Taxmann’s Analysis | The Code on Social Security, 2020 – A Framework for Worker Protection in India
CS Neha Sharma Taxmann’s Advisory & Research [Corporate Laws]
1. Introduction
The Code on Social Security, 2020 is a transformative reform that unifies nine fragmented labour laws into a single, modern framework, simplifying compliance for employers while expanding protections for all workers. It ensures access to social security benefits including provident fund, health care, maternity leave, gratuity, and injury compensation not only for formal employees but also for gig workers, platform workers, home-based workers, fixed-term employees, and those in the unorganised sector.
By consolidating laws under one umbrella, the Code makes social security more accessible and inclusive, addressing gaps that previously left millions of workers without coverage. It simplifies registration, clarifies obligations, and empowers the government to design schemes for emerging work models, creating a system that is adaptable to India’s evolving workforce.
In essence, the Code is more than legislation, it’s a promise of security, dignity, and financial protection for every worker, no matter their job type or sector.
2. From Fragmented to Unified – The Code Combines Nine Key Labour Laws
The Code merges following laws into one single modern law, making compliance easier for employers and easier access of benefits for workers1:
(a) The Employee’s Compensation Act, 1923
(b) The Employees’ State Insurance Act, 1948
(c) The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(d) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
(e) The Maternity Benefit Act, 1961 (53 of 1961)
(f) The Payment of Gratuity Act, 1972 (39 of 1972)
(g) The Cine-Workers Welfare Fund Act, 1981 (33 of 1981)
(h) The Building and Other Construction Workers’ Welfare Cess Act, 1996 (28 of 1996)
(i) The Unorganised Workers’ Social Security Act, 2008 (33 of 2008)
1 Section 164 of Code on Social Security, 2020
3. Applicability and Enforcement of the Social Security Code, 2020
The Code applies across India, and its provisions relating to PF, ESI, Gratuity, Maternity Benefits, and Unorganised Workers have officially come into force with effect from 21 November 2025.
(a) Chapter III – Employees’ Provident Fund (EPF) – Applies to all establishments with 20 or more employees.
(b) Chapter IV – Employees’ State Insurance (ESIC) – Applies to establishments with 10 or more employees, including hazardous workplaces with even 1 employee. Employers of plantations can opt in if ESIC benefits are better. Contributions start from the date ESIC benefits are provided.
(c) Chapter V – Gratuity – Covers factories, mines, oilfields, plantations, ports, railway companies, and shops/establishments with 10 or more employees or as notified by the government.
(d) Chapter VI – Maternity Benefit – Applies to factories, mines, plantations, government establishments, and shops/establishments with 10 or more employees or as notified.
(e) Chapter VII – Employee’s Compensation – Applies to employers and employees not covered under Chapter IV, as per the Second Schedule.
(f) Chapter VIII – Social Security Cess for Building and Construction Workers – Applies to all construction establishments.
(g) Chapter IX – Social Security for Unorganised Workers – Covers unorganised sector employees, gig workers, platform workers, and home-based workers.
(h) Chapter XIII – Employment Information and Monitoring – Applies to career centres, job seekers, employers, and vacancy monitoring.
4. Definition of “Social Security”
“Social Security” means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner by means of rights conferred on them and schemes framed, under this Code2
2 Section 2(78) of Code on Social Security, 2020
5. Types of “Employers” Under the Code on Social Security, 2020
Section Types of Employers/ Entities
2 (27) Employer
2(20) Contractor
2(2) Aggregator
Summary of Definitions
Employer refers to any person or authority who employs one or more employees directly or through another person. It includes the head or designated authority of a government department, the chief executive of a local authority, the occupier of a factory, the owner or qualified manager of a mine, the person or authority with ultimate control over any establishment (including its manager or managing director), any contractor who hires workers, and the legal representative of a deceased employer.
A contractor is a person who either undertakes a specific task or job for an establishment (not just supplying goods) or provides contract workers for any work of the establishment, and this also includes subcontractors.
A digital platform that connects buyers/users with service providers or sellers.
Factory occupier, Mine owner appointing a certified manager, Contractor hiring labour for construction or person with ultimate control of establishment.
Uber, Ola, Zomato, Swiggy, urban company etc. connect users with delivery partners.
6. Categories of Workers and Employees Under the Code on Social Security, 2020
Section Types of Workers/ Employees
Summary of Definitions Example
2(7) Building Worker A person employed for skilled, semi-skilled, or unskilled manual, technical, or clerical work, for hire or reward, in connection with any building or construction work but does not include any such person who is employed mainly in a managerial or supervisory or administrative capacity.
2(19) Contract Labour Contract Labour refers to a worker hired by a contractor to do work for an establishment. This can be with or without the knowledge of the main employer. It includes inter-state migrant workers, but does not include an employee who are regularly employed by the contractor under mutually agreed terms (like permanent employees), and who receive benefits such as pay increments, social security, and other welfare benefits as per the law.
2(26) Employee Employee means anyone (except apprentices under the Apprentices Act) who works for an establishment and is paid wages. This includes workers doing skilled, semi-skilled, unskilled, manual, technical, or clerical work, whether directly hired or through a contractor. It also includes anyone the government declares to be an employee, but does not include members of the armed forces.
A site electrician, or a clerk maintaining attendance registers at the construction site of building project.
A team of housekeeping staff or security guards employed by an external contractor agency to clean a large corporate office.
A full-time software developer on the company payroll, a factory line worker, or a branch manager of a bank etc.
Section Types of Workers/ Employees
2(34) Fixed Term Employment
Summary of Definitions Example
Fixed Term Employment refers to hiring an employee for a specific period under a written contract.
The employee must receive the same work hours, wages, allowances, and benefits as a permanent employee doing similar work.
Additionally, the employee is entitled to proportionate benefits (such as leave or social security) based on their length of service, even if they do not meet the full qualifying period for permanent employment.
2(35) Gig Worker Gig worker means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.
2(36) HomeBased Worker
2(41) Inter-State Migrant Worker
2(60) Platform Work
Home based worker means a person engaged in, the production of goods or services for an employer in his home or other premises of his choice other than the workplace of the employer, for remuneration, irrespective of whether or not the employer provides the equipment, materials or other inputs.
A person recruited in one State for employment in another State, or a person who migrates on their own and finds work in another State.
A work arrangement facilitated by an online platform where individuals provide specific services or solve problems for payment.
A marketing executive hired for a 9 month contract specifically to launch a new product line.
A tutor who provides home tuition on a per-class basis.
A wedding decorator who works event-to-event without being employed by any company.
A person works for a footwear company to stitch shoe parts at their residence, or a worker assembling small electronic components at home who is paid for per assignment and is paid for the goods or services produced but not employed by the company.
A worker from Bihar who is recruited by a contractor to work on a large factory construction project in Gujarat.
Delivering food or goods through an app like Zomato or Swiggy, or a person offering ride-sharing services through an app like Uber or Ola.
Section
Types of Workers/
Employees
2(61) Platform Worker
Summary of Definitions Example
A person engaged in or undertaking an online platform work.
2(71) Sales Promotion Employees
Defined as per the Sales Promotion Employees (Conditions of Service) Act, 1976.
2(73) Seamen Any person forming part of the crew of any ship, but does not include the master of the ship.
2(75) Self-employed Worker
2(86) Unorganised Worker
A self-employed worker is someone who works for themselves, not for an employer, in the unorganized sector. They earn a monthly income below a certain limit set by the government or own cultivable land within a specified size as set by the state.
Unorganised worker means a home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who
is not covered by the Industrial Disputes Act, 1947.
A food delivery agent or a cab driver who uses an online application to connect with customers and perform their job.
A medical representative or any person employed to promote sales of any establishment’s business.
An ordinary seaman, a cook, or an engineer working on a merchant ship.
Street vendors, freelance photographers, small farmers, independent tailors, and carpenters. They earn income from their own business or services, often within income limits or land size regulations set by the government.
A worker in a small factory or business who is officially employed but does not fall under the protections of the Industrial Disputes Act, 1947, and lacks the rights and benefits of a regular employee.
2(90) Wage Worker
A wage worker is someone employed in the unorganised sector, either directly by an employer or through a contractor. They can work for one or more employers, and their payment can be in cash or kind. This includes homebased workers, temporary or casual workers, migrant workers, or domestic workers. The wage worker earns a monthly wage, which is below a certain amount set by the government.
A wage worker is someone employed in the unorganised sector, either directly by an employer or through a contractor, earning a regular wage in cash or kind.
This includes workers like construction labourers, domestic workers, agricultural workers, migrant workers, street vendors’ employees, and casual factory workers.
7. Employer’s Perspective – Focus on Compliance and Ease of Doing Business
For employers, the Code primarily reduces complexity and simplifies the regulatory environment:
7.1 Single Registration System for All Social Security Benefits
A single electronic (or other) registration will now be sufficient for all social security schemes such as EPF and ESI under the Code. Additionally, any establishment that is already registered under another Central labour law will not be required to obtain a separate registration under this Code, leading to a significant reduction in the compliance burden, administrative costs, and the need to file multiple forms across different regulatory bodies3
7.2 Reduced Amount of Deposit for Appeal
The appeal process for Provident Fund disputes stays the same, but the required upfront deposit pre-deposit required from employers to file an appeal before the Tribunal against an order determining dues or levying damages has been reduced from 75% to 25% of the amount due as determined by the officer. This makes the appeals process far more accessible and fair for employers4.
7.3
Power of Government to Defer or Reduce Contribution in the Time of Pandemic
Government is empowered to defer or reduce employer/employee contributions in times of calamity or pandemic.
8. Employee/Worker’s Perspective –Focus on Welfare and Protection
For employees and the vast unorganized workforce, the Code focuses on extending rights and security:
7.1 Social Security Covers Gig Workers (e.g., Home Service Providers, etc.)
The Code introduces broader definitions particularly Gig Workers, Platform Workers, Fixed term employees, and Home-based workers enabling ESIC and other social security schemes to cover new and emerging categories of labour. 3
The definitions of unorganised sector, unorganised worker, and social security have also been expanded to ensure wider protection5
8.1.1 Constitution of Board for Unorganised Platforms
National Social Security Board mandates the constitution of a National Board for Unorganised, Gig, and Platform Workers, giving them dedicated oversight6.
8.1.2
Government to Make Schemes for Gig, Platform, and Unorganised Workers
The Government will design and oversee dedicated social security schemes for unorganised workers, gig workers, and platform workers. This is a major reform because it creates India’s first statutory social security framework for gig-economy workers through the National and State Social Security Boards7
8.1.3
Power of Govt. to Frame New Schemes for Self-Employed Workers
Central Government is empowered to frame new schemes for self-employed workers or any other class of persons. This makes the Code adaptable to future work models like freelancers and independent professionals8
8.1.4 Social Security Fund for Unorganised or Gig Workers
A separate is required to be established to finance the schemes for the Unorganised, Gig, and Platform Workers9
8.2 Provident Fund Transfer on Job Change
In case an employee changes jobs, their PF and Pension balances must be transferred or settled. If the new job is covered, the amount moves to the new account. If not, then employee may withdraw or keep the account inactive until returning to covered employment10 .
8.3 Responsibilities of Principal Employer and Contractor for Fair Contributions
The Principal Employer must pay all employer side PF contributions and administrative charges. Contractors may deduct only the employee’s share from wages and cannot deduct employer contributions from workers. This protects employees from unfair wage cuts11
5 Section 2 of Code on Social Security, 2020
6 Section 6 of Code on Social Security, 2020
7 Section 6 of Code on Social Security, 2020
8 Section 15 of Code on Social Security, 2020
9 Section 141 of Code on Social Security, 2020
10 Section 22 of Code on Social Security, 2020
11 Section 17of Code on Social Security, 2020
8.4 ESIC Coverage for Gig and Unorganised Workers
This is one of the Code’s biggest reforms. It paves the way for ESIC to extend medical benefits to unorganised workers, gig workers, and platform workers—something the old ESI Act could not do12
8.5 Better pay for ESIC Medical Specialists to Boost Quality of Services
ESIC medical specialists’ compensation is aligned with AIIMS standards. This helps attract highly qualified doctors and improves medical care for insured workers which is crucial for enhancing the quality of medical services provided to insured persons13
8.6 New Revenue Sources and Approved Expenditures for ESIC
Code explicitly includes user charges collected from non-insured beneficiaries and the Corporate Social Responsibility (CSR) Fund as formal sources of income. This strengthens ESIC’s financial base14
The Code has effectively codified the exhaustive list of permissible expenditures without making any material changes to the fund’s utilisation15
8.7 Gratuity for Fixed-Term Employees
Fixed-term employees are now eligible for pro-rata gratuity without needing 5 years of service. The formula for calculating 15 days’ wages, previously based on judicial interpretation, is now explicitly defined in the law. The consolidated definition of Wages introduced by the Labour Codes will likely increase the base on which gratuity is calculated16.
8.8 Maternity Benefits Continued With Paid Leaves and Flexible Work
The Code did not amend the existing maternity benefits but ensured their seamless legal continuity by consolidating the MB Act into the new Code structure. The Code retains the provision of 26 weeks paid leave, rights for adopting mothers and commissioning mothers for 12 weeks paid leave and the provision for mutually agreed work from home arrangements after availing the maternity benefits.
8.9 No Dual Benefits for Same Contingency
The Code significantly improves clarity by explicitly codifying the non-receipt of dual benefits (Sub-section 7), ensuring that workers cannot simultaneously claim both ESI benefits and benefits under the newly unified chapters for Employees’ Compensation (Chapter VII) and Maternity Benefit (Chapter VI) for the same event17.
12 Section 45 of Code on Social Security, 2020
13 Section 24 of Code on Social Security, 2020
14 Section 25 of Code on Social Security, 2020
15 Section 26 of Code on Social Security, 2020
16 Section 46 of Code on Social Security, 2020
17 Section 41 of Code on Social Security, 2020
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