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Challenges to Social Security for Self-Employed Workers in India and the Code for Social Security Bill 2019

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Social security is recognised as a universal human right that is integral to the guarantee of human dignity for all persons and social cohesion. Indeed, Article 22 of the Universal Declaration of Human Rights of 1948, affirms that “[e]veryone, as a member of society, has the right to social security.” Not surprisingly, there has been a proliferation of social security laws in most welfare democracies, including India. In India, social security has also been enshrined in the Constitution as one of the Directive Principles of State Policy and recognised by the judiciary as a part of the Fundamental Right to Life under Constitution of India. This constitutional mandate has been operationalised through 15 Central labour legislations on social security and numerous other state legislations.

Employment Centricity in Indian Social Security Laws

However, most of the existing social security legislation and schemes in India are centred around the relationship of employment and cast responsibility on the employer. This employment-centricity has presented numerous hurdles in the path of realisation of social protection for informal labour. Firstly, it has encouraged the misclassification of workers as independent contractors and not employees in order to avoid social security regulation. More critically, the focus on employment has also rendered self-employed workers ineligible for most existing social security benefits. Such exclusion has had a grave impact since self-employed workers constitute more than half of all workers in India. According to the National Commission for the Enterprises in the Unorganised Sector (NCEUS), the share of self-employed in the workforce was 56.61 %in 2004-05. The  Periodic Labour Force Survey (PLFS) of 2017-18 found that this percentage had come down to 52.2%. The exclusion of self-employed workers from most social security statutes and schemes, therefore, is mystifying and negates the constitutional mandate on providing social security to everyone.

Protection under the Unorganised Workers Social Security Act and Other Schemes

A potentially significant exception to the employment centricity of social security laws is the Unorganised Workers Social Security Act, 2008 (UWSSA). This statute was specifically enacted for informal labour and did extend to self-employed workers. S. 2 (m) of this Act which defines ‘unorganised worker’ includes a reference to ‘self-employed worker’. However, this Act remained still-born since it did not create any entitlement for workers and left the introduction of schemes to the discretion of the government. As Paromita Goswami has noted, “the language of the act is not one of giving rights” but rather of charity. Further, the schemes listed in the Schedule I to the Act were existing anti-poverty schemes that applied only to workers who fall Below-Poverty Line (BPL). As a result, even though some states have notified a few schemes under this Act for the protection of self-employed workers in certain sectors[1], the hopes of extending protection to informal workers through this Act has been belied. Indeed, the Parliamentary Standing Committee on Labour found that “even after 12 years of the enactment of the Act, only six per cent of the unorganised workers are covered under one or other form of social security.” (Page 126 of the report) Further, the Comptroller and Auditor General (CAG) had found in 2016-2017 that the funds lying in the National Social Security Fund constituted under the UWSSA had not been used since its inception.

It must also be acknowledged that the Central Government has introduced additional social security schemes like the Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), a pension scheme for unorganised workers, and the National Pension Scheme for Traders and Self-Employed Persons (NPS-Traders) 2019. However, there is a dearth of information on the legal basis, the enforcement framework and the extent of enrolment of self-employed workers in these schemes.

The Code on Social Security 2019: A Rope of Sand for Self-Employed?

The Code on Social Security, 2019 has been drafted as part of the process of consolidation and rationalisation of existing Labour Laws into four comprehensive Codes, and it seeks to amalgamate nine major Central Labour statutes on social security into a single Code. The Ministry of Labour and Employment has also claimed that the Code attempts to ‘universalise’ social security by applying the Code to all workers.

Indeed, the ambit of the Code has been drafted in such broad language so as to extend it to informal labour, including self-employed workers. Much like the UWSSA, s. 2 (78) of the Code defines an ‘unorganised worker’ as including a home-based worker and a self-employed worker. Further, s. 2(68) reproduces the definition of ‘self-employed workers’ as provided in the UWSSA.  

However, the Code suffers from the same vice as the UWSSA with respect to social security for informal workers. S. 109 of the Code, which deals with social security schemes for unorganised workers, does not create any legal binding entitlement to social security protection for workers. There is no minimum content, nor any statutory timeline or any concrete procedure for framing of social security schemes. Consequently, the Code does not reflect a rights-based approach to social security. In fact, the Code does not contemplate a justiciable legal right to social security for unorganised workers at all. Nor does the Code spell out any minimum level of social security that would be available for all workers as suggested by the NCEUS and recommended by the International Labour Organisation (ILO) Social Protection Floors Recommendation, 2012 (Recommendation No. 202). Not surprisingly, the Standing Committee on Labour and Employment has observed:

“merely retaining the usual administrative Clauses of the UWSSA, 2008 in the Social Security Code without any legal framework will not bring the intended benefits for the unorganised workers nor widen the social security coverage in the near future. The Committee, therefore, impress upon the Ministry to make suitable modifications in the appropriate Clauses so as to ensure a legally binding universal social protection for all the workers in the unorganised sector within a definite time frame.” (Page 151 of the report)

Not only does the Code fail to guarantee a minimum legal entitlement to social security for self-employed and other unorganised workers, but it also does not address the structural barriers towards effective operationalisation of social security for self-employed workers. Apart from gaps in legal eligibility and coverage, there are particular structural challenges in extending social security to self-employed workers. In view of the absence of an employer to shoulder the burden of contributing and the volatility of the earnings of self-employed earnings, contributory-schemes can be particularly ill-suited for self-employed workers. Further, self-employed workers may lack the capacity of record-keeping and other compliance-work associated with social security schemes. As such, the design of the social security schemes would have to have to be appropriately tailored to the specificity of self-employed workers. Indeed,  the UN Committee on Economic, Social and Cultural Rights (CESCR) had in its General Comment No. 19 on the right to social security (Art. 9 of the Covenant), had called upon States to ‘establish non-contributory schemes or other social assistance measures to provide support to those individuals and groups who are unable to make sufficient contributions for their own protection.’ In the same vein, the ILO and Organisation for Economic Co-operation and Development (OECD) have recommended policy innovations that range from lowering minimum contribution thresholds and allowing for interruptions in contribution periods to government subsidy for low-income self-employed workers. The failure of the Code to engage with these structural impediments is, therefore, a critical deficiency and may undermine the promise of universalisation of social security for all workers.

Remarkably, the Code is also very economical with provisions on financing of social security schemes for unorganised workers.  While s. 109 (4) does empower the Central Government to constitute a Social Security Fund, the Code does not provide any explicit mandate on financial support for social security schemes. The Code only acknowledges that schemes may be funded by the Central Government; by the State Government; through contributions collected from the beneficiaries or from any other source including corporate social responsibility fund. However, there is no acknowledgement of any legal mandate upon the Central Government and State Government to provide financial support for the social security schemes for unorganised workers. If the experience of the National Social Security Fund under the UWSSA is any indication, such lack of clarity and mandate on government financing may be fatal to the enforcement of the Code. That is why the Standing Committee on Labour and Employment averred that :

“there is a lack of firm commitment on the part of the Government to fund schemes meant for the unorganised sector. The Committee, therefore, recommend that the funding pattern for the schemes meant for the unorganised sector workers be clearly spelt out in the law so as to ensure adequate accrual of funds for potent implementation of various Schemes.” (Page 154 of the report)

Even as the employment-centricity of social security schemes and the consequent exclusion of self-employed workers in India has been addressed at a normative level through the UWSSA and the Code on Social Security Bill 2019, meaningful social protection is likely to remain a chimaera for self-employed workers.  Unless the Code on Social Security Bill, 2019 provides for concrete justiciable entitlements to a minimum level of social protection and adapts the design of social security programmes to the specificity of self-employment and creates specific mandate on governmental funding for social security, the right to social security shall remain a pipedream for self-employed workers.

*Saurabh Bhattacharjee is an Assistant Professor at The WB National University of Juridical Sciences where he teaches Labour Laws and Law and Impoverishment, among other courses. He is also the Founder of the Centre for Labour Laws and Livelihood at NUJS.

This is part of a series of guest posts on social security for self-employed workers in the informal economy organised by the Social Protection Initiative at Dvara Research. All views are those of the author and do not necessarily reflect those of Dvara Research.

[1] West Bengal Transport Workers Social Security Scheme 2010, Karnatak State Private Commercial Transport Workers Accident Benefit Scheme

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