions in the organised sector and reducing such persons’ role in union activities in the unoranised sector. Also, an industrial strike would be defined afresh by including concerted casual leave by 50% of more workers while the provision for prior notice of strike would be extended to “all activities similar to existing public utility services.”

Under the SSC, administrative charges would be a maximum of 5% of the contribution rather than as a percentage of wages as prevalent at present effectively reducing the actual outgo. The Comptroller and Auditor General will audit the accounts of social security organisations. The code also make provisions for social audits of the schemes every five years. Regulator general of Social Security, director general and commissioner would be the executive heads of NSSC, central board and state board respectively. State board would appoint inspectors for the enforcement of the provisions of the code.

The Financial Express.