Opinion National Interest PoV 50-Word Edit

ThePrint On Camera Videos In Pictures

Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story

More Judiciary Education YourTurn Work With Us Campus Voice

Opinion National Interest PoV 50-Word Edit

ThePrint On Camera Videos In Pictures

Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story

More Judiciary Education YourTurn Work With Us Campus Voice

India’s majority of workers don’t have social security. New labour reforms can change that

The Code's effects on employment and productivity depend less on its provisions than on how mandates interact with firm size, labour market structure, and worker perceptions of contributions.

Social security – the provision of a safety net against retirement, health expenses, and income shocks – is a foundational principle of formal employment. In India, this net remains out of reach for most workers. With 88% informally employed in 2024, down only marginally from 91% in 2010 (Figure 1), the vast majority of the workforce lacks pension, health insurance, or any income protection. India’s principal social security schemes (that is, Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI)) cover formal establishments only above a size threshold, structurally excluding informal, casual, and platform workers. 

The Code on Social Security, 2020 is an attempt to address the poor coverage of social security benefits by widening its reach beyond formal establishments, making accumulated benefits portable so workers do not lose protection when they change jobs and bringing gig and platform workers under statutory coverage for the first time.

Figure 1. Informal employment rate: India versus other developing economies

Key changes in the Code on Social Security, 2020

The Code on Social Security, 2020 introduces several structural changes that collectively reshape India’s social security landscape. 

First, it consolidates nine separate labour statutes into a single legislation, replacing multiple overlapping inspectorates with a single Inspector-cum-Facilitator and unifying compliance filings – directly lowering the administrative cost of formal employment. 

Second, the 50% wage rule closes the most exploited salary-structuring loophole, whereby employers inflated allowances to suppress basic wages and shrink EPF, gratuity, and maternity liabilities; any excluded allowances exceeding half of total remuneration are now reclassified as wages.

Third, a new category of fixed-term employees receive full parity with permanent workers from day one, with gratuity accruing on a pro-rata basis after one year........

© ThePrint