Code on Social Security, 2020

Introduction to the Code on Social Security, 2020

The Code on Social Security, 2020 (Act No. 36 of 2020) is a comprehensive legislation enacted by the Parliament of India on September 28, 2020, and it came into force on May 3, 2021, with provisions being notified progressively by the Central Government. This Code consolidates and amends nine previous laws related to social security, including the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Employees’ State Insurance Act, 1948; Maternity Benefit Act, 1961; Payment of Gratuity Act, 1972; Employees’ Compensation Act, 1923; Unorganised Workers’ Social Security Act, 2008; Building and Other Construction Workers’ Welfare Cess Act, 1996; Cine-Workers Welfare Fund Act, 1981; and others. The primary aim is to extend social security benefits to all workers, including those in the organized sector, unorganized sector, gig economy, platform workers, and building/construction workers, while simplifying administration through digital means, such as Aadhaar linkage for portability and efficient delivery of benefits.

The Code addresses gaps in the previous fragmented laws by providing a unified framework for health care, income security during old age, unemployment, sickness, invalidity, work injury, maternity, or loss of the breadwinner. It promotes inclusivity, especially for vulnerable groups, and aligns with international labor standards like those from the International Labour Organization (ILO). Key reforms include the introduction of schemes for gig and platform workers, mandatory registration for unorganized workers, cess on construction for welfare funds, and priority of social security dues over other debts in insolvency proceedings. The Code also facilitates electronic registration, record-keeping, and helplines to enhance accessibility and reduce administrative burdens.

Objectives of the Code

The Code on Social Security, 2020, has the following key objectives:

To consolidate and amend laws relating to social security, ensuring universal coverage for all employees and workers across sectors.
To provide health care and income security in cases of old age, unemployment, sickness, invalidity, work injury, maternity, or loss of the breadwinner.
To extend benefits to unorganized, gig, platform, and building workers, who were previously underserved.
To establish social security organizations, funds, and schemes for effective administration, including portability of benefits across establishments and states.
To promote welfare measures like medical benefits, pensions, insurance, rehabilitation, and re-employment for disabled persons.
To ensure timely payment of contributions and benefits, with priority over other debts (e.g., under the Insolvency and Bankruptcy Code, 2016).
To integrate digital processes for registration, record-keeping, and service delivery, including the use of Aadhaar for identification.
To levy and collect contributions, cess, and penalties while regulating employment information through career centers.
To balance employer obligations with employee rights, encouraging compliance through appeals, adjudication, and reduced litigation.

Applicability and Extent

The Code applies to the whole of India, with provisions coming into force on dates notified by the Central Government. It covers establishments based on thresholds specified in the First Schedule:

Chapter III (Employees’ Provident Fund): Establishments with 20 or more employees (or fewer if notified); includes factories, shops, and other establishments; exemptions for armed forces, seafarers, agriculture, domestic service, and short-duration employments.
Chapter IV (Employees’ State Insurance): Establishments with 10 or more employees (excluding seasonal factories); hazardous occupations even with one employee; optional for plantations with superior benefits.
Chapter V (Gratuity): Establishments with 10 or more employees in the preceding 12 months; factories, mines, oilfields, plantations, ports, railways, shops.
Chapter VI (Maternity Benefit): All establishments employing women; factories, mines, plantations (including government); shops with 10+ employees in preceding 12 months.
Chapter VII (Employees’ Compensation): Where Chapter IV does not apply; plantations and specified employments; extends to accidents outside India for seamen/aircraft crew.
Chapter VIII (Building Workers): Construction works employing 10+ workers in preceding 12 months; cess of 1-2% on cost (excluding land/compensation).
Chapter IX (Unorganized, Gig, Platform Workers): Unorganized enterprises with <10 workers or self-employed; gig/platform workers via aggregators; registration required.
Other Chapters: Apply to all relevant social security organizations and establishments.

Special notes:

The Central Government can apply provisions to smaller establishments after a two-month notice.
Applicability continues even if employee count falls below thresholds.
Exemptions for establishments with alternative superior benefits.
Registration is mandatory; existing registrations under repealed acts are deemed valid.
Extraterritorial application for certain workers (e.g., seamen, aircraft crew).

Key Definitions as Mentioned in the Act (Section 2)

Below is a verbatim list of key definitions from Section 2 of the Code, organized thematically in tables for clarity. These are extracted directly from the official act.

Administrative and Governmental Terms

Term	Verbatim Definition
Appropriate Government	“appropriate Government” means — (a) in relation to, an establishment carried on by or under the authority of the Central Government or concerning any such controlled industry as may be specified by notification in this behalf, by the Central Government or the establishment of railways including metro railways, mines, oil field, major ports, air transport service, telecommunication, banking and insurance company or a corporation or other authority established by a Central Act or the central public sector undertaking or subsidiary companies set up by the central public sector undertakings, subsidiary companies set up by the principal undertakings or autonomous bodies owned or controlled by the Central Government, including establishment of contractors for the purposes of such establishment, corporation or other authority, central public sector undertakings, subsidiary companies or autonomous bodies or any company in which not less than fifty-one per cent. of the paid up share capital is held by the Central Government, as the case may be, or in relation to an establishment having departments or branches in more than one State, as the case may be, the Central Government; and (b) in relation to any other establishment, the State Government. Explanation 1. — For the purposes of this clause, the expression “metro railway” means the metro railway as defined in sub-clause (i) of clause (1) of section 2 of the Metro Railways (Operation and Maintenance) Act, 2002 (60 of 2002). Explanation 2. — For the purposes of this clause, the Central Government shall continue to be the appropriate Government for the central public sector undertakings even if the holding of the Central Government reduces to less than fifty per cent. equity in that public sector undertaking after the commencement of this Code;
Authorised Officer	“Authorised Officer” means such officer of the Central Board, or as the case may be, of the Corporation notified by the Central Government;
Competent Authority	“competent authority” means any authority appointed under section 58 for the purposes of Chapter V or notified for the purposes of Chapter VI or appointed under section 91 for the purposes of Chapter VII, as the case may be, as competent authority by the appropriate Government or the State Government, as the case may be;
Agent	“agent” when used in relation to an establishment, means every person, whether appointed as such or not, who acting or purporting to act on behalf of the owner, takes part in the management, control, supervision or direction of such establishment or part thereof;

Entities and Organizations

Term	Verbatim Definition
Aggregator	“aggregator” means a digital intermediary or a market place for a buyer or user of a service to connect with the seller or the service provider;
Audio-visual Production	“audio-visual production” means audio-visual produced wholly or partly in India and includes — (i) animation, cartoon depiction, audio-visual advertisement; (ii) digital production or any of the activities in respect of making thereof; and (iii) features films, non-feature films, television, web-based serials, talk shows, reality shows and sport shows;
Building Workers’ Welfare Board	“Building Workers’ Welfare Board” means the State Building and other Construction Workers’ Welfare Board constituted under sub-section (1) of section 7;
Career Centre	“career centre” means any office (including employment exchange, place or portal) established and maintained in the manner prescribed by the Central Government for providing such career services (including registration, collection and furnishing of information, either by the keeping of registers or otherwise, manually, digitally, virtually or through any other mode) as may be prescribed by the Central Government, which may, inter alia, relate generally or specifically to — (i) persons who seek to employ employees; (ii) persons who seek employment; (iii) occurrence of vacancies; and (iv) persons who seek vocational guidance and career counselling or guidance to start self-employment;
Central Board	“Central Board” means the Board of Trustees of the Employees’ Provident Fund constituted under section 4;
Central Provident Fund Commissioner	“Central Provident Fund Commissioner” means the Central Provident Fund Commissioner of the Central Board appointed under sub-section (1) of section 14;
Company	“company” means a company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013);
Corporation	“Corporation” means the Employees’ State Insurance Corporation constituted under section 5;

Contributions and Benefits Terms

Term	Verbatim Definition
Child	“child”, for the purposes of Chapter VI, includes a stillborn child;
Commissioning Mother	“Commissioning mother” means a biological mother who uses her egg to create an embryo implanted in any other woman;
Confinement	“confinement” means labour resulting in the issue of a living child, or labour after twenty-six weeks of pregnancy resulting in the issue of a child whether alive or dead;
Contribution	“contribution” means the sum of money payable by the employer, under this Code, to the Central Board and to the Corporation, as the case may be, and includes any amount payable by or on behalf of the employee in accordance with the provisions of this Code;
Delivery	“delivery” means the birth of a child;
Dependant	“dependant” means any of the following relatives of deceased employee, namely: — (a) a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted daughter or a widowed mother: Provided that for the purposes of Chapter IV, a legitimate adopted son, who has not attained the age of twenty-five years, shall be dependant of the deceased employee; (b) if wholly dependant on the earnings of the employee at the time of his death, a legitimate or adopted son or a daughter who has attained the age of eighteen years and who is infirm; except for the purposes of Chapter IV wherein the word “eighteen” occurring in this sub-clause shall be deemed to have been substituted by the word “twenty-five”; (c) if wholly or in part dependent on the earnings of the employee at the time of his death, — (i) a widower; (ii) a parent other than a widowed mother; (iii) a minor illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or illegitimate or adopted if married and a minor or if widowed and a minor; (iv) a minor brother or an unmarried sister or a widowed sister if a minor; (v) a widowed daughter-in-law; (vi) a minor child of a pre-deceased son; (vii) a minor child of a pre-deceased daughter where no parent of the child is alive, or; (viii) a grandparent if no parent of the employee is alive. Explanation. — For the purposes of sub-clause (b) and items (vi) and (vii) of sub-clause (c), references to a son, daughter or child include an adopted son, daughter or child, respectively;

Worker and Employment Terms

Term	Verbatim Definition
Building or Other Construction Work	“building or other construction work” means the construction, alteration, repairs, maintenance or demolition in relation to buildings, streets, roads, railways, tramways, airfields, irrigation, drainage, embankment and navigation works, flood control works (including storm water drainage works), generation, transmission and distribution of power, water works (including channels for distribution of water), oil and gas installations, electric lines, internet towers, wireless, radio, television, telephone, telegraph and overseas communications, dams, canals, reservoirs, watercourses, tunnels, bridges, viaducts, aquaducts, pipelines, towers, cooling towers, transmission towers and such other work as may be specified in this behalf by the Central Government, by notification, but does not include any building or other construction work which is related to any factory or mine or any building or other construction work employing less than ten workers in the preceding twelve months or where such work is related to own residential purposes of an individual or group of individuals for their own residence and the total cost of such work does not exceed fifty lakhs rupees or such higher amount and employing more than such number of workers as may be notified by the appropriate Government;
Building Worker	“building worker” means a person who is employed to do any skilled, semi-skilled or unskilled, manual, technical or clerical work for hire or reward, whether the terms of such employment are express or implied, in connection with any building or other construction work, but does not include any such person who is employed mainly in a managerial or supervisory or administrative capacity;
Contract Labour	“contract labour” means a worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker but does not include an employee (other than part time employee) who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on permanent basis), and gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment;
Contractor	“contractor”, in relation to an establishment means a person, who — (i) undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment through contract labour; or (ii) supplies contract labour for any work of the establishment as mere human resource, and includes a sub-contractor;
Dock Work	“dock work” means any work in or within the vicinity of any port in connection with, or required for, or incidental to, the loading, unloading, movement or storage of cargoes into or from ship or other vessel, port, dock, storage place or landing place, and includes — (i) work in connection with the preparation of ships or other vessels for receipt or discharge of cargoes or leaving port; (ii) all repairing and maintenance processes connected with any hold, tank structure or lifting machinery or any other storage area on board the ship or in the docks; and (iii) chipping, painting or cleaning of any hold, tank, structure or lifting machinery or any other storage area in board the ship or in the docks;
Employee	“employee” means any person (other than an apprentice engaged under the Apprentices Act, 1961) employed on wages by an establishment, either directly or through a contractor, to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or any other work, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union: Provided that for the purposes of Chapter III, except in case of the Employees’ Provident Fund Scheme and Chapter IV, the term “employee” shall mean such employee drawing wages less than or equal to the wage ceiling notified by the Central Government and includes such other persons or class of persons as the Central Government may by notification, specify to be employee, for the purposes of those Chapters: Provided further that for the purposes of counting of employees for the coverage of an establishment under Chapter III and Chapter IV, as the case may be, the employees, whose wages are more than the wage ceiling so notified by the Central Government, shall also be taken into account: Provided also that for the purposes of Chapter VII, the term “employee” shall mean only such persons as specified in the Second Schedule and such other persons or class of persons as the Central Government, or as the case may be, the State Government may add to the said Schedule, by notification, for the purposes of that Government;
Employer	“employer” means a person who employs, whether directly or through any person, or on his behalf, or on behalf of any person, one or more employees in his establishment and where the establishment is carried on by any department of the Central Government or the State Government, the authority specified, by the head of such department, in this behalf or where no authority, is so specified, the head of the department and in relation to an establishment carried on by a local authority, the chief executive of that authority, and includes, — (i) in relation to an establishment which is a factory, the occupier of the factory; (ii) in relation to any other establishment, the person who, or the authority which has ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager or managing director, such manager or managing director; (iii) contractor; and (iv) legal representative of a deceased employer;

(Additional definitions such as “establishment”, “factory”, “gig worker”, “home-based worker”, “insurance”, “insured person”, “maternity benefit”, “medical termination of pregnancy”, “miscarriage”, “notification”, “occupational disease”, “pension”, “platform work”, “platform worker”, “prescribed”, “provident fund”, “self-employed worker”, “social security”, “unorganised sector”, “unorganised worker”, “wages”, etc., are detailed in Section 2, but due to space, focus is on key ones. Refer to the full act for complete list.)

Summary of Chapters and Key Provisions

Chapter I: Preliminary

This chapter provides the short title, extent, commencement, and definitions. It mandates electronic registration of establishments and deems existing registrations under repealed acts valid. It sets the foundation for applicability as per the First Schedule.

Chapter II: Social Security Organizations

Establishes bodies like the Central Board for EPF, ESI Corporation, National Social Security Board for unorganized workers, State Unorganized Workers’ Boards, and State Building Workers’ Welfare Boards. Provisions for composition, disqualification, meetings, supersession, and additional functions. Executive heads include the Central Provident Fund Commissioner and Director General.

Chapter III: Employees’ Provident Fund

Covers appointment of officers, framing of schemes (Provident Fund, Pension, Deposit-Linked Insurance as per Fifth Schedule). Funds include Provident Fund (10-12% contributions), Pension Fund (up to 8.33%), and Insurance Fund (up to 1%). Contributions recoverable from contractors; priority over debts; exemptions for certain establishments; appeals to Tribunal.

Chapter IV: Employees’ State Insurance

Mandates insurance for all employees; contributions by employer/employee; benefits include sickness, maternity, disablement, dependants’, medical, and funeral. Presumption of injury for accidents/occupational diseases (Third Schedule). Schemes for unorganized/gig/platform workers; exemptions for superior benefits; ESI Court for disputes.

Chapter V: Gratuity

Payment after 5 years’ continuous service (15 days’ wages per year, capped); nomination required; compulsory insurance or fund; competent authority for determination and disputes; forfeiture for misconduct; payment within 30 days with interest for delays.

Chapter VI: Maternity Benefit

Prohibits employment 6 weeks post-delivery/miscarriage; 26 weeks paid leave for first two children (12 weeks for subsequent); medical bonus (₹3,500 if no care provided); crèche for 50+ employees; nursing breaks; no dismissal during pregnancy; appeals to competent authority.

Chapter VII: Employees’ Compensation

Applies where ESI does not; compensation for injury/death (50% wages x factor for death, 60% for total disablement per Fourth and Sixth Schedules); funeral expenses (₹15,000 min); reporting of accidents; competent authority for claims; review and commutation of payments.

Chapter VIII: Social Security for Building Workers

Levies 1-2% cess on construction cost for welfare fund; registration of workers (90 days’ engagement); benefits like pension, medical, maternity, skill development; State Welfare Board administration; penalties for non-payment.

Chapter IX: Social Security for Unorganised, Gig, and Platform Workers

Schemes for life cover, health, old age, housing; registration with self-declaration; aggregators contribute 1-2% turnover (Seventh Schedule); National/State Boards; helplines; funding from government/cess.

Chapter X: Finance and Accounts

Maintenance of accounts, audits by CAG, budgets, annual reports; ESI Fund for contributions/grants; investments/loans with approval; expenditure on benefits/admin.

Chapter XI: Authorities, Assessment, Compliance, and Recovery

Inspector-cum-Facilitators for enforcement; record-keeping/returns; assessment of dues; recovery as land revenue or under Income-tax Act; appeals; interest on delays; Employees’ Insurance Court for disputes.

Chapter XII: Offences and Penalties

Punishments for non-payment of contributions (imprisonment up to 3 years, fine); failure to submit returns (fine); false statements (imprisonment); compounding of offences.

Chapter XIII: Employment Information and Monitoring

Career centers for vacancies/registration; mandatory reporting of vacancies; no fees for services.

Chapter XIV: Miscellaneous

Delegation of powers; protection for actions in good faith; power to make rules/schemes; transitional provisions for repealed acts.

Key Features and Reforms Introduced

Universal Coverage: Extends to gig/platform workers (e.g., ride-sharing, delivery via Seventh Schedule) and unorganized sector.
Digital Integration: Electronic registration, Aadhaar linkage for portability, helplines.
Funding Mechanisms: Cess for building workers, aggregator contributions, priority dues in insolvency.
Enhanced Benefits: Longer maternity leave, presumptions for injuries, schemes for self-employed.
Administrative Simplification: Consolidated organizations, appeals to tribunals/courts, exemptions for superior benefits.
Penalties and Compliance: Strict for non-compliance, with compounding options.
Schedules: First (applicability), Third (occupational diseases), Fourth (disablement percentages), Fifth (scheme matters), Sixth (compensation factors), Seventh (aggregators).