Study sheet: Code on Social Security 2020

📋 Course Outline

1. Purpose and Legislative Background
2. Objectives and Covered Laws
3. Definitions and Wage Structure
4. Provident Fund Framework
5. Gratuity Entitlement and Calculation
6. Employee State Insurance
7. Employee Compensation
8. Maternity Protection
9. Unorganised and Platform Workers
10. Employment Information System
11. Penalties and Compliance Administration
12. Implementation and Transitional Position

📖 1. Purpose and Legislative Background

🔑 Key Concepts & Definitions

• Code on Social Security : legislation enacted to amend and consolidate social-security laws and extend benefits to employees and workers in organised, unorganised, and other sectors

★ Must-know

• The Code on Social Security, 2020 came into force on 21 November 2025.

Further detail

• The Code was passed by the Lok Sabha on September 22, 2020, and by the Rajya Sabha on September 23, 2020.

💡 Memory Hook

Fragmented labour laws → one consolidated social-security framework

📖 2. Objectives and Covered Laws

★ Must-know

• The Code subsumes nine enactments, including the Employees' Compensation Act, 1923, the Employees' State Insurance Act, 1948, the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the Maternity Benefit Act, 1961, the Payment of Gratuity Act, 1972, and the Unorganised Workers' Social Security Act, 2008.

• The objectives of the Code are:

  • consolidate laws
  • universalise social security
  • include diverse worker categories
  • provide comprehensive benefits
  • recognise new forms of employment
  • simplify and rationalise compliance

Further detail

• The Code covers self-employed, home, wage, migrant, unorganised-sector, gig, platform, and fixed-term workers within its wider social-security framework.

💡 Memory Hook

C-U-I-B-R-S: consolidation, universalisation, inclusion, benefits, recognition, simplification

📖 3. Definitions and Wage Structure

🔑 Key Concepts & Definitions

• Wages : monetary remuneration payable under the employment terms, including basic pay, dearness allowance, and retaining allowance, while excluding specified items such as bonus, HRA, overtime, commission, and conveyance allowance
• Platform Work : work outside a traditional employer–employee relationship in which an online platform connects organisations or individuals to obtain or provide services for payment

📝 Essential Points

📌 If excluded components exceed 50% of total remuneration, the excess is added back to wages, and remuneration in kind up to 15% is included.

💡 Memory Hook

Traditional employer–employee relationship versus inclusive worker categories

📖 4. Provident Fund Framework

★ Must-know

📌 Provident-fund provisions apply to every establishment employing 20 or more employees, and the Central Government may extend coverage by notification.

• The employer contribution is generally 10% of wages and may be enhanced by notification to 12%, while the employee contributes an amount equal to the employer's statutory contribution.

Further detail

📌 An establishment employing fewer than 20 employees may opt for provident-fund coverage if the employer and the majority of employees agree.

• Up to 8.33% of wages from the employer contribution may be allocated to the Pension Fund, and up to 1% of wages may be contributed to the Employees' Deposit Linked Insurance Fund.

💡 Memory Hook

Coverage → contributions → pension and insurance → transfer

📖 5. Gratuity Entitlement and Calculation

★ Must-know

📌 Gratuity is generally payable after at least five years of continuous service on superannuation, retirement, resignation, death, disablement, expiry of a fixed-term contract, or another notified event.

📐 Formula — For a monthly-rated employee, gratuity equals $\text{Last drawn monthly wages} \times \frac{15}{26} \times \text{years of service}$.

📐 Formula — For a fixed-term employee, gratuity is calculated proportionally as $\text{Last drawn monthly wages} \times \frac{15}{26} \times \text{completed service}$, without rounding service beyond six months up to a full year.

Further detail

📌 An employer must determine gratuity, give written notice, and pay it within 30 days after it becomes due, even if the employee has not applied.

💡 Memory Hook

Permanent employees: five years; fixed-term employees: one year and proportional calculation

📖 6. Employee State Insurance

★ Must-know

📌 ESI applies to employees earning up to Rs.21,000 per month, or Rs.25,000 for persons with disabilities, in establishments employing at least 10 persons.

• ESI contributions are 3.25% of wages for the employer and 0.75% of wages for the employee.

• ESI benefits include:

  • medical benefits
  • sickness benefits
  • maternity benefits
  • disablement benefits
  • dependants' benefits
  • funeral benefits
  • vocational rehabilitation
  • re-employment benefits

Further detail

📌 Sickness benefit requires contributions for at least 78 days in a contribution period and is paid at 70% of the standard benefit rate for a maximum of 91 days in two consecutive periods.

💡 Memory Hook

Registration → contributions → medical and cash benefits

📖 7. Employee Compensation

★ Must-know

📌 Employee compensation applies to injuries caused by an accident arising out of and in the course of employment or by an occupational disease, while employees covered by ESI are excluded.

📐 Formula — Compensation for death equals $50\% \times \text{monthly wages} \times \text{relevant factor}$, and compensation for permanent total disablement equals $60\% \times \text{monthly wages} \times \text{relevant factor}$.

Further detail

📌 An employer must notify the Competent Authority within seven days of an accident involving serious bodily injury or an absence from work exceeding 20 days.

📌 Unjustified delay in compensation may require interest and additional damages of up to 50% of the compensation.

💡 Memory Hook

Employment injury → employer liability → compensation and possible damages

📖 8. Maternity Protection

★ Must-know

📌 Maternity benefit applies to establishments employing women, and eligibility generally requires at least 80 days of work in the preceding 12 months.

• Eligible women receive up to 26 weeks of maternity leave, limited to 12 weeks when they have two or more surviving children; adoptive and commissioning mothers receive 12 weeks from handover.

Further detail

📌 A woman must not be employed during the six weeks immediately following delivery, miscarriage, or medical termination of pregnancy.

• Establishments employing 50 or more employees must provide a creche, and returning mothers are entitled to two nursing breaks daily until the child is 15 months old.

💡 Memory Hook

Eligibility → leave → payment → workplace protection

📖 9. Unorganised and Platform Workers

🔑 Key Concepts & Definitions

• Unorganised Worker : a home-based, self-employed, or wage worker in the unorganised sector, including an organised-sector worker not covered by a social-security scheme

★ Must-know

📌 Unorganised, gig, and platform workers aged 16 years or older must register, generally through self-declaration and prescribed documents including Aadhaar, to access social-security schemes.

• Aggregators must contribute between 1% and 2% of annual turnover, subject to a ceiling of 5% of payments made to workers.

Further detail

• Welfare schemes may provide:
  • life and disability cover
  • accident insurance
  • health and maternity benefits
  • old-age protection
  • education
  • housing
  • skills training
  • funeral assistance
  • creche facilities

💡 Memory Hook

Employee relationship versus gig and platform work

📖 10. Employment Information System

🔑 Key Concepts & Definitions

• Career Centre : an office, employment exchange, place, or portal maintained by the Central Government to provide career services and information on employers, candidates, vacancies, and vocational guidance

★ Must-know

📌 Specified employers must report notified vacancies to career centres before filling them, but reporting does not require the employer to recruit through the career centre.

Further detail

📌 Reporting requirements generally exclude agriculture other than plantations, domestic service, legislative staff, vacancies lasting less than 90 days, and establishments employing fewer than 20 workers.

📖 11. Penalties and Compliance Administration

★ Must-know

• Failure to pay employees' contributions deducted from wages may attract a fine of Rs.1,00,000 and imprisonment for one to three years.

• 🔄 The compliance process involves:

  1. guidance
  2. technology-driven inspections
  3. rectification where applicable
  4. prosecution for unresolved violations

Further detail

• Failure to pay a contribution under the Code may attract a fine of Rs.50,000 and imprisonment for two to six months.

📌 PF and ESI applicability and dues inquiries are barred after five years and must generally be completed within two years, extendable by one year.

💡 Memory Hook

Facilitation → inspection → rectification → prosecution

📖 12. Implementation and Transitional Position

★ Must-know

• Rules notified by the Central Government and the State of Karnataka were described as being in draft form, so full operational clarity depends on final notification and implementation.

Further detail

• Pending notifications include:
  • new EPF schemes
  • Employees' Pension Scheme
  • Employees' Deposit Linked Insurance Scheme
  • contribution rates
  • maximum gratuity ceiling
  • Social Security Fund
  • National Social Security Board
  • gig- and platform-worker schemes

📌 Earlier EPF, ESI, and related schemes, rules, regulations, and procedures continue for one year from commencement to the extent that they are not inconsistent with the Code.

📊 Synthesis Tables

Old Regime and Social Security Code

Dimension	Earlier regime	Code on Social Security, 2020
Coverage	Sector-specific laws with thresholds and traditional employment relationships	Employees, unorganised workers, gig workers, platform workers, and fixed-term employees
Definitions	Different definitions across statutes	Standardised definitions, including Section 2(88) wages
Administration	Separate organisations, forms, and paper records	Integrated boards, digital registration, and portability
Employment services	Employment exchanges	Government-maintained career centres
Offences	Uneven compounding and penalties	Structured compounding and enhanced repeat-offence penalties

Key Benefit Thresholds

Benefit	Eligibility or threshold	Principal entitlement
Provident fund	Generally 20 or more employees	Employer and employee contributions
Gratuity	Generally five years; one year for fixed-term employees	Payment based on last drawn wages
ESI	Wages up to Rs.21,000; Rs.25,000 for persons with disabilities	Medical and cash benefits
Maternity benefit	80 days in preceding 12 months	Up to 26 weeks of leave
Creche	50 or more employees	Creche and related facilities