General Studies IIDevelopment ProcessesVulnerable Section

The Code on social Security (Employee’s Compensation) (Central) Rules

Ministry of Labour & Employment


Ministry of Labour and Employment, Government of India has notified the draft rules relating to Employee’s Compensation under the Code on Social Security, 2020 on 03.06.2021 for inviting objections and suggestions, if any, from the stakeholders. 

  • Such objections and suggestions are required to be submitted within a period of 45 days from the date of notification of the draft rules.

Key Highlights:

  • The Code on Social Security, 2020 amends and consolidates the laws relating to social security with the goal to extend social security to employees and workers in the organized as well as unorganized sectors.
  • Chapter VII (Employee’s Compensation) of the Social Security Code, 2020 envisages, inter-alia, provisions relating to employer’s liability for compensation in case of fatal accidents, serious bodily injuries or occupational diseases.
  • The draft Employee’s Compensation rules notified by the Central Government provide for the provisions relating to manner of application for claim or settlement, rate of interest for delayed payment of compensation, venue of proceedings and transfer of matters, notice and manner of transmitting money from one competent authority to another and arrangements with other countries for the transfer of money paid as compensation.
  • The draft rules under the Code on Social Security, 2020 relating to Employees’ Provident Fund, Employees’ State Insurance Corporation, Gratuity, Maternity Benefit, Social Security and Cess in respect of Building and Other Constructions Workers, Social Security for Unorganized Workers, Gig Workers and Platform Workers and Employment Information were notified on 13.11.2020.

The draft of the Code on social Security (Employee’s Compensation) (Central) Rules, 2021 (Hindi and English) can be accessed at here….

The Code On Social Security, 2020

The Code on Social Security, 2020 is a code to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors.

The Social Security Code, 2020 brings unorganised sector, gig workers and platform workers under the ambit of social security schemes, including life insurance and disability insurance, health and maternity benefits, provident fund and skill upgradation, etc. The act amalgamates nine central labour enactments relating to social security.


The bill was passed by the Lok Sabha 22 September 2020 and the Rajya Sabha on 23 September 2020. The bill was formulated according to the Report and Recommendations of the Second National Commission on Labour.

It consolidated:

  • The Employees’ Compensation Act, 1923,
  • The Employees’ State Insurance Act, 1948,
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,
  • The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, 
  • The Maternity Benefit Act, 1961,
  • The Payment of Gratuity Act, 1972,
  • The Cine Workers Welfare Fund Act, 1981,
  • The Building and Other Construction Workers Welfare Cess Act, 1996, 
  • Unorganised Workers’ Social Security Act 2008.

The bill received the presidential assent on 28 September 2020, and section 142 of the Act has come into force on 3 May 2021.

Key Definitions under the Social Security Code

Aggregator:Aggregator” has been defined as a digital intermediary or a market place for a buyer or user of a service to connect with the seller or the service provider.

Employee:Employee” has been defined as 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. The employee of definition may vary for different chapters under the SS Code based on the quantum of wages such an employee earns.

Gig Worker:Gig Worker” under the SS Code has been defined as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.

Platform Work:Platform work” has been defined as a work arrangement outside of a traditional employer employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for payment and a “platform worker” has been defined as a person engaged in or undertaking Platform Work.

Social Security:Social Security” under the SS Code means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed, under the SS Code.

Unorganised Sector: “Unorganised Sector” means an enterprise owned by individuals or self-employed workers and engaged in the production or sale of goods or providing service of any kind whatsoever, and where the enterprise employs workers, the number of such workers is less than ten (10).

Unorganised Worker:Unorganised Worker” means a home-based worker, self-employed worker or a wage worker in the Unorganised Sector.

Comparison between fixed term employment, permanent employment and contract labour

FeatureFixed Term EmployeePermanent EmployeeContract Labour
Type of employmentEmployment under written contract.  No contractor or agency is involved.  On the payroll of the establishment.  Employment directly under a written contract.  On the payroll of the establishment. Engaged in an establishment through a contractor or agency.  Not on the payroll of the establishment.
TermStipulated fixed term.  Employment lapses on completion of term, unless renewed.     No notice is required to be given for retrenchment.Employed on a permanent basis Notice has to be given for termination of employment. Based on terms negotiated with the contractor. 
Nature of workNot specified.Hired for routine work.   Employment may be prohibited in certain cases, e.g., if similar work is carried out by regular workmen.  

Social Security Code Significance

It has enhanced the coverage, extended the benefit to all workers in the organised/unorganised sectors, introduced concepts of providing maximum benefits under minimum governance and reflects uniformity in approach across the four labour codes.

Enhanced coverage:

  • New-age businesses that thrive on e-commerce have created new types of jobs. Some of the workers in these new businesses were not covered under any of the existing laws. The new Social Security Code expands the scope of social security by providing for the registration of all types of workers including gig workers and platform workers. Its recognition of non-conventional forms of work outside the scope of the traditional employer-employee arrangement is encouraging as there is a global shift towards self-employment, gig, and platform work.

  • Gig workers will now become eligible for life and disability coverage, maternity benefits, pension, etc.
  • The Code has widened coverage by including the unorganised sector, fixed-term employees, inter-state migrant workers, etc., in addition to contract employees.
  • Therefore, in terms of coverage, the scope has been expanded.
  • The Social Security Code, 2020 brings these workers under the ambit of social security schemes, including life insurance and disability insurance, health and maternity benefits, provident fund and skill up-gradation, etc.

Taking care of the fixed-term employees:

  • The code expands the scope to cover fixed-term contract workers who will now be eligible for gratuity; whereas earlier only employees that were permanent were covered.
  • The events giving rise to gratuity are superannuation, retirement, resignation, death or disablement due to accident or disease or termination of a contract under fixed-term employment or on the happening of any event notified by the central government.
  • With the inclusion of ‘expiration of fixed-term employment’, fixed-term contract workers will become eligible for gratuity and this is a welcome move.

Penal provisions:

  • The strength of implementing a legislation lies in the ease of compliances as well as in the penalties that deter non-compliance. The Code captures it all.
  • The Code contains penal provisions in the case of failure to pay gratuity to employees or a failure to pay the contributions.


  • As per the Act, all records and returns have to be maintained electronically. Digitisation of data will help in the exchange of information among various stakeholders/funds set up by the Government, will ensure compliance and also facilitate governance.

Uniform definitions:

  • Uniformity in determining wages for the purpose of social security benefits is another highlight of the code given the ambiguity in the current regulations.
  • This has provided a wide definition for wage. Specific exclusions with ceilings have been provided for discouraging inappropriate structuring of salaries to minimise social security benefits.

Consultative approach:

  • The Code has brought in a facilitating approach by the authorities. Unlike the existing role of inspectors, the Code provides for an enhanced role of inspector-cum-facilitator whereby employers can look for support and advice to enhance compliances.

Social Security Code 2020 Key Concerns

Online Registration Process:

  • The onus lies on informal workers registering as beneficiaries, further they do not have digital literacy and connectivity.
    • Also, there is a lack of awareness among informal workers regarding social security schemes.

Lack of Inter-State Arrangement and Cooperation:

  • Unorganised workers are spread across the length and breadth of India. Implications of this code would be too varied across States to be administered.

Complicated Processes & Overlapping Jurisdiction:

  • Providing holistic social security cover for the unorganised workforce in a simple and effective manner is lost in the Centre-State procedural complications and jurisdictional or institutional overlap.

Maternity Benefit:

  • Women engaged in the unorganised sector remain outside the purview of maternity benefit.

Employees Provident Fund:

  • For informal sector workers, access to employees’ provident fund remains unfulfilled too in the new code.

Payment of Gratuity:

  • Although payment of gratuity was expanded in the new Code, it still remains inaccessible for a vast majority of informal workers.

Comparison of Bill with existing laws and NCL recommendations 

FeatureNCL Recommendations2019 BillStanding Committee Recommendations2020 Bill
CoverageMove from the current fragmented social security system to an integrated universal one with: (i) mandatory state-funded social security for the poor, (ii) contribution-based system for workers earning up to a certain wage (with part state-subsidy for unorganised workers), and (iii) voluntary schemes for others. Retains coverage as per existing laws, with limited modifications.The Bill additionally permits the government to frame schemes for gig workers and platform workers.Code does not clearly define benefits and entitlements for several categories of workers. Code should provide a framework to achieve universal social security for all workers with firm entitlements and within a defined time frame.     Standing Committee recommendations not addressed
RegistrationMove from differing registration requirements to a comprehensive system of registration of workers and establishments.Establishments to register with respective organisations.Aadhaar-based registration for all eligible workers. Provide for a unified registration and compliance platform.     All establishments should mandatorily register with a single authority.  Standing Committee recommendations not addressed
Portability Address lack of portability by issuing cards with unique social security number to enable portabilityNo explicit provision for portability of benefits.Provide for common “minimum mandatory entitlements” across states for construction and unorganised workers to enable portability.  Ensure portability for migrant workers.  Standing Committee recommendations not addressed
DeliveryMove to a decentralised mechanism with: (i) national authority chaired by the Prime Minister, (ii) central board for managing the scheme, (iii) state boards for delivery and implementation, and (iv) local committees for identification and registration of beneficiaries.The Bill retains the same organisational set up as under existing laws.Code continues with the existing fragmented structure for delivery of benefits.  Committee recommended that the government consider putting in place a more compact system of governance of social security.Standing Committee recommendations not 

Comparison of the general provisions and special provisions in the 2020 Bill

FeatureGeneral ProvisionsSpecific provisions
Duties of EmployersDuties include providing a safe workplace, issuing appointment letters, and complying with the provisions of the Code.   Factories, mines, docks, plantation and construction: Employer must provide a risk-free workplace and instruct employees on safety protocol. Inter-state migrant workers: Employers/contractors have to: (i) notify specified authority of both states in case of fatal accidents and serious bodily harm, (ii) ensure suitable work conditions, and (iii) extend medical check-up and other benefits like provident fund and ESI entitlements which other workers in the establishment may be entitled to.  Mines: The owner and agent of the mine will be jointly responsible for providing a safe work environment.
Working conditions and welfare facilitiesTo be notified by the central government. These may include bathing spaces, canteens, and first aid boxes. Factories, mines, plantation, construction, and motor transport undertakings: Appropriate government may require provision of added facilities like ambulance rooms, welfare officers, and temporary housing.  Factories, mines, plantation, and motor transport undertakings: Appropriate government may appoint medical officers to examine, certify, and supervise the health of workers.  Factories involved in hazardous processes: Maximum permissible limits of exposure to chemical and toxic substances in manufacturing processes will be prescribed by state government.  Further, it may specify medical examinations for workers, among other facilities.  Interstate migrant workers: Employers must provide suitable conditions of work, medical facilities and journey allowance.  They must also be given an option to avail benefits of the public distribution system in their native or destination state where they may be employed. Plantations: Employer to provide welfare facilities such as housing accommodation, creches, educational, health and recreational facilities.
Dangerous operations No general provision for hazardous and dangerous operations.Factories involved in hazardous processes: Emergency standards may be set. The National Advisory Board may give recommendations in cases of extraordinary occurrences.   Plantations: Arrangements must be made for the safety of workers in connection with use, handling, storage and transport of insecticides, pesticides and chemicals and toxic substances. 
InspectorInspector-cum-Facilitators may inquire into accidents and conduct inspections, among others.Factories, mines, docks, and construction work: Inspector-cum-Facilitators may limit number of employees working or prohibit work in an establishment, if it appears that workers are in danger.
Licenses and other  registration requirementsAll establishments with ten or more workers must register with the appropriate government.(or in hazardous establishments as notified by the government)Factories: Additional licenses may be required.  Beedi workers and contract labour: License required for beedi and cigar establishments (except for family establishments).  Contractors must either obtain a five-year license or obtain work-specific licenses.   Audio-visual workers: A signed agreement between the employer or contractor and worker must be registered with the government.
Work hoursMaximum eight hours per day.Working Journalists: Work hourscannot exceed 144 hours in 4 weeks.  
LeaveWorkers are entitled to one day off for every 20 days of work and one day off every week.Sales promotion employees and working journalists are entitled to leave for 1/11th of time on duty, and medical leave for 1/18th of time on duty.  Motor transport workers are entitled to one day off in every 10 days, in certain cases. 
DisabilityNo general provision in the Code.Construction work: No employer can hire workers with defective vision, deafness, or a tendency for giddiness, if there is a risk of accident.
Age No person below the age of 14 may be allowed to work. Mines: No worker below the age of 18 or apprentice/trainee below the age of 16, may work in a mine. 

Source: PIB



Leave a Reply

Open chat
Hello Dear Aspirant,
Join our whatsapp group here to get Daily Newspapers, Magazines, Monthly, Question Banks and much more..
Just ping us your Name..
See you then..!!!