Social security for informal-sector workers: Draft rules silent on resource channels

Although the Code on Social Security, 2020 envisages a corpus to facilitate extension of such benefits to large sections of Indian workforce, including those in the unorganised sector and even the self-employed, the draft rules released recently haven’t provided any clarity on how the necessary resources would be mobilised.

As per the rules, “The central government shall identify the source(s) for initial funding/ replenishing the Social Security Fund from time to time. The fund shall be administered by the central government through an agency designated by the central government in the manner, as notified by the central government.”

The self-employed form more than half of the country’s workforce, whose count was 47.12 crore in 2017-18 as per government data. The government had earlier said that it would roll out schemes to extend social security to all workers in phases. The self-employed include own-account workers, employers and unpaid family workers.

For the platform and gig workers, who work outside the ambit of employer-employee relationship, the Code provides for contribution towards the social security fund — aggregators will have to contribute 1-2% of their turnover or 5% of the payments to the workers, whichever is lower.

The Centre had earlier said the social security fund could be financed either through its sole contribution or jointly by both the Centre and the states. There was also a plan to get contributions from employers or employees. It could also be funded from the contribution of companies through their corporate social responsibility fund.

A senior labour ministry official said that the self-employed would be treated as part of unorganised sector workforce and the social security fund which would be financed via a variety of sources. The funds received will be credited into the corpus and all expenses towards the schemes for the unorganised sector workers, gig and platform workers would be met out from this fund, he added.

Labour expert and XLRI professor KR Shyam Sundar said, “the draft rules do not inspire confidence because the main aspect of funds for the social security for the 4 crore unorganised sector workers have not been clearly spelt out. The failure of the Unorganised Workers’ Social Security Act, 2008 was primarily due to this reason.”

“Since the Code and the Rules talk of electronic labour administration, one expected that the Rules would provide for linkage of bank accounts with the URN and Aadhar for safe and quick transfer of benefit funds. But this is absent in the regulations. Further, there is no mention of issuance of physical identify cards in both, which will make transactions under the Code difficult if not impossible,” he said.

Rituparna Chakraborty, co-founder and executive vice president, Teamlease, said, “Through the rule-making process, it is important to ascertain how the social security fund for self-employed and unorganised sector shall be funded, what is the process of disbursement of such social security and how it actually helps those it intends to support. Any ambiguity around these would lead to a novel idea in really not taking off.”