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Social Security Code 2020: The Only Guide You Need

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The Social Security Code of 2020 is a crucial component of the Government of India’s efforts to simplify and modernize India’s labor laws. Passed in December 2019 and reviewed by the Parliamentary Standing Committee in July 2020, the Social Security Code was introduced as a new bill aimed at improving compliance with labor laws. The code’s goals include simplifying the labor laws, reducing the number of definitions, encouraging the use of technology to facilitate compliance and enforcement, and ensuring that the basic principles of worker welfare and benefits are upheld.

Social Security Code 2020: Bringing Clarity to Social Security Laws

The Social Security Code of 2020 encompasses a comprehensive system of social security benefits by consolidating, clarifying and rationalizing provisions from the following 9 central labor laws:

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

The Social Security Code 2020: A Closer Look at its Scope of Coverage

The Social Security Code of 2020 is a comprehensive legislation aimed at providing social security benefits to all employees and workers, regardless of the sector in which they work, including the organized, unorganized, and gig/platform sectors. The Code sets forth the requirements for the applicability of various social security schemes, such as the EPF Scheme, and the ESI Scheme, as designated by the Central Government which retains the power to alter these standards.

A Guide to the Social Security Code 2020: Key Provisions That Matter

The Social Security Code of 2020 outlines key provisions aimed at improving the welfare and benefits for workers in various sectors. Here are some of the main provisions of the code:

Employees Provident Fund (EPF)

Establishments with over 20 employees must comply with EPF provisions. Both the employer and employee contribute 10% of the employee’s wages to the fund.

Social Security Fund

The government will set up a Social Security Fund to implement welfare schemes for unorganized workers, and organizations may contribute to it as part of their Corporate Social Responsibility initiatives.

Benefits for Fixed-term Employees

Fixed-term employees are eligible for the same statutory benefits as permanent employees, proportional to the period of service if less than the qualifying period.


Gratuity is calculated based on a larger salary base, including basic pay and allowances. Basic pay must make up 50% of the employee’s cost to the company (CTC).

Take-home Salary and Employer Contributions to Provident Fund

The law requires employees’ basic salary to be at least 50% of their gross salary, leading to larger contributions to Provident Fund and gratuity and reduced take-home salaries.

Maternity Leave and Benefits

Women are entitled to 26 weeks of maternity leave, with up to 8 weeks prior to the expected date of delivery. To be eligible for maternity benefits, a woman must have worked 80 days in the current establishment in the last 12 months.

Record Keeping

Employers must maintain records of wages, leave, attendance, overtime, etc. and issue payment slips in electronic or paper form. Returns must be filed electronically or otherwise.

Employees State Insurance Corporation (ESIC)

ESIC coverage is now mandatory for all establishments with more than 10 employees, and organizations with fewer employees can choose to be voluntarily covered. It will provide benefits such as medical coverage and gratuities.

Registration and Compliance

New business establishments are required to obtain only one mandatory registration, and workers must be registered through Aadhaar.

Definition and Role of Aggregators

Nine categories of aggregators are designated for this purpose, including e-marketplaces, content and media services, food and grocery delivery services, and ride sharing services.

National Welfare Board – What you need to Know Here?

A legislative act from 2019 mandated the establishment of national and regional boards to manage the social security of workers in the informal sector. The National Welfare Board, as stated in the 2020 Social Security Code, has expanded its scope to include gig workers and platform employees along with unorganized workers.

The Board’s function is to recommend and oversee programs for these workers and is comprised of the following members:
• 4 representatives each from –

  • Aggregators nominated by the central government
  • Gig workers and platform workers, also nominated by the central government
  • The director general of the Employees’ State Insurance Corporation (ESIC)
  • Various state governments

Social Security Code 2020: Ensuring Compliance & Avoiding Consequences

The Social Security Code of 2020 brought about changes to the penalties for various offenses. For instance, the maximum sentence for obstructing an inspector from performing their duties has been reduced from a year to six months. Additionally, the penalty for unlawfully retaining the employer’s contribution from an employee’s wages has been altered to a fine of Rs 50,000 instead of a jail term of one year or a fine of Rs 50,000.

A New Path for Companies

The recent overhaul of labor laws in India represents a substantial transformation of the nation’s labor regulations. The four labor codes have been introduced to consolidate and simplify existing laws, making them more applicable and efficient in today’s economic and social environment. The responsibility of implementing these reforms falls
upon HR leaders in companies.