Context: COVID-19 has rendered low-paid, informal workers, who constitute 91% of the workforce, totally hapless, pushing them further into poverty. 


  • India’s estimated 450 million informal workers comprise 90% of its total workforce, with 5-10 million workers added annually.
    • An informal sector or grey economy is the part of any economy that is neither taxed nor monitored by any form of government.
    • About half of India’s GDP is informal.
  • Job loss: According to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75% were lost in the informal sector.
  • India’s Parliament in September 2020 passed a Social Security Code (SS Code 2020). 
  • The SS Code 2020 merges existing social security laws and attempts to include informal workers within the ambit of social security administration. 
  • However, an examination of the code reveals that universalisation of social security remains an unfulfilled aspiration.

The Social Security Code Act, 2020

The SS Code 2020 amalgamates and rationalises the provisions of eight existing central labour laws. 

Of these acts, employees provident fund, employees state insurance (ESI), maternity benefit, gratuity are entirely for organised sector workers. 

  • It proposes to form a National Social Security Board that would recommend suitable schemes for the different sections of unorganised sector workers.
  • It proposes to bring unorganised sector, gig workers and platform workers under the ambit of social security schemes, including life and disability insurance, health and maternity benefits, provident fund and skill upgradation.
  • It also proposes to empower the centre to constitute a social security fund for provision of social security for the unorganised workers, platform workers or gig workers or any such class of workers.

Key provisions 

  • Registrations:
    • The draft rules provide for Aadhaar-based registration, including self-registration by unorganised workers, gig workers and platform workers on the portal of the Central government.
    • The rules also provide for the Aadhaar-based registration of Building and Other Construction Workers Welfare Board (BOCW) on a portal of the Centre, State government or the BOCW welfare board of the State.
      • Where a building worker migrates from one State to another he shall be entitled to get benefits in the State where he is currently working.
      • Also, it shall be the responsibility of the Building Workers Welfare Board of that State to provide benefits to such a worker.
  • Procedural efficiency
    • The rules also provide for a single electronic registration of an establishment, including for cancellation in case the business is closed. 
  • The BOCW cess:
    • It would be calculated by the employer on the basis of the cost of construction according to the rates of the State Public Works Department or the Central Public Works Department or the documents submitted to the Real Estate Regulatory Authority.
    • The rate of interest for delayed payment of such cess has been reduced from 2% every month or part of a month to 1%.
  • Other provisions:
    • Under the existing rules, the assessing officer has the power to direct that no material or machinery can be removed or disturbed from the construction site. 
    • Such power for indefinitely stopping of construction work has been withdrawn. 
    • Also, the assessing officer can visit the construction site only with the prior approval of the secretary of the Building and Other Construction Workers Board.

Gaps in the code

  • Maternity benefit: Under the SS Code, the provision of maternity benefit has not been made universal. Maternity benefit is presently applicable for establishments employing 10 workers or more. 
    • The definition of ‘Establishment’ in the proposed code did not include the unorganised sector.
    • Hence, women engaged in the unorganised sector would remain outside the purview of maternity benefit. 
  • Employees Provident Fund: The SS Code maintains that the Employees’ Provident Fund Scheme will remain applicable, as before, to every establishment in which 20 or more employees are employed. 
    • Thus, for informal sector workers, access to employees’ provident fund remains unfulfilled too in the new code.
  • Payment of gratuity: Gratuity shall be payable to eligible employees by every shop or establishment in which 10 or more employees are employed, or were employed, on any day of the preceding 12 months.
    • But although payment of gratuity was expanded in the new Code, it still remains inaccessible for a vast majority of informal workers.
  • Free basic curative health care is not in scope of the code. If we leave out the allocation for the COVID-19 vaccine (still mostly unused), then the FY22 health Budget is actually lower. It is insufficient for the whole population, leave alone the informal workers.
  • Failing to delineate it from gig work and unorganised work: A categorical clarification could ensure that social security measures are provided to workers without compromising the qualities of platform work.
  • Misclassification of platform workers as ‘independent contractors’ instead of employee status: Granting employee status to platform workers, guarantees minimum wage and welfare benefits.
  • Given the temporary nature of workers in the gig economy, there are question marks over social security for them.
    • Flexibility of the platform

      • The algorithm of a platform affects pricing per unit of work, allocation of work, and hours. 
      • To enter the platform economy, workers rely on intensive loan schemes, often facilitated by platform aggregator companies. 
      • This results in dependence on platform companies and reduces flexibility.
  • Undefined stakeholder
    • The Code states the provision of basic welfare measures as a joint responsibility of the Central government, platform aggregators, and workers. 
    • However, it does not state which stakeholder is responsible for delivering what quantum of welfare. 
  • For employees’ state insurance, the existing employee threshold has been withdrawn and now the central government can extend ESI benefits to any organisation irrespective of the number of workers employed therein. 
    • However, there are areas of ambiguity and overlapping too.
  • Problem with mandatory registration: It proposes that both the central and State governments will formulate schemes for unorganised workers. 
    • The basic onus lies on informal workers registering as beneficiaries. Registration is a prerequisite for universal coverage. 
    • Digital literacy: Online registration places a further challenge as most informal workers lack digital literacy and connectivity. 
    • Migrant workers: Most informal workers are footloose casual workers (26% of all workers) and self-employed (46% of all). Furnishing proof of livelihood and income details in the absence of tangible employer-employee relations is very difficult. 
  • Inter-State cooperation: Further, as unorganised workers are spread across the length and breadth of India, inter-State arrangement and cooperation becomes imperative. The code does not provide for such eventualities. 
  • Basic security cover: All unorganised workers should have basic social security coverage, irrespective of labour market classifications. The code fails to undertake such inclusion in a meaningful way.

The informal workers have no social security (including free basic curative care in public clinics and hospitals, the elderly have no old age pensions, the dying have no death/disability insurance or life insurance). 

Way forward:

  • Basic structure: Ideally, the central government should conceptualise a basic structure, which if successful, should be adopted by States after necessary customisation. 
    • Without such a basic structure, implications of this code would be too varied across States to be administered. 
  • Formalising the workforce: The provision of social security could be used to formalise the workforce to a certain extent. 
    • Employers could have been made to own up to the responsibility of providing social security to their workers. 
  • Strengthening MSME: Nearly 40% of the informal workforce is employed with MSMEs. Therefore, it is natural that the strengthening of MSME will lead to economic recovery, employment generation, and formalization of the economy.
  • To mitigate operational breakdowns in providing welfare services, a tripartite effort by the State, companies, and workers to identify where workers fall on the spectrum of flexibility and dependence on platform companies is critical.
  • A socio-legal acknowledgement of the heterogeneity of work in the gig economy, and the ascription of joint accountability to the State and platform companies for the delivery of social services is necessary.

Related facts

  • Labour is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre. 
  • Article 23: Traffic in human beings and begar and other similar forms of forced labour are prohibited
  • Article 24: No child below the age of fourteen years shall be employed to work in factories, mines and other hazardous occupations.
  • Article 39 (d): “The State shall, in particular, direct its policy towards securing; that there is equal pay for equal work for both men and women
  • Article 43A directs the state to take steps to ensure workers participation in management of industries.