LABOUR LAWS AMENDMENTS: Part 20

Code on Social Security: An Attempt to Dismantle Workers’ Social Security 

R Karumalaiyan 

THE third version of the Code on Social Security 2019, which will subsume eight laws related to social security of both organised as well as unorganised workers, has been circulated for stakeholders’ consultations on September 17. The CITU has raised serious objection to this codification exercise being undertaken on pretext of “universalizing” social security benefit as it unleashes a frontal attack on all social security schemes meant for workers. The code will subsume the Employees State Insurance Act; the Employees Provident Fund and Miscellaneous Provisions Act; the Employees Compensation Act; the Maternity Benefits Act; the Payment of Gratuity Act; the Unorganized Workers Social Security Act; the Building and Other Construction Workers Welfare Cess Act; and the Cine Workers Welfare Fund Act. 

All such schemes are being fully funded by workers’ money. Despite this, the BJP government at the Centre has decided to dismantle the state-owned (not funded) system of social security through this codification as a prelude to place the workers at the altar of market. In fact, by the Social Security Code, 2019, all existing social security rights and provisions for a large sections of workers in the industries such as beedi, iron ore mines, mica mines, limestone and dolomite mines are thrown to total uncertainty, practically to oblivion, by the government’s own act of abolishing all the related provisions of cess collection. 

In the run-up to the rolling-out of GST, the Beedi Workers Welfare Cess Act, 1971 was repealed by Taxation Laws Amendment Act, 2017, thereby abolishing beedi cess. Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare Cess, the Mica Mines Labour Welfare Fund Cess, the Limestone and Dolomite Mines Labour Welfare Fund Cess and the Cine Workers Welfare Cess -- all were abolished by amending respective legislations with effect from May 21, 2016. For the workers of all these sectors, sector specific multiple welfare benefits were provided as per existing statutes to be funded out of the funds generated out of these sector specific cess collections. The Social Security Code 2019 does not stipulate anything for these sector specific social security schemes, making the huge workforce totally out of any social security arrangements. And through such exclusion process, can universality be even dreamt of? 

Secondly, universality of social security coverage is also severely compromised through retention of the existing threshold limit of employment of establishments for the purpose of coverage. For EPF, it is 20 workers and it has not been reduced despite unanimous recommendation of Central Board of Trustees since long back. Even at present threshold of level of employment, the EPF scheme did hardly cover 50 per cent of the entitled workforce owing to extremely tardy enforcement procedure and nominal penalties for violation. Even that nominal provisions have been diluted under the Social Security Code. Similarly, for ESI, the threshold level of employment is 10. Even then the total number enrollment/coverage of workers under ESI is much less than EPF having the threshold size double of that of ESI. This also certifies extremely tardy standard of enforcement with the active patronage of the enforcement machinery both at central and state levels. 

ON EMPLOYEES PROVIDENT FUND 

While the EPF&MP Act has been claimed to be subsumed under the Social Security Code 2019, almost simultaneously, the government moved a proposal for amendment of EPF&MP Act 1952 which has numerous retrograde proposals of change to the advantage of employers by way of diluting the definition of wage, reduction of employers’ contribution to EPF, usurping executive power to reduce the rate of contribution further, opening option for migrating to New Pension Scheme unleashing a contribution-defined pension regime to replace the existing Employees’ Pension Scheme etc. The CITU opposed all such retrograde pro-employer amendment proposals. And whatever provision is there in the existing Social Security Code on the Employees Provident Fund Scheme, there are many shortcomings and ambiguities having negative bearings on the rights and benefits of the workers to the advantage of the employers. Further, the CITU strongly opposes the idea of opening an option route for New Pension Scheme as this would open the gateway for making NPS a circumstantial fait accompli for the EPF pensioners through different administrative measures, as has happened for government employees, both at the Centre and in states. An overwhelming majority of government employees, irrespective of union affiliations, are opposed to the contribution-defined regime of NPS. 

The EPF&MP Act has four Schedules. These are all connected with coverage and scheming and scheduling the social security benefits. For instance, Schedule-I has got the exhaustive list of industries with reference to the definition of ‘industry’, where it would apply. Now the present code, in the name of simplification of labour laws, omitted the ‘industry’ definition itself and abolished all schedules. It has instead annexed one empty schedule. This may make the area of coverage of the Act subject to interpretation by the officials and bureaucrats in the background of unlimited executive power usurped by the administration on various aspects of definition, coverage, interpretation and application of various provisions of the proposed code. 

ON EMPLOYEES STATE INSURANCE SCHEME 

The enforcement of the existing ESI Act continued to remain extremely tardy. Despite the coverage of ESI starts with all establishments employing 10 or above as compared to 20 in case of EPF, as on date total number of workers/employees covered under the scheme is almost half or even less than that covered by EPF and that speaks about the precariousness of the situation and accountability of the enforcement machinery. 

Unfortunately, the Social Security Code 2019 has not addressed this problem of enforcement and coverage at all; instead it diluted and weakened even the existing provisions in the ESI Act to make the enforcement tardier to the advantage of the employers at the cost of sufferings of the workers and employees. The code weakens the enforcement of the ESI Act. Through Section 41(4) and 41(5), it has made it an obligation of ESIC to establish medical colleges, dental colleges, nursing colleges and training institutes, etc. and to run them by ESI Corporation with the funds generated by workers’ contribution and employers’ contribution. Instead of expanding the health service facilities, accident benefits, service for occupational diseases other mandated works for the workers, with the fund generated and owned by the workers, the code seeks to reduce and curtail the benefits and rights of the workers and divert the funds for the area of work which is actually the political and governmental obligation of the government. Such atrocious provision of diverting ESI funds for non-ESI purposes are being pushed through despite total opposition of the tripartite governing body of ESI at the initiative of workers’ representatives in that Statutory Body. 

Equally regressive is the provision under section 42(1) of the code for allowing workers to opt out of the ESI scheme. Given the predominantly fragile and contract-oriented employment relations prevailing in the workplaces in the private-corporate sector, this provision will pave the way of making the opting out virtually compulsory or forcible through threat/intimidation by employers. Section 4(1) and 4(3) of the code seeks to deliberately dilute and undermine the tripartite character of the Standing Committee of ESI leaving it to central government to decide. 

ON EMPLOYEES COMPENSATION ACT 

The manner the existing Act has been subsumed in the code leaves much to be done. The government should accept the proposal for changing rules for making the calculation of compensation on the basis of actual pay of the accident affected worker subject to a minimum ceiling of Rs 21,000, whichever is higher. 

ON PAYMENT OF GRATUITY ACT 

The unanimous demands of the entire trade union movement are being continuously ignored by the government and the same has been reflected in this code also. Gratuity is a retirement benefit after long years of service and there should not be any restriction /ceiling either on entitlement, eligibility and calculation. But that just demand is not taken into consideration in the code. What has been done in the code is to dilute enforcement and reduce the penalty as well as enforcement of penalty provision for violation by the defaulting employers. This is just not acceptable. 

BUILDING & OTHER CONSTRUCTION WORKERS CESS ACT 

The cess-related Act has been claimed to be subsumed by the code. But it remained absolutely silent about the management of the fund collected from the cess. On the social security benefits for construction workers, certain heads of social security benefits have been mentioned but on the details of the benefits, entitlement, calculation, mode of delivery, etc., the code remained absolutely silent leaving them totally at the disposal of state-level boards. 

The CITU demands total review and revisit of the government’s approach on social security measures which must include in the least health services, pension and children’s education, besides providing for other eventualities. The proposed Social Security Code cannot meet this requirement and hence should be scrapped. 

CITU DEMANDS 

1. CITU strongly opposes the EPF&MP Act’s inclusion in the code. The well-functioning and well-administered EPF scheme, including EPS section, should be allowed to function separately, independently and autonomously. Only changes that are required in this original Act are: a) abolition of threshold level of employment for the purpose of coverage to make it universal for all employees and workers, b) strengthening enforcement mechanism by way of empowering as well as making accountable EPFO for independent inspection and prosecution and penalty for violation by employers without any interference from any corner, c) Additionally strengthening the grievance redressal machinery both at central and state level, d) enhancing EPS benefit to ensure minimum pension at not less than Rs 6,000 per month as at present level of inflation. All central government scheme workers must be brought under the coverage with the government being the contributor to the EPF as employer. 

2. In case of ESI Act also CITU demands to make the ESIC function autonomously and be taken out of Social Security Code. ESI Act should be amended a) to ensure expansion of the benefits of the workers, b) to strengthen its enforcement and empower the ESI authority as well as make them autonomous under the supervision of tripartite governing body appropriately for enforcement simultaneously holding them accountable, c) abolition of the threshold limit of employment to make it universal etc. 

3. CITU is of the strong opinion that Both the Building & Other Construction Workers (Regulation & Condition of Service) Act 1996 and the Building & Other Construction Workers Welfare Cess Act 1996 should be taken out of the codification exercise and separately examined in consultation with the trade unions for its improvement in implementation/enforcement of both the service conditions and welfare and social security measures. This is required owing to the very fact that the Building & Other Construction workers are exposed to different and extreme kind of hazards in respect of service conditions affecting their health and longevity owing to their exposure to various kinds of hazards, thereby necessitating special kind of treatment in respect of health, social security including pension and also occupational diseases. 

4. Similar separate treatment in respect of social security is needed for the mines workers who are also exposed more widely to typical occupational hazards, further exposing them to occupational diseases. For them the provision of collection of cess should be restored and separate health and social security schemes should be devised to cover the occupational diseases also in a comprehensive manner. 

5. For beedi, iron ore mines, mica mines, limestone and dolomite mines and cine workers, the abolished cess collection system should be restored and separate health and social security schemes including pension benefits should be put in place. 

6. Besides, for other sections of unorganised sector workers, fully govt-funded social security schemes should be drawn in consultation with trade unions to provide for at least health services, children education, and pension (not less than Rs 6,000 as on date) besides providing for other eventualities like accidents, special diseases related to occupation etc. 

7. Another aspect CITU seeks to draw the attention of all concerned. The codification exercise is full of stipulations like “as may be specified / as may be prescribed/ as may be framed” in respect of almost all substantive provisions of the Code on Social Security Bill for any change to be made in future in the provisions of entitlement, contributions and benefits and also on the aspects remaining undefined in the Bill. This means after the Code Bill is passed, any future change in many substantive provisions of the Act can be made through executive decision bypassing Parliament and all stakeholders, the workers and their unions in particular. 

In the Social Security Code, the central government has alone usurped such executive power of making change in the Act passed by Parliament in 98 cases. From issue of fixing the contribution to framing the social security schemes and from exempting establishment from coverage of the Code to the appointing of various authorities, the central government retains its executive power. All such provision for usurping executive power for future changes in any stipulations of the Act, if allowed or retained, the whole legislative process will lose its basic democratic content. Hence all such provisions must be scrapped.