This chapter will enable students to:
- Explain the factors leading to the adoption of social security measures for industrial workers in the country
- Describe the contingencies covered under various social security laws in the country
- Understand the role of ILO in creating international standards in the field of social security
- Understand the basic features of social security system in some developed countries
- Explain the main Recommendations of the second National Commission on Labour (2002) relating to social security and modifications in the existing laws
Lord William Beveridge, who considered ‘want’, ‘disease’, ‘ignorance’, ‘squalor’ and ‘idleness’ as five giants on the road to social security which should be attacked and killed, defines ‘social security’ as ‘security of an income to take the place of earnings when they are interrupted by unemployment, sickness or accident, to provide for retirement through age, to provide against loss of support by death of another person and to meet exceptional expenditure, such as those concerned with birth, death and marriage’.1 According to ILO ‘Social security is the security that society furnishes, through appropriate organization, against certain risks to which its members are exposed. The risks are essentially contingencies against which the individual of small means cannot effectively provide by his own ability or foresight alone or even in private combination with his fellows’.2 The various risks against which social security seeks to provide protection include: sickness, invalidity, maternity, employment injury, unemployment, old age, death and emergency expenses.
There are generally two pillars or methods of social security—‘social insurance’ and ‘social assistance’. Approaches to these methods have not always been uniform, but their broad features can be conveniently identified. An important feature of most social insurance schemes is that they are financed mainly through the contributions of employers, workers or other beneficiaries, and in some cases, supplemented by state grant. Most of these programmes are compulsorily established by law and specifically defined categories of employers, workers and other beneficiaries are required to participate in the programmes. The benefits under social insurance schemes are generally linked to the contributions of insured persons. Financial planning in social insurance schemes is on long-term basis and they administered by the government or under its supervision. The beneficiaries are entitled to benefits as a matter of right, but after fulfilling the prescribed eligibility conditions.
‘Social assistance’ programmes generally provide benefits for meeting the minimum needs of persons of small means. The programmes are financed by state funds or funds arranged by the state. The beneficiaries do not have to pay contributions for entitlement to the benefits, but they receive them as a matter of right. However, the beneficiaries have to fulfil the prescribed eligibility conditions. The benefits under social assistance programmes are generally changeable according to the income and means of the beneficiaries.
EVOLUTION AND GROWTH OF SOCIAL SECURITY IN SELECTED COUNTRIES
The beginning of social assistance can be traced back to the Elizabethan period in England when the Poor Relief Act of 1601 provided for economic assistance to the poor and the destitute. Such Acts were enacted from time-to-time and remained in operation till 1834. Subsequently, piecemeal social security laws were enacted in the country. With the acceptance of the Beveridge Report submitted in 1942, a system of comprehensive social schemes came to operate in UK. However, the system of compulsory scheme of insurance owes its origin in Germany where Chancellor Bismark initiated compulsory scheme of insurance against sickness, industrial injury and burial from 1883 to 1885. Insurance scheme for old age and invalidity pensions were introduced in 1889. In the United States, the Social Security Act, 1935, was the first nationwide scheme incorporating measures for old-age and death of the bread-winners. The Social Security Act of New Zealand enacted in 1938 provided for different kinds of cash and health benefits. A brief description of social security laws in operations in the United Kingdom, United States, and a few other countries is given below.
In the United Kingdom, a series of social security laws have been enacted and enforced from time-to-time. The Poor Relief Act, 1601, with subsequent amendments, remained in force till 1834. The Workmen’s Compensation Act, 1897, introduced the principle of employer’s liability to pay compensation in the event of disability resulting from accidents ‘arising out of’ and ‘in the course of employment’. The Act was amended several times since its enactment in 1897. The Old-age Pension Act, 1935, provided for a means-tested pension to person aged 70 and over. The National Insurance Act, 1935, introduced a scheme of unemployment and sickness insurance. A series of such Acts were enacted in the country between 1920 and 1939. Prior to the implementation of comprehensive social security plans based on Beveridge Report of 1942, the country also had a few pension and housing Acts.
Following the Beveridge Report, the country introduced comprehensive social security schemes under the National Insurance Acts, National Insurance (Industrial Injuries) Acts, Family Allowances Acts, National Assistance Acts and National Insurance Acts. Subsequently, most of these Acts were replaced by new enactments such as Social Security Acts, Social Security Pension Acts, Child Benefit Acts, Supplementary Benefit Acts, National Health Services Acts and Social Security and Housing Acts.3 These laws provide comprehensive social security programmes for the workers and citizens.
The Social Security Act, 1935, established a unified social insurance system in the country. The Act primarily envisages Old-age, Survivors, Disability and Health Insurance (OASDHI) schemes. The coverage is universal and compulsory. As the title of the schemes suggest, they provide for benefits in the events of retirement, death, disablement, medical care and hospital insurance. The unemployment insurance programmes in the country are generally administered by the state under state laws, but the Social Security Act encourages the state on the basis of a ‘tax-offset device’. The Act also envisages federal state programmes of assistance to special groups of persons in financial need, for example, the aged, the blind, dependent children and permanently and totally disabled. Schemes of grants-in-aid to the states for improving the maternal and child health services, services for the crippled children in child welfare services are also in operation in the country.4
In New Zealand, the Social Security Act, 1938, with subsequent amendments provide for cash and health benefits. The cash benefits include: superannuation benefits, widows’ benefits, orphans’ benefits, family benefits, unemployment benefits, and emergency benefits. The health benefits include maternity benefits, hospital benefits, medical benefits, pharmaceutical benefits, and supplementary benefits,
The social security system in Germany consists of sickness insurance, accident insurance, old-age pension insurance and unemployment insurance. The social security schemes in Japan comprise: public assistance, welfare services, social insurance (medical care, pensions, children’s allowance, unemployment insurance and workers’ accident compensation), public health, and old public service pension and aid for war victims.5 The Australian Social Service Consolidation Act, 1947, with amendments cover old-age pension, invalidity pension, widow’s pension, maternity allowance, child endowment, unemployment benefit, and funeral benefit. In Russia, there is no provision for unemployment insurance as the right to work is a fundamental right in the Constitution. The risks covered under the schemes in the country are: old-age, invalidity, death, sickness, maternity, work-injury and family allowance. Membership of a trade union is generally necessary for full insurance benefits. Most programmes of social security in the country are administered by trade unions. Premiums for most of the schemes are paid by the employers. The benefits are provided by the social consumption funds. The social insurance schemes in the country are extensively supplemented by social services.6
ILO ON SOCIAL SECURITY
The preamble to the Constitution of the International Labour Organization inter alia lays emphasis on prevention of unemployment, protection of worker against sickness, disease and injury arising out of his employment and provision for old age and injury. The Philadelphia Charter of 1944 recognized the solemn obligation of ILO to further among nations of the world programmes which would achieve full employment and raising the standard of living; the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care adequate protection for the life and health of workers in all occupations and provision for maternity protection (see Chapter 32).
The ILO has adopted a series of Conventions and Recommendations laying down international standards in regard to various aspects and subject matters of social security, for instance, workmen’s compensation, sickness insurance, pension insurance, invalidity and old-age insurance, survivors’ insurance, maternity protection and unemployment provision. The notable Conventions and Recommendations relating to social security are briefly described in Box 23.1.
NOTABLE ILO’S CONVENTIONS AND RECOMMENDATIONS RELATING TO SOCIAL SECURITY
Workmen’s Compensation: The Conventions dealing with workmen’s compensation are: (i) Workmen’s Compensation (Accidents) Con. (No. 17), 1925; (ii) Workmen’s Compensation (Occupational Diseases) (No. 18), 1925; (iii) Equality of Treatment (Accident Compensation) (No. 19), 1925; Workmen’s Compensation (Occupational Diseases) (Revised) Con. (No. 42), 1934; Employment Injury Benefits Con. (No. 120), 1964. The Recommendations relating to workmen’s compensation are: Workmen’s Compensation (Minimum Scale) (No. 22). Workmen’s Compensation (Jurisdiction) (No. 23), Workmen’s Compensation (Occupational Diseases) (No. 24) and Equality of Treatment (Accident Compensation) (No. 25) all adopted in 1925, and Employment Injury Benefits Rec. No. 121 (1964).
Sickness Insurance: The Sickness Insurance (Industry) Con. (No. 24) and the Sickness Insurance (Agriculture) Con. (No. 25) both adopted in 1927, Sickness Insurance (Sea) (No. 56), 1936, the Medical Care and Sickness Benefits Con. (No. 130), 1969.
Invalidity, Old-age and Survivors’ Insurance: In 1933, ILO adopted a series of Conventions dealing with observance of minimum conditions with every scheme of compulsory invalidity, old-age and survivors’ insurance. These are: Old-age. (Industry etc.) Con. (No. 35), Old-age Insurance (Agriculture) Con. (No. 36), the Invalidity Insurance (Industry and Others) Con. (No. 37), the Invalidity Insurance (Agriculture) Con. (No. 38), the Survivors’ Insurance (Industry and Others) Con. (No. 39), and Survivors’ Insurance (Agriculture) Con. (No. 40). These Conventions were subsequently revised by the Invalidity, Old-age and Survivors’ Benefits Con. (No. 128), 1967. The relevant Recommendations are: the Invalidity, Old-age and Survivors’ Insurance Rec. (No. 43), 1933 and (No. 131), 1967.
Unemployment Provisions: The Unemployment Provision Con. (No. 44), 1934, deals with unemployment insurance, the scheme of which may be compulsory, voluntary or a combination of both. The Unemployment Provision Rec. (No. 47), 1934, relates to the scheme of unemployment insurance.
Maternity Protection: The Conventions dealing with maternity protection are: Maternity Protection Con. (No. 3), 1919, and Maternity Protection (Revised) Con. (No. 103), 1952, and Maternity Protection Con. (No. 183), 2000. The relevant Recommendations are: Maternity Protection (Agriculture) Rec. (No. 12), 1921, Maternity Protection Rec. (No. 95), 1952, and Maternity Protection Rec. (No. 191), 2000.
Broader Forms of Social Security: Of late, ILO has given attention to broader forms of social security and has adopted a few Conventions and Recommendations in this regard. The Social Security (Minimum Standards) Con. (No. 102), 1952, with nine different branches of social security that is, medical care, sickness benefit, unemployment benefits, family benefit, maternity benefit, invalidity benefit and survivors’ benefit. Other Conventions are: Equality of Treatment (Social Security) Con. (No. 128), 1962, Maintenance of Social Security Rights Con. (No. 157), 1982, Social Security (Seafarers) Con. (Revised) (No. 165), 1987. The Recommendations include: Income Security Rec. (No. 67) and Medical care Rec. (No. 69), both adopted in 1944, and Maintenance of Social Security Rights Rec. (No. 167), 1983.
The social security legislation in India has been influenced by quite a few Conventions and Recommendations adopted by ILO and also in other ways, such as assistance of experts in drafting the schemes. The Convention relating to social security formally ratified by India include: Workmen’s Compensation (Occupational Diseases) Con. (No. 18), 1925, Equality of Treatment (Accident Compensation) Con. (No. 19), 1925, Protection Against Accidents (Dockers) (Revised) Con. (No. 32), 1934, Workmen’s Compensation(Occupational Diseases) (Revised) Con. (No. 42), 1934, and Equality of Treatment (Social Security) Con. (No. 118), 1962. (see also Chapter 32).
EVOLUTION AND GROWTH OF SOCIAL SECURITY LEGISLATION IN INDIA
The evolution of social security legislation in India has been rather slow, sporadic, and on a more or less selective basis. Although the need for protecting workmen against even the common hazards of life such as injury, sickness, maternity and old age was realized soon after the advent of industrialisation in the country, no concrete measures were adopted for a long time; only in the case of fatal injuries, some relief was available to the dependants of the deceased workmen under the Fatal Accidents Act, 1855, but the measure was not quite beneficial owing to the ignorance and illiteracy of the workmen and their dependents, and a complicated legal procedure involved in establishing a claim. After the outbreak of the First World War, the pace of industrialisation was accelerated and a large number of wage-earners came to be various industrial undertakings. The increasing hazards of industrial life led to further dissatisfaction among the working class which wanted protection against at least certain contingencies such as injuries and death. By that time, the workman had realized the utility of forming trade unions and resorting to concerted action for the furtherance of their legitimate interests. Besides, ILO, which came into existence in 1919, also emphasized the need of protecting workers against hazards of industrial life. It was under these conditions that the question of providing security to the workers against the more obvious of the contingencies of life received the attention of the government. A beginning in this direction was ultimately made in 1923 by the passing of the Workmen’s Compensation Act (now renamed Employees’ Compensation Act) which made the employer liable to pay compensation in respect of industrial injuries and death. The Act was a central measure and patterned after the British Workmen’s Compensation Act, 1897.
The next contingency engaging the attention of the state was maternity. The lead in this direction was taken by Bombay which adopted a Maternity Benefit Act in 1929. The Act provided for cash benefit during specified period of maternity. A few other states followed suit and by and by Maternity Benefits Acts came to be passed in almost all the states. Unlike Workmen’s Compensation Act, Maternity Benefit laws have mostly been state measures. However, the Government of India also adopted an Act in 1941 which applied to miners. Later, the Plantation Labour Act, 1951, a central legislation, also provided for maternity benefit to plantation workers. In 1961, the Government of India passed the Central Maternity Benefit Act which provides for uniform benefit all over the country. The Act is now in operation in all the states and union territories.
These measures pertaining to workmen’s compensation and maternity protection covered only a part of the various contingencies of life and that too, on the principle of employer’s liability rather than that of social insurance. However, the questions of providing protection against other risks and application of the principle of social insurance received attention of various committees appointed by the Government of India and the state government from time to time.
Royal Commission on Labour
In 1927, the Indian Legislature discussed the question of health insurance for industrial workers when the issue of ratification of ILOs Sickness Insurance (Industry) Convention (No. 24) and Sickness Insurance (Agriculture) Convention both adopted is 1927 came up for discussion. The Government of India expressed its inability to ratify the Conventions on practical considerations but realized the need for some provision for workers during sickness. The Government of India invited suggestions from the provincial governments in this regard, but in view of the proposal for the appointment of Royal Commission on Labour, the matter was kept in abeyance.
The Royal Commission on Labour appointed in 1929 emphasized the need for protecting workers during sickness and recommended a scheme of health insurance for them. Realizing the difficulties in the formulation of the scheme, the Commission, however, recommended the operation of the scheme on an experimental basis in the first instance, to be replaced by a country-wide scheme later on. The Government of India examined the Recommendations and requested the Actuary’s Department, London, to give advice. On receipt of the advice, the Government of India sought the view of the provincial governments regarding the conduct of preliminary enquiries. However, the response of the provincial governments was not encouraging in view of the financial burden involved and extent of efforts required in the collection of relevant statistics. In consequence, the question was dropped for the time being.
The Commission also examined the questions of unemployment insurance and old-age pension, but did not favour the adoption of the schemes owing to unfavourable conditions obtaining in the country.
Bombay Textile Labour Enquiry Committee, 1937
The Bombay Textile Labour Enquiry Committee set up in 1937 recommended the adoption of a compulsory and contributory sickness insurance scheme. The scheme provided for both cash and medical benefits and was to be financed by contributions from the workers, employers and government. It was to be implemented in the first instance in Bombay and Ahmadabad and subsequently extended to other cotton textile centres. However, no concrete efforts were made to implement the scheme. Earlier, the Bombay Strike Committee appointed in 1928 had also advocated a voluntary gratuity payment scheme for workers during periods of unemployment.
The Cownpore Labour Enquiry Committee appointed in 1937 also dealt with the question of health insurance. In this regard, the Committee endorsed the earlier Recommendations of the Royal Commission on Labour and suggested an appropriate subsidy from the state for financing it. The Committee also recommended the establishment of a gratuity scheme for making payments during periods of unemployment and a contributory provident fund as a provision against old age.
Bihar Labour Enquiry Committee, 1938
The Bihar Labour Enquiry Committee appointed in 1938 under the chairmanship of Dr. Rajendra Prasad recommended the adoption of a sickness insurance scheme based on a contributory basis.
First Labour Ministers’ Conference, 1940
The question of health insurance came up for discussions before the first Labour Ministers’ Conference held in 1940. The Conference realized the necessity for a sickness benefits fund and suggested that before taking further action, the Government of India should ascertain the willingness of employers and workers to contribute to the fund.
Second Labour Ministers’ Conference, 1941
At the time the Second Labour Ministers’ Conference was held, the adoption of a sickness insurance scheme had received a wide acceptance. Both the employers and workman had expressed their willingness to pay contribution. The provincial governments, which were hitherto hesitant, also supported its introduction. In view of the encouraging responses, the central government did not favour any further postponement of the scheme. Thus, the Government of India decided to start preliminary actuarial examination for the purpose, but it was subsequently realized that in absence of sufficient statistical data, the actuarial examination was not possible. However, it was ultimately decided that instead of dropping the matter, an actual scheme for selected industries be framed and implemented even in the absence of adequate statistical data.
Third Labour Ministers’ Conference, 1942
On the basis of the earlier decision, the Government of India prepared a tentative scheme of sickness insurance for factory workers and placed the same before the Third Labour Ministers’ Conference for consideration. The proposed scheme, which was very limited in scope and applicable, only to cotton textile, jute textile and heavy engineering industries in the first instance, was to be implemented on an experimental basis.
The conference discussed the scheme and suggested that even when the government was not required to subsidize the scheme, it should advance loans whenever needed. Besides, it also recommended the establishment of a committee of experts to work out the details of the scheme. However, it was subsequently considered expedient to entrust the work to only one expert, to be assisted by a panel of advisers.
PROFESSOR ADARKAR‘S REPORT
In accordance with the Recommendations of the Third Labour Ministers’ Conference, the Government of India appointed Professor B. P. Adarkar as a Special Officer in 1943 to work out a scheme of health insurance for industrial workers. Shortly thereafter, the Health survey and Development Committee under the chairmanship of Joseph Bhore was appointed by the Government of India to make broad survey of the existing position in regard to health conditions and health organization in India and to give Recommendations for future development. The Committee was assisted by an Industrial Health Sub-committee which considered the question of providing overall medical care to industrial workers. In finalizing the scheme, Professor Adarkar had the benefit of consulting the sub-committee on industrial health, and also organizations of employers and workmen. A panel of actuaries was also created to assist Professor Adarkar in matters concerning financial structure of the proposed scheme.
Professor Adarkar submitted his report in August 1944. The scheme framed by him was to cover three major groups of industries namely, textiles, engineering, and minerals and metals. All perennial factories in these industries, other than a few specially exempted, were to be covered. The upper wage limit was to be 200 per month, and the upper age limit, 60 years. Professor Adarkar suggested classification of workers into three groups—‘permanent’, ‘temporary’ and ‘casual’ depending on the length of service. The permanent and temporary workers were required to pay contributions and were entitled to cash and medical benefits. The casual workers were not required to pay contributions, but were entitled only to medical relief. The employer was required to pay contributions at uniform rate in respect of all the three categories of workers. The medical service organization was to be fully controlled by the insurance institutions and not by an outside authority or the state government. Besides, Professor Adarkar also emphasized a uniform scheme of maternity insurance in place of scattered Maternity Benefit Acts, and a scheme of insurance against industrial disability in place of Workmen’s Compensation Act. At the same time, he strongly suggested merging of Maternity Benefit laws and Workmen’s Compensation Act with the health insurance scheme and framing unified and integrated scheme of health, maternity and employment injury insurance. Professor Adarkar also framed schemes of maternity insurance for miners and social insurance for seamen. Professor Adarkar’s report led to serious efforts towards formulation of the social security scheme in the country. Shortly after the submission of the report, the subject came up for discussions before the Indian Labour Conference which recommended a thorough investigation into the questions of wages, employment, housing, and social conditions, and thereafter, the appointment of a committee to formulate a complete social security plan for the country on the basis of information obtained.
In pursuance of the Recommendations of the Indian Labour Conference, the Government of India appointed in 1944 the Labour Investigation Committee headed by D. V. Rege. Unfortunately, the committee which submitted its report in 1946 dealt with the question of social security only casually, though the term of reference had laid considerable emphasis on the matter. As such, the report of the Rege Committee was not of much help in the formulation of the social security schemes.
Subsequently, the Government of India thought it desirable to obtain an expert opinion before giving effect of Professor Adarkar’s Recommendations. Accordingly, the International Labour Office was requested to depute some experts to assist in the formulation of the scheme. In response to the request thus made, services of two ILOs experts, namely, M. Stack and R. Rao were made available to the Government of India. These experts went into the question in some detail and suggested some modifications in Professor Adarkar’s plan. The main modifications suggested by the experts pertained to: (i) administration of medical and cash benefits, (ii) integration of maternity benefit and workmen’s compensation in the health insurance scheme, and (iii) the classes of factories and workmen to be covered. In general, they agreed with Professor Adarkar in respect of financial participating of the state and adoption of an integrated scheme covering sickness, maternity and employment injury.
EMPLOYEES’ STATE INSURANCE ACT, 1948
On the basis of Professor Adarkar’s Recommendations and the suggestions made by Stack and Rao, the Workmen’s state Insurance Bill, 1946, was framed and was passed by the Dominion Assembly in April, 1948, as the Employees’ State Insurance Act. The Employees’ State Insurance Act, 1948, the first of its kind in south-east Asia, marked a beginning of social insurance for industrial workers in India. The Act provides for sickness benefit, maternity benefit, disablement benefit, dependant’s benefit, medical benefit, funeral expenses and unemployment allowance in certain specified cases.
PROVISIONS FOR OLD AGE
In 1948 itself, a beginning was made for old-age protection by the enactment of the Coal Mines Provident Fund and Bonus Schemes Act. The Act established a compulsory provident fund for coal-miners and provided for bonus based on attendance. Later, the Employees’ Provident Funds Act, 1952, provided for provident fund for the benefit of employees in a few industries and establishments. These Acts with changed names are still in force in the country.
PROVISION AGAINST UNEMPLOYMENT
Although, there is no legislation providing for unemployment insurance in the country certain amendments introduced in the Industrial Disputes Act, 1947, provide for relief to industrial workers in the event of lay-off retrenchment and closure of establishments.
The Payment of Gratuity Act passed in 1972 provides for payment of gratuity to employees on the termination of their employment after rending service for the prescribed period, on superannuation, retirement, resignation, death or disablement.
EXISTING SOCIAL SECURITY LAWS
Thus, at present, the important social security legislations in the country for industrial workers comprise: the Employees’ Compensation Act, 1923, the Central Maternity Benefit Act, 1961, the Employees’ State Insurance Act, 1948, the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and the Payment of Gratuity Act, 1972. The specific risks and the laws under which they are covered are given in Box 23.2.
RISKS COVERED UNDER SOCIAL SECURITY LAWS IN INDIA
|Disablement||1. Employees’ Compensation Act, 1923|
|2. Employees’ State Insurance Act, 1948|
|3. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952|
|4. Payment of Gratuity Act, 1972|
|Death||1. Employees’ Compensation Act, 1923|
|2. Employees’ State Insurance Act, 1948|
|3. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952|
|Maternity||1. Maternity Benefit Act, 1961|
|2. Employees’ State Insurance Act, 1948|
|Old age||1. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952|
|2. Payment of Gratuity Act, 1972|
|Termination of service||1. Industrial Disputes Act, 1947|
|2. Payment of Gratuity Act, 1972|
|3. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952|
|Sickness||1. Employees’ State Insurance Act, 1948|
|2. Maternity Benefit Act, 1961|
RECOMMENDATIONS OF THE SECOND NCL (2002)
The Recommendations of the second NCL relating to various aspects of social security are reproduced in brief below.
- The Commission accepts the need to consider social security as a fundamental human right [Par. 8.30].
- The Commission recommends a system in which the state bears the responsibility for providing and ensuring an elementary or basic level of security, and leaves room for partly or wholly contributory schemes [Par. 8.32].
- The Commission agrees with the Recommendation of the Task Force on Social Security that ‘wage ceiling and employment threshold can and should be uniform with a provision for raising the wage ceiling and its eventual removal and lowering employment threshold and its ultimate removal’. [Par. 8.93].
The Workmen’s Compensation Act should be converted from an employer’s liability scheme to a social insurance scheme; its coverage should be progressively extended to more employments and classes of employees; and the restrictive clauses in Schedule II of the Act should be removed [Par. 8.97].
- In the organized sector, the existing provisions for maternity benefit should be extended so as to be applicable to all women workers [Par. 8.100].
- So far as women in the unorganized sector are concerned, there is undoubtedly a need for a separate legislation for providing maternity benefits. Its implementation is possible through welfare funds or area-based schemes [Par. 8.102].
Employees’ State Insurance (ESI) Scheme
- The object and scope of the ESI Scheme of medical benefit needs to be reviewed in the current context when public and private medical services have increased [Par. 8.103].
- The ESI Corporation has to take a decision to de-link the employment injury and maternity benefits from the medical benefits, and to extend the application of the ESI Scheme for the purposes of these benefits throughout the country. Alternately, separate social insurance schemes confined to these benefits will have to be evolved [Par. 8.104].
- The Commission agrees with the views of the Study Group on Social Security that ‘the benefit structure of the ESI Scheme be unpacked, and provision be made for extension of the scheme for one or more benefits separately or in groups … and immediate steps be taken to extend the scope of the Act for purposes of employment injury benefit and maternity benefit throughout the country without waiting for the corresponding provision for medical benefits’ [Par. 8.106],
- Casual and contract workers may be covered for limited benefits at reduced rates of contribution [Par. 8.109].
- Exemptions may be granted from the ESI Scheme in cases where establishments provide similar or superior benefits. Since the ESI Scheme is a contributory scheme, the rates of contribution should be fixed on an actuarial basis, and be free from collective bargaining [Par. 8.111].
- The management of the ESI Scheme should be professionalized. While a tripartite body may continue to remain the general body, day-to-day administration may be entrusted to a body of experts who should constitute the governing body [Par. 8.113].
- Provision for payment of funeral expenses should be substituted by the term ‘emergency expenses’ so as to include care of the sick and the elderly members [Par. 8.114].
Provident Funds (PF), Gratuity and Unemployment Insurance
- A law to place all the provident funds under a common regime seems to be called for [Par. 8.115].
- The Employees’ Provident Funds Act (EPF) be made applicable to all classes of establishments, subject to such exceptions as may be necessary for specified reasons [Par. 8.117].
- The employment threshold of the PF Act should be brought down to 10 immediately, to 5 during the next 3–5 years, and to one within a short time-frame thereafter [Par. 8.118].
- The Commission suggests that appropriate provisions be made in the Act to enable the organization to frame different schemes with different contributory and benefit packages for application to different classes of establishments, employees and persons. This is particularly necessary to make the Act applicable to self-employed people [Par. 8.124].
- Considering the likely expansion of the coverage of the Schemes under the EPF Act, there seems to be a greater need for decentralising the administration of the Schemes. One way to decentralize the administration is to authorize more and more employers to administer their won Provident Funds, the Employees’ Provident Funds Organization (EPFO) acting as a regulatory authority [Par. 8.128].
- The Commission suggests that EPFO should have its own mechanism for investment of its balances; investment patterns should be liberalized and the government may consider issuing of indexed bonds for investment of PF balances [Par. 8.132].
- The Commission is of the opinion that the provision for premature withdrawal of funds should be restricted [Par. 8.136].
- There can be no justification for permitting premature final withdrawals in case of resignation [Par. 8.137].
- Proposals to integrate the Payment of Gratuity Act with the Employee Deposit-linked Scheme and also to introduce the Unemployment Insurance Scheme as part of the Scheme should be implemented soon [Par. 8.138].
- The Payment of Gratuity Act may be integrated with the EPF Act and converted into a social insurance scheme [Par. 8.149].
- Integration of the Payment of Gratuity Act and the EPF Act will ensure automatic extension of the Payment of Gratuity Act to all establishments to which the EPF Act applies [Par. 8.150].
- The scope of the Payment of Gratuity Act should be co-extensive with that of the EPF Act [Par. 8.152].
- An integrated insurance scheme providing for gratuity, unemployment benefits, lay-off and retrenchment compensation may be evolved, and entrusted to the EPFO for its implementation [Par. 8.160].
- An unemployment insurance scheme could play a substantial role in coping with unacceptable levels of unemployment resulting from the implementation of the structural adjustment programmes and other economic reforms [Par. 8.175].
- The scheme should preferably be implemented through the EPF Organization and be applicable to all establishments and employees to which the EPF Act is currently applicable [Par. 8.176].
- The unemployment insurance scheme should be financed by a tripartite contribution to be determined actuarially [Par. 8.177].
The National Renewal Fund (1992) was established to provide a form of a wage guarantee which had to be used for retraining, redeployment, counselling, and so on. But in practice, NRF has mostly been utilized for implementing the Voluntary Retirement Scheme (9VRS). There is need to restructure this fund to serve as a wage guarantee fund [Par. 8.179].
A provision should be made for payment of education allowance to all employees by amending the existing laws regulating employment and conditions of service of employees [Par. 8.182].
Welfare funds can be transformed into instruments of social security by expanding the coverage of the funds; broadening the range of benefits, modifying the financial arrangements for providing benefits and decentralising the administration of the funds.
Employers are not averse to contributing to a welfare fund which would provide all the benefits including social security to workers through a tripartite board [Par. 8.223].
- The basic benefits in such schemes may include: (i) insurance against death or disability, (ii) health insurance and (iii) old age benefits [Par. 8.248].
- The funding of the scheme is envisaged to be from contributions from members and other sources [Par. 8.252].
- The area-based scheme appears to be suitable for application to the workers in the unorganized sector [Par. 8.254].
- Unorganized workers may be mobilized to form Self Help Groups, local workers economic organizations, district level cooperatives and village based mahila mandals or yuvak mandals or kisan sanghs [Par. 8.266].
- These organizations could be actively involved in provision of credit, micro insurance by linking with savings and credit supplying groups or organizations and social security services through the area-based approach [Par. 8.276].
National Social Assistance Programme
- National Social Assistance Programme (NSAP) has served the long felt need for uniform national minimum standards for providing social assistance to weaker sections of the society. More benefits may be added to this programme in due course of time [Par. 8.271].
- Apart from NSAP, there are several schemes under which social assistance is being provided. All such programmes should be integrated to maximize coverage, avoid overlapping and ensure a basic minimum to all [Paras.8.275–8.276].
- The quantum of maternity benefit may be raised to a minimum of 2,000 [Par. 8.280].
National Employment Assurance Scheme
- Effort to implement a National Employment Assurance Scheme is of considerable importance. Such a Scheme would not be unfeasible and should be given a fair trial [Par. 8.292].
- The central government should consider introducing a National Scheme of Unemployment Relief to the unemployed persons subject to a means test [Par. 8.294].
- A National Widow Pension Scheme coupled with a training programme to help the younger ones to be self-sufficient may be introduced [Par. 8.332].
- A national scheme may be designed for the payment of children’s allowance on a universal basis, subject to a means test, to persons below the poverty line [Par. 8.340].
- A National Scheme for Pensions for Physically Handicapped may be introduced [Par. 8.365].
- The Commission welcomes the introduction of Khetihar Bima Yajana for agricultural workers, but in the Commission’s view it is a departure from the original proposal to establish an employment board and a welfare fund for the workers. The Commission suggests that these proposals may also be revived and implemented early [Par. 8.372].
- A permanent Commission for disaster management should be set up on the lines of the Election Commission [Par. 8.393].
- The system of social security envisaged by the Commission comprises four tiers(i) social assistance programmes, financed from the exchequer and wholly based on tax revenue, (ii) schemes which are partly contributory and partly subsidized by the state, (iii) wholly contributory social insurance schemes, and (iv) voluntary schemes [Par. 8.407].
Broader Aspects of Social Security
- It is high time that a national policy on social security is formulated and a national plan to achieve the objectives set out in this policy evolved [Par. 8.414].
- The Commission strongly recommends the constitution of a high-powered National Social Security Authority, preferably under the chairmanship of Prime Minister of India. The functions of the Authority will be mainly to formulate the national policy on social security and to co-ordinate the central and state level programmes [Par. 8.415].
- The Commission would suggest a Department of Social Security within the Ministry of Labour. This Department would provide inputs and secretarial services to the National Authority, co-ordinate, monitor and review specific programmes among various ministries and the states. Similar arrangements can be made in the states [Par. 8.416].
- The unification of administrative responsibility in respect of the existing social security legislation is both necessary and desirable [Par. 8. 417].
- The Commission recommends the establishment of a comprehensive social security system covering various existing programmes of different ministries/departments. However, to begin with functional integration of all social security programmes in the organized sector could be attempted, pending a review of the need for administrative integration [Par. 8.418].
- The mechanism of delivery should be based on two key principles: (i) it should be as decentralized and as close to the beneficiaries as possible; and (ii) it should be tripartite or multipartite involving workers, employers, governments and other stakeholders [Par. 8.421].
- A Social Security Fund of India and a Social Security Fund of each state may be set up [Par. 8.433].
- There will be three kinds of social security schemes: social insurance type of contributory schemes; subsidised insurance/welfare fund type of partly contributory and partly socially assisted schemes; and social assistance which will be wholly non-contributory [Par. 8.434].7
These Recommendations of the Commission are yet in the process of study and examination of the government. Some of the Recommendations of the Commission in regard to unorganized sector have found place in the Unorganized Workers’ Social Security Act, 2008, but entirely on a different footing.
The Government of India and most of the state governments have adopted some social security programmes for the benefit of the handicapped and vulnerable sections of the population and also as a measure to alleviate poverty, especially in the rural areas. Of these, the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, and National Assistance Programme deserve a particular mention.
- Mahatma Gandhi National Rural Employment Guarantee Act, (MGNREGA): The NRGA Act, 2005, came into force in February, 2006. It was renamed as Mahatma Gandhi National Rural Employment Guarantee Act through an amendment of 2009. The Act was initially enforced in 200 selected districts but was extended to all the districts of the country with effect from April, 2008.
The Act aims at enhancing livelihood security of households in rural areas of the country by providing at least 100 days of guaranteed wage-employment in every financial year to every household whose adult members volunteer to do unskilled manual work. The basic features of the scheme include: time-bound guarantee of employment, wage-payment within 15 days, emphasis on labour intensive work, prohibiting use of contractors, creation of durable community assets and infrastructure in rural areas. The work may be undertaken in such areas as conservation of water, afforestation and tree plantation, land development, flood control, drainage and rural connectivity roads.
Each district has to prepare perspective plans with a bottom-up approach deriving from the needs of the local community. Panchayats have to play a key role in the planning, implementation and monitoring of the programmes. Gram Sabha has the power of social audit. Local vigilance and monitoring committees are set up to ensure the quality of work executed. The Act also envisages a grievance redressal mechanism and helpline.8
The Act is a highly ambitious and challenging measure for a country like India facing the problem of massive population and a very high incidence of rural poverty and unemployment. The measure, combined with other programmes of rural development, if implemented sincerely and effective check on malpractices, may pave the way for the adoption of more effective social security measures covering contingencies of unemployment and poverty, particularly in the rural areas.
- National Social Assistance Programme: The National Social Assistance Programme was launched by the Government of India on 15 August 1995. The programme comprised: (i) National Old Age Pension Scheme, (ii) National Family Benefit Scheme, and (iii) National Maternity Benefit Scheme. Originally, the National Old Age Scheme provided for the payment of 75 per beneficiary to destitutes who were 65 years of age and above. The National Family Benefit Scheme provided for payment of 10,000 in lump sum in case of the death of the breadwinner to the bereaved household. Under the National Maternity Benefit Scheme women of 19 years of age and above belonging to poor families were paid 500 per live delivery for the first two births.
In 2002, the programmes were transferred to the state plan along with another scheme known as Annapurna Scheme. After the transfer of the schemes to the state plan, state-wise allocation of additional central assistance is made by the government of India. The scale of central assistance under the National Old Age Pension Scheme is now 200 per month and the states have been requested to provide for another 200 per month from their own resources. Under the National Family Benefit Scheme, the central assistance is to the tune of 10,000 per beneficiary, and under the Annapurna Scheme 10 kilogram of food grains per month per person is provided free of cost to the beneficiaries. Payment of maternity benefit is now the responsibility of the state government. All these schemes apply to those who are below the poverty line.
In 2009, the central government also adopted Indira Gandhi National Widow Pension Scheme under which 200 per month is payable to widows in the age group of 40–64 years living below the poverty line. The same year another scheme known as Indira Gandhi National Disability Pension Scheme was also initiated. The scheme provides for payment of 200 per month for persons below poverty line in age group 18–64 years in the cases of severe of multiple disabilities.9
In addition to these, other programmes of rural development such as Swarnajayanti Gram Swarojgar Yojana, Pradhan Mantri Gram Sadak Yojna and Indira Awas Yojna also aim at fighting the problems of unemployment and poverty facing the rural poor. Many states have their own programme of public social security covering such contingencies as disablement, death, maternity and old age.
Unorganized Workers’ Social Security Act, 2008
The Unorganized Workers’ Social Security Act, 2008, was enacted on 31 December 2008 and come into force on 16 May 2009.
The Act provides for the constitution of National Social Security Board which is required to frame social security schemes on matters relating to: (i) life and disability cover, (ii) health and maternity benefits, (iii) old age protection, and (iv) any other benefit as may be determined by the central government. Similar Boards have to be constituted at the state level. These state Boards are required to formulate schemes relating inter alia to provident fund and employment injury benefits. The National Social Security Board is required to send the schemes to the central government for approval. Similarly, the schemes formulated by the state Boards require approval of the state governments concerned.
The National Social Security Board, in addition to formulating social security schemes for different sections of unorganized workers, has been assigned the responsibility of monitoring the implementation of the schemes and rendering advice to the central government arising out of the administration of the Act. The state Boards are also required to perform similar functions.
The Act also provides for setting up of Workers Facilitation Centre to disseminate information on social security schemes available to them, and facilitate registration of workers by the district administration and enrolment of unorganized workers.10
Unlike other social security laws applicable to workers in the organized sector, this Act does not guarantee any legal commitment regarding social security benefits to be statutorily available to workers in the unorganized sector. The Act leaves the adoption and implementation of the schemes entirely at the discretion of the government.
Rashtriya Swasthya Bima Yojna (2007)
A health insurance scheme known as Rashtriya Swasthya Bima Yojna for families of below poverty line in the unorganized sector was launched in October, 2007. The scheme, which became operational in 2008, provides for (i) smart card based cashless health insurance cover of 30,000 per annum to a family of below poverty line, (ii) coverage of all pre-existing diseases and (iii) hospitalisation expenses covering most of the illness including maternity.
NEED FOR A COMPREHENSIVE SOCIAL SECURITY SCHEME
India does not yet have a comprehensive and unified social security scheme covering all its citizens nor even a limited comprehensive scheme covering the industrial workers in respect of various contingencies of life. Amongst many paradoxes facing the country, here is another paradox. The poorer the country, the greater is the need of its citizens for social security measures, but less is its capacity to finance the same. The widespread poverty of the masses including that of industrial workers makes them still more vulnerable to the interruptions in the flow of income caused by various contingencies and hazards of life. People living at the margin of subsistence become destitute and are the least able to cope with the situations interrupting their meagre income. Individually, they have no savings to face the contingencies of life; it is only collective efforts that can save them from sinking deeper and deeper into the morass of economic destitution. But the poverty that makes collective assistance an urgent necessity also hinders emergence of collective efforts as the state does not have adequate resources to finance the same. It appears that the country may have to wait for quite some time before the economic development and the resulting increase in the national income can enable it to launch and implement a comprehensive social security scheme on a consistent and regular basis.
- Many developed countries of the world, particularly the United Kingdom, United States, New Zealand, Germany, Australia and Russia have comprehensive social security system covering a number of contingencies such as disablement, sickness, maternity, death, old age, unemployment and other kinds of disabilities. In these countries both social insurance and social assistance schemes are in operation on a regular basis.
- The ILO has created international standards through Conventions and Recommendations in various areas of social security including workmen’s compensation, sickness insurance, invalidity, old age and survivors’ insurance, maternity protection and unemployment provision. Social security laws in India have also been influenced by the provisions of a number of such Conventions and Recommendations.
- Adoption of particular measures of social security for industrial workers in the country has been the outcome of deliberations of a few committees and Commissions appointed at different intervals of time. These have included: the Royal Commission on Labour (1929), Labour Enquiry Committees appointed in the provinces during the 1930s. Professor Adarkar’s Committee (1943), Bhore Committee (1943), and Labour Investigation Committee (1944). Of these, Professor Adarkar’s Committee has been particularly significant in the adoption of an integrated scheme of social security in the form of Employees’ State Insurance Act, 1948.
- The important social security laws applicable to workers in the organized sector include: (i) ESI Act, 1948 (sickness benefit, maternity benefit, disablement benefit, dependants’ benefit, funeral expenses and unemployment allowance); (ii) Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (provident fund, deposit-linked insurance, employees’ and family pension); (iii) Employees’ Compensation Act, 1923 (disablement and death); (iv) Maternity Benefit Act, 1961 (maternity and sickness); (v) Payment of Gratuity Act, 1972 (Gratuity), and (vi) Industrial Disputes Act, 1947 (lay-off and retrenchment).
- The second National Commission on Labour (2002) has made significant Recommendations covering various aspects of social security and its schemes. The areas covered by the Commission include: general aspects of social security, employees’ compensation, gratuity, maternity benefit, ESI scheme, provident fund and pension and unemployment insurance. The Commission has recommended inter alia the constitution of a high powered National Social Security Authority and the establishment of a comprehensive social security system in the country.
- Some of the special programmes of government adopted in the course of alleviation of poverty and unemployment in rural areas and related to social security have been Mahatma Gandhi National Rural Employment Guarantee Act, 2005, and National Social Assistance Programme 1995.
- The Unorganized Workers’ Social Security Act, 2008, provides for the constitution of National Social Security Board for the formulation of social security schemes for workers in the unorganized sector covering such areas as life and disability, health and maternity benefits, old age protection and any other benefit as may be prescribed by the central government. These schemes have to be approved by the central government. Similar Boards have to be constituted in the states. The state Boards are required to formulate schemes relating inter alia to provident fund and employment injury. Unlike other social security laws, the Act does not guarantee any legal commitment regarding the social security benefits.
- India does not yet have a comprehensive and unified social security system covering all its citizens nor even a limited comprehensive scheme covering the industrial workers in respect of various contingencies of life. It appears that the country may have to wait for quite some time before the economic development and the consequent increase in the national income can enable it to launch and implement a comprehensive social security system on a continuous basis.
- What do you understand by ‘social security’? Give a brief account of the growth and development of social security legislation in India.
- Briefly describe the various contingencies covered under social security laws of the country.
- What are the main Recommendations of the second National Commission on Labour (2002) in the regard to the modifications in the existing social security laws of the country? How are these feasible under the existing economic and labour conditions in the country?
- How does the Unorganized Workers’ Social Security Act, 2008, seek to provide social security benefits to workers in the unorganized sector? In what way is the Act different from social security laws applicable to industrial workers?
- Discuss the role of the ILO in creating international standards in the field of social security. Have these influenced the social security legislation in India?
Five giants on road to social security
Convention of the ILO
Recommendation of the ILO
What are the main features of social security legislation in india?
In India, social security laws have come to cover certain contingencies of life of workers in the organized sector. The benefits available to this class of workers include: employees’ compensation, maternity benefit, sickness benefit, disablement benefit, dependants’ benefit, medical benefit, provident and employees’ pension, gratuity, compensation in the event of lay-off and retrenchment and unemployment allowance. The main legislative measures have comprised: Employees’ Compensation Act, 1923, Employees’ State Insurance Act, 1948, Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, Maternity benefit Act, 1961, Payment of Gratuity Act, 1972, and Industrial Disputes Act, 1947. Besides, the Unorganized Workers’ Social Security Act, 2008, seeks to provide certain social security benefits in the forms of life and disability cover, health and maternity benefit and old age protection to workers in the unorganized sector. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005, and the National Social Assistance Programme, 1995, also aim at covering certain contingencies.
What social security benefit to the industrial workers is not payable in cash?
Can you identify the laws which are based on the principle of social assistance?
What are social security laws based on the principle of social insurance?
In what way is the Unorganized Workers’ Social Security Act, 2008, different from social security laws applicable to industrial workers?
Which law covers compensation for lay-off and retrenchment?