Concerns Over Amalgamation: Code on Social Security

 

Animay Singh
Simpliance COE

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Code on Social Security

The Code on Social Security was introduced in the Lok Sabha on 11th December 2019 and referred to the Parliamentary Standing Committee on Labour on 23rd December 2019. Following an extension of three months from the original date of presentation, the report was adopted on 29th July 2020.

This series of blogs by Simpliance covers the important concerns, recommendations and suggestions made by the Parliamentary Committee as well as examine some of the justifications provided by the Ministry of Labour and Employment. The aim of this series is to promote awareness about the policy considerations surrounding India’s social security scheme. With India set to become the most populous country in the world, the scheme has to cover a significant number of beneficiaries with diverse requirements and socio-economic backgrounds. Thus, it becomes increasingly pertinent for all stakeholders to understand the policies being proposed and their impact.

The first blog in this series examines concerns expressed by the Committee over the scheme of amalgamation of labour laws as proposed by the Code, the Government’s response, and the Committee’s recommendations.

Scheme of Amalgamation

The Code on Social Security 2019 subsumes the following nine Central Labour Acts after simplifying their provisions and providing for alterations that bring them in consonance with the objectives of the Code:

i. The Employees’ Compensation Act, 1923

ii. The Employees’ State Insurance Act, 1948

iii. The Employees Provident Fund and Miscellaneous Provisions Act, 1952

iv. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

v. The Maternity Benefit Act, 1961

vi. The Payment of Gratuity Act, 1972

vii. The Cine Workers Welfare Fund Act, 1981

viii. The Building and Other Construction Workers Welfare Cess Act, 1996

ix.   The Unorganised Workers’ Social Security Act, 2008

The amalgamation of these laws aims to facilitate the implementation of the Code, remove the multiplicity of authorities and definitions. Currently, the numerous authorities administering these schemes coupled with the complex regulatory framework have led to a great deal of confusion with regards to compliance. Moreover, the complex regulatory web acts as a disincentive for compliance with companies circumventing or opting to pay their way out of compliance related issues. Thus, the above coupled with the proposed electronic filing of a single return seeks to untangle the above regulatory net and promote ease of compliance with the law.

There are however certain concerns raised by the Committee with regards to the above scheme of amalgamation. Questions have been raised about the laws being amalgamated and those left out, the crucial details of several laws being left to delegated legislation as well as the need for a universal rights based social security scheme that covers all workers. These shall be examined in the following section.

Concerns

In this section we shall examine the concerns put forth by the Committee in a question-answer-recommendation format. The questions being posed by the Standing Committee, followed by the answer provided by the Ministry, and concluded with the recommendation of the Standing Committee on the subject. Following this we shall analyze the import of these recommendations and reflect on whether any further changes can be made.

Question: The Parliamentary Standing Committee sought to ascertain the rationale for including the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 in the Code when the Act’s import does not in any way relate to Social Security.

Answer: The Ministry stated that according to them, the primary objective of the Employment Exchanges Act, 1959 is to connect workers with employers thereby allowing suitable employment opportunities to reach those who need the same. The Ministry added that the labour market information obtained under the provisions of the above Act and its rules would act as an indicator of the skill requirements as well as the movement of labour in the country and those under the Code. A comparative reference was made to the definitions under the existing Act wherein the Ministry pointed out that the definitions of key terms like employer, establishment, employee, wages etc. are common. Based on the same the Act has been included in the draft Code on Social Security, 2019.  

Recommendation: The Committee observed that the above Act provides for reporting of vacancies to the Employment Exchanges which essentially operate as labour market facilitation institutions. The same has no bearing on social security schemes which operate as a part of welfare programs, provision of which is a duty of the State. Inclusion of the same merely to reduce the number of Acts operating outside the framework of the Codes is illogical. Therefore, the Committee recommended that the Ministry revisit the inclusion of the Employment Exchanges Act, 1959 and explore the compliance aspect of the provisions under the Act.

Question: What is the justification for subsuming the Cine Workers Welfare Fund Act, 1981, the Building and other Construction Workers (BOCW) Cess Act, 1996 and the Unorganised Workers Social Security Act, 2008 in the Code, when a similar number of Labour Welfare Fund laws such as the Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare Fund Act, 1976, the Beedi Workers Welfare Cess Act, 1976, the Limestone and Dolomite Mines Labour Welfare Fund Act, 1972 etc. have been left out of the Code[s21] ?

Answer: The Ministry stated that the Acts included in the Code were in force when the Code was introduced and hence, they have been subsumed in it.

Recommendation: The Committee was unconvinced by the reasoning provided by the Ministry, it observed that the same was inconsistent with the objective of the Code which is to streamline labour laws in a manner that allows for their implementation without compromising the basic notion of social welfare for workers. The Committee recommended that if the intent is to promulgate a welfare legislation, the same must be extended universally to workers from all social levels. It urged the Ministry to re-examine the laws that have been left out of the amalgamation process and ensure that the relevant provisions are incorporated in the Code. The object of this recommendation is to ensure that the principles contained in such laws reach workers as there are sector specific benefits that they are entitled to. The Cess under the iron ore and manganese welfare fund laws had been abolished under the 2016 budget, however, under the Beedi Workers Welfare Cess Act it is still payable. Thus, the logic employed to exclude the above enactments is questionable.

Question: The Committee observed that several stakeholders and experts expressed concern at the fact that crucial details under the scheme of the Code have been left to delegated legislation. Moreover, the scope of delegated legislation has been enlarged in favour of the Central Government and/or appropriate governments. Matters such as powers and functions of social security organizations under Chapter-2, powers to nominate members to the same, qualifications to receive benefits under the Code, contributions to be made, registration of establishments etc. have been left to delegated legislation. Another related concern raised by stakeholders was the number stipulations along the lines of ‘as may be specified’/’as may be prescribed’/’may be framed’ in relation to almost all substantive provisions of the Code.

Answer: The Ministry submitted that the inclusion of delegated legislation and the above stipulations was to provide for dynamism and flexibility to provisions that need to be altered according to varying needs and circumstances. The Ministry clarified that the same must not be construed as abdication of Parliament’s essential law-making functions in favour of lower authorities. The Government pointed out that the above stipulations were used in cases such as rate of contribution under ESI, rates of contribution in case of EPFO, occupational diseases, injuries to be specified under employees’ compensation etc.

A reference was drawn to Section-159 of the Code that mandates the laying of every rule, regulation, notification and scheme made or framed by the Central Government or the Corporation before each House of the Parliament either before or after it is framed. Both houses may agree to modifications to the rule/scheme/notification or that the same should not be made. They shall be effective only in such modified form or shall have no effect.

Recommendation: The Committee took into cognisance the Ministry’s reasoning based on dynamism and flexibility but disagreed with the sweeping powers conferred on the Central Government. They noted that the same would be at the cost of duplicity and ambiguity in law making processes and exhorted the Ministry to review the cryptic provisions to allow for a more transparent and inclusive legislation.

Conclusion

From the above it is clear that while the draft Code on Social Security has much to offer in terms of ease of compliance and modernising labour laws, there are still significant issues in terms of its operational framework. These concerns must be addressed for the Act to successfully achieve its objectives and provide social security to what will soon be the most populous country in the world[s22] . However, the same must not be at the cost of flexibility and dynamism that are essential for the smooth operation of social security schemes. This is because they are linked to changing economic metrics such as the Consumer Price Index (CPI), rate of employment in the country and overall financial health of the nation.

What are your thoughts on the concerns raised by the Parliamentary Standing Committee? Do you believe the recommendations provided by the Committee are enough? What more do you believe can be done from the amalgamation perspective?

Drop your thoughts in the comments below.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney.
Simpliance makes no representations or warranties in relation to the information on this article.

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