Benefits of Social Security Code - Ministry of Labour, Central

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Benefits of The Code On Social Security, 2020 

The Code on Social Security, 2020 is a legislation having been passed by both the 

Houses of Parliament, received the assent of President on 28th September, 2020 that 

consolidates and amends 9 existing social security laws to extend benefits to all 

workers, including those in the unorganized, organized, gig and platform 

workers. It aims to provide comprehensive social security schemes for life and 

disability insurance, health, and maternity benefits, and provident fund, while also 

introducing digitized processes and inspector-cum-facilitator roles to improve 

compliance and support for employers.

 

Pro Workers Provisions

1.Gratuity to Fixed term employees (Section 53):

Normally Fixed Termed Employees (FTE) are engaged for a short period like one 

year or two years or so. As a result, many of them cannot become eligible for

gratuity for not fulfilling statutory five years continuous service. In order to provide 

them the benefit of gratuity, Government has reduced the length of service from 5 

years to 1 year exclusively for FTE under the Labour Codes. Due to the above, an 

employee on FTE will be eligible for gratuity on proportionate basis if he/she 

completes one year of continuous service. 

2. Inclusion of Gig and Platform Workers (Section 113 &114):

At present, there is no law by which social security benefits can be provided to gig 

and platform workers in our country. The Code on Social Security, 2020 for the first 

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time has addressed this gap by including unorganised, gig, and platform workers 

within the ambit of social security benefits. The definition of aggregator (digital 

intermediary), gig worker and platform worker have incorporated in the code for 

the first time. This will directly benefit a large workforce in the gig and platform 

economy and unorganised sector.

The Code also establishes a National Social Security Board for unorganised

workers to advise central Government for framing and monitoring suitable schemes 

for different sections of unorganised workers, gig and platform workers.

It also provides provision for State Unorganised workers Social Security Board

[Section 6(9)] which will advise respective state Governments in framing suitable 

schemes for different sections of the unorganised workers and monitor social welfare 

schemes. 

It further provides for setting up of a Social Security Fund with contribution from 

Central & State Governments, Corporate Social Responsibility, fines collected due 

to compounding etc. This fund will finance social security and welfare schemes, 

including life insurance, disability insurance, health and maternity benefits, and 

provident fund schemes.

A new provision for entrustment of additional functions to social security 

organisations (Sec. 13) has also been envisaged in the Code with the view of future 

requirement.

3. Universal coverage of Employees Provident Fund:

The provisions of EPFO shall now apply to all establishments employing 20 or more 

employees. The existing Employees Provident Fund & Miscellaneous Provisions 

Act, 1952 is applicable only for the establishments mentioned in Schedule 1 of the 

Act which has been removed under the Code. It will increase the coverage of 

establishments leading to increase in the number of members eligible for the social 

security benefits of EPFO. At the same time it will also reduce litigation as 

applicability issue is resolved.

4. National Registration & Unique Identification:

Every unorganised, gig, platform worker within the eligible age limits shall be 

required to be registered on a national portal. They will get a Unique Number which 

would be portable across the country. The verification of registration will be done 

through Aadhaar. This will help to create a National Database of Unorganised 

Workers. This database will help Government to formulate appropriate social 

security schemes for the targeted sector. This will also facilitate portability of social 

security benefits especially in case there is any change of workplace of workers 

including for migrant workers.

5. Better Terms of Wage:

The Code standardizes the definition of “wages” for social security purposes. In the 

existing Acts, different definitions exist for different purpose. The Code brings 

uniform definition for all Central Labour laws. As per the Code, definition of 

“Wage” includes all remuneration including basic pay, dearness allowance, and 

retaining allowance, if any. In addition to the above, if other pay outs to employees 

such as bonus, value of any house accommodation, conveyance allowance, house 

rent allowance, overtime allowance, commission etc exceeds 50% or such other 

percent as may be notified by Govt of India of all remuneration, the amount in excess 

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of such 50% or such other percent (as defined by Govt. of India) will be added back 

to the wages. This will lead to increase in wage amount and lead to increase the 

monetary value of social security benefits like gratuity, pension, etc. which are all 

linked to the wage amount.

Illustration:

Mr. A draws basic Rs.15000/-, DA Rs.6000/- and retaining allowance Rs.1000/-. 

Total remuneration of Mr. A is Rs.15000+6000+1000=Rs.22000/- (A)

In addition to above he also draws Rs.40000/- per month (B) on account of bonus, 

HRA, Transport allowance and OTA as other pay out.

Therefore, the total remuneration is Rs.22000+40000=Rs.62000/- (C)

It is assumed that the notified cap is 50% 

Therefore, 50% of total remuneration (C) is Rs.31000/- (D)

Therefore, the other pay-out(B) exceeds the 50% of remuneration by Rs.40000(C)-

31000(D)=Rs.9000/- (E)

As per Code, the Rs.9000/- will be added to Rs.22000/- and the final wage would be 

Rs. 22000+Rs.9000=Rs.31000/-.

Now all the calculation of benefits such as gratuity, pension, leave salary etc in 

respect of Mr A will be done on the basis of Rs.31000/- and will therefore be higher 

as compared to the current wage definition which amounts to Rs.22000/- as wage.

6. Expansion of “Family” definition:

Definition of family has been expanded under Social Security Code by including

mother-in-law and father-in-law of a woman employee with income cap. A minor 

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brother or sister wholly dependent upon earnings of the insured person, who is 

unmarried and parents are not alive, is also included in the definition of family. This 

will increase the coverage of family members in case of benefit under ESIC.

7. Accidents while commuting included under the employee’s compensation:

Many cases have been observed when employees meet with an accident while 

commuting from his residence to the place of employment for duty or returning from 

place of his employment to his residence after performing duty. This is not being 

treated as on duty and thus they are not given any compensation. This leads to 

hardship to the employee. 

The Code has changed the concept and as per the new provision, any accident 

occurring to an employee while commuting from his residence to the place of 

employment for duty or returning from place of his employment to his residence 

after performing duty shall be deemed to have arisen out of and in the course of 

employment for the purpose the employee’s compensation. This will give some 

relief to the suffering employee or family and enable them to get the defined benefits 

for such cases under ESIC. 

8. Extension of coverage of ESIC throughout India:

Presently, ESIC coverage is limited in the notified area only. Under the Code, the 

ESIC coverage has been extended to pan India by removing the criteria of notified 

area. In addition to that voluntary ESIC membership has also been introduced in 

case of establishments having less than 10 employees also if both employer and 

employees agree to join ESIC.

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Further, to bring all workers engaged in hazardous or life-threatening occupations

under the coverage of ESIC, the threshold of minimum 10 workers have been 

removed for this purpose and ESIC coverage would be mandatory even for a single 

person if engaged in hazardous occupation.

 Pro Women Provisions

1.Maternity Benefit Entitlement (Sec. 60)

Every woman employee who has worked for at least 80 days in the 12 months 

immediately preceding the expected delivery are eligible for maternity benefit.

Every woman is entitled to get maternity benefit equal to her average daily wages 

for the period of maternity leave. The maximum duration of such leave is 26 weeks, 

of which up to 8 weeks may be taken before the expected date of delivery. In 

addition, a woman who legally adopts a child below 3 months of age, or a 

“commissioning mother” (a biological mother who uses surrogacy), is entitled to 12 

weeks of maternity benefit starting from the date of adoption or from the date the 

child is handed over.

2. Work from home [Section 59(5)]:

With a view to give more flexibility to women employee who returned to work after 

availing maternity leave, the Code has envisaged a provision for them to work from 

home. However, it will be applicable if the nature of work permits for work from 

home. The employer is the competent authority to allow her to work from home on

mutually agreed conditions.

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3. Simplification of certification for proof of delivery, etc.:

Proof of maternity-related conditions such as pregnancy, delivery, miscarriage, 

medical termination of pregnancy, tubectomy operation, or illness arising from such 

events has now been simplified. Under the Maternity Benefit Act, 196, such 

certificate can only be obtained from a registered medical practitioner or a hospital 

or midwife. Whereas under the Code, medical certificate can now be furnished 

through a form issued by:

 a registered medical practitioner,

 an accredited social health activist (ASHA),

 a qualified auxiliary nurse, or

 a midwife.

4. Medical bonus (Sec. 64)

If the employer does not provide free pre-natal confinement & post-natal care, the 

woman is entitled to a medical bonus of ₹3,500.

5. Provision of Nursing breaks (Sec. 66)

After resuming duty post-childbirth, a woman is entitled to two breaks during her 

daily work for nursing the child until the child attains the age of 15 months so that 

she can take care of her child(ren) during office hours.

6. Crèche facility (Sec. 67)

As per the existing Factories Act, wherein more than 50 women workers are 

ordinarily employed, there shall be a creche to be provided and maintained by the 

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factory. Under the Labour Codes, the threshold of number of employees in all types 

of establishments has been made gender neutral and accordingly, in every 

establishment, where 50 or more employees are employed, there must be a creche 

facility either separate or common within a prescribed distance.

The employer must allow four visits a day by the woman to the crèche which 

includes the rest intervals. Further, provision is also given for establishments to 

avail common crèche facility of the Central Government, State Government, 

municipality or private entity or provided by non-Governmental organisation or by 

any other organisation or group of establishments who may pool their resources for 

setting up of common crèche in the manner as they may agree for such purpose.

In case no crèche facility is provided by the employer, then, such employee shall be 

paid crèche allowance which shall not be less than Rs. 500 per month per child up

to two children. [Rule 39]

 Pro Growth Provisions

1.Digitalisation:

The Code explicitly provides for the maintenance of records, registers, and returns 

in electronic form. This reduces compliance costs for employers and makes the 

process easier and more efficient.

2.The limitation of 5 years introduced in commencing inquiry [Section 125(1)]:

A new major reform is introduced in Employees Provident Fund wherein the 

limitation period of 5 years for initiating inquiry to decide the applicability of the act 

and to recover the amount due towards employee’s provident fund and the inquiry 

has to be completed within 2 years from the date of commencement of the inquiry 

and further one year can be extended with approval of the CPFC. It will increase 

compliance and it will also bring discipline in disposal of the cases by assessment 

officer.

3. Deposit amount for filing appeal reduced:

For filing appeal before tribunal against the order of EPFO officer, the deposit of 

25% of the awarded amount determined by the EPFO officer will be required to be 

deposited by the employer against existing provision of between 40% to 70% of the 

awarded amount on discretion of the tribunal.

4.Self-assessment of cess:

New provision of self-assessment of cost of construction and payment of cess 

thereon for construction of building or other construction works has been introduced.

This will facilitate easier and quicker collection cess that will be utilised for the 

welfare of Building & Other Construction workers

5. Benefit to plantation owners:

As per existing Act, plantation owners are not covered by ESIC Schemes. Under 

the Code, the plantation owners are given the option to join ESIC

6. Decriminalisation of Certain Offences:

At present, there is no provision of compounding of offences. Further, there is no 

provision to give notice to the establishment to comply with the laws in case of 

violation. The Code has mandated that a 30 days’ notice of improvement should be 

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given to the employer in case of violation of laws so that they can comply with the 

law. This promotes fairness, gives employers time to rectify non-compliance, and 

encourages voluntary adherence rather than punitive enforcement. Further, the Code 

has replaced imprisonment provisions with monetary fines for 13 offences. Further, 

7 violations having imprisonment provision of less than one year can be 

compounded to penalty or fine. Replacing criminal penalties with fines reduces fear 

of imprisonment, encourages voluntary compliance in favour of workers, reduces 

litigation, and promotes ease of doing business.

8.Inspector-cum-Facilitators:

Inspector cum facilitator in place of inspector and randomized web-based inspection 

system aims to reduce the traditional “inspector raj,” where inspections were often 

seen as intrusive and burdensome. By using technology and clear guidelines, 

inspections will become more transparent, efficient. Inspectors will function more 

as facilitators—helping employers comply with law, rules and regulations rather 

than merely policing them. This shift promotes harmonious environment and 

facilitate ease of doing business. (Section 72).

 This makes inspections transparent, and encourages compliance through 

guidance.

 Replaces the old “Inspector Raj” system with a transparent, technology￾driven inspection process, reducing arbitrary harassment.

 Ensures randomised, web-based inspections, which prevent biasness 

 Positions inspectors as facilitators, meaning their role is to guide 

employers to comply with labour laws that ultimately protect employee.

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 Helps create a harmonious work environment, which benefits both 

employee and employers by ensuring better compliance without 

unnecessary conflict.

9. Compounding of Offences (Section 138):

The first time offences which are punishable with fine shall be compoundable by 

paying sum of 50% of the maximum fine and the punishment with fine or 

imprisonment or with both shall be also be compoundable by paying sum of 75% of 

the maximum fine making the law less punitive and more compliance-oriented. By 

allowing compounding of offences through authorized officers, it reduces legal 

burden, speeds up resolution, and promotes ease of doing business. Employers can 

avoid prolonged litigation by paying a prescribed penalty and ensuring compliance. 

This time-bound, administrative resolution enhances faster adjudication and 

regulatory efficiency. Allowing first-time offences to be settled with fines reduces 

court burden, provides quick resolution, and encourages businesses to maintain 

compliance without harsh penalties.

 

 Pro Employment Provisions

1.Career Centres:

The Code on Social Security, 2020 provides for the establishment of Career Centres 

by the Central Government to offer services such as registration, vocational 

guidance, and job matching. Functioning as modern employment exchanges through 

both digital and physical platforms, these centres will connect job seekers with 

employers. Employers are mandated to report vacancies to these centres, making it 

easier for job seekers to find employment and thereby boosting overall employment 

in the country.

2. Fixed-term employment treated on par with regular employment:

The Code expressly provides for fixed-term employees i.e., those employed for a 

fixed duration under contract to be entitled to the same social security benefits 

(gratuity, pension, etc.) as permanent employees. In particular, one of the reforms is 

that fixed term employees can now be eligible for gratuity if they have completed 

one year of continuous service. This provision was earlier limited to permanent 

employees only.

3. Universal coverage of various categories of workers:

The Code broadens social security and employment coverage to the following 

categories which which are still outside the purview of the social security benefits:

(a) Gig workers and platform workers: For the first time, these categories are 

recognized, and the Code mandated for framing of social security schemes for 

them regarding life insurance, disability insurance, health, maternity, pension, 

etc. It will help the Gig and Platform workers to live with a dignified life.

(b)Unorganised sector / self-employed workers: The Code allows for social 

security schemes for self-employed or unorganised workers or other classes 

of persons for the welfare of the citizens.

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