Social security

Topic: Employment, Unemployment and Informalisation · NCERT: Class 11, Ch 5 "Rural Development"; Class 11, Ch 6 "Employment: Growth, Informalisation and Other Issues"

Meaning

Social security is protection given to workers against the big risks of working life: old age, illness, injury, loss of job and childbirth. It comes through benefits such as provident fund, gratuity, pension, maternity benefit and medical care, and through a safe workplace.

It matters because in India these benefits reach mainly formal-sector workers. In 2019-20 about 89% of workers were informal, and most of them had no such protection. So extending social security to informal and gig workers is a central goal of India's labour reforms.

Explanation

What it protects against

Risk	Benefit that covers it
Old age	Provident fund, pension
Illness or injury	Medical benefits, employees' compensation, ESIC health insurance
Leaving a job, retirement or death	Gratuity
Childbirth	Maternity benefit (paid leave and support for a woman worker around childbirth)
Unsafe work	A safe workplace. The factory manager must provide drinking water and safe working conditions.

Main components

• Provident fund (PF): retirement savings under rules set by the government.

• Both the employer and the employee pay in every month.

• Gratuity: a lump sum (a one-time payment) given on retirement, resignation or death.

• Formula: gratuity = 15 days' wages × completed years of service.
• Eligibility: five years' continuous service, or one year for fixed-term employees under the Code on Social Security [2][3].
• A fixed-term employee is hired directly for a set period. They get the same wages and benefits as permanent workers [2].
• Worked example 1: daily wage = ₹1,000; service = 10 years → 15 × ₹1,000 × 10 = ₹1,50,000.

• Worked example 2 (fixed-term): daily wage = ₹800; 1 year completed → 15 × ₹800 × 1 = ₹12,000.

• Pension: a regular payment, usually monthly, after retirement.

• Medical benefits: for example, health insurance through ESIC (Employees' State Insurance Corporation).

Who pays: contributory and non-contributory schemes

• Contributory scheme: workers or employers pay in, and benefits come out of that money. PF is an example.
• Non-contributory scheme: the government pays from its own budget. The worker pays nothing.
• ILO Social Protection Floors Recommendation, 2012: it asks countries to combine both types so that nobody is left without cover [5].
• A new hybrid model for gig workers: aggregators (the companies that run the apps) pay 1-2% of annual turnover, capped at 5% of what they pay to gig and platform workers [2].
• Worked example: turnover = ₹1,000 crore; payments to gig workers = ₹40 crore.
  • 1% of turnover = ₹10 crore.
  • Cap = 5% × ₹40 crore = ₹2 crore.
  • The aggregator pays ₹2 crore, because the cap is the lower figure.

Who gets it, who is left out, and why

• Formal-sector workers usually get it. Under the Class 11 definition, the formal sector means:
• all public-sector establishments, whatever their size;

• private establishments with 10 or more hired workers.

• Kanta (organised) vs Kamal (unorganised): Kanta has an appointment letter, PF, medical allowance, gratuity and pension. Kamal gets nothing beyond his wages and can be dismissed at any time without compensation.

• Why informal workers are left out:
• They have no written contract, so there is no legal record that they are employees.

• They work in many small units or for many employers → it is hard to form trade unions → they cannot use collective bargaining (workers negotiating as a group) to demand benefits.

• What reduced coverage: after the reforms of the early 1990s:

• the government hired fewer people in the public sector;
• firms used more contract labour;

• so the share of jobs that came with social security fell.

• What increases coverage: registering firms and workers, giving written contracts, and bringing workers under PF and ESIC.

In India

• Main law: the Code on Social Security, 2020. It merged nine laws [4], including:
• the Employees' Compensation Act, 1923;
• the ESI Act, 1948;
• the EPF Act, 1952;
• the Maternity Benefit Act, 1961;
• the Payment of Gratuity Act, 1972;

• the Unorganised Workers' Social Security Act, 2008.

• Timeline: the Code was notified on 29 September 2020 [2]. The four Labour Codes came into force on 21 November 2025 and replaced 29 central labour laws [2][3].

• Changes that bring more workers under cover:
• ESIC now applies across India. The old "notified areas" limit is gone. Establishments with fewer than 10 employees may join voluntarily if employers and employees both agree [2].
• Appointment letters for all workers. Each letter must state the social security benefits [2][3].

• Contract workers: the principal employer (the firm that uses contract workers) must give them health and social security benefits [3].

• Gig and platform workers:

• The Code is the first law to define "gig worker", "platform worker" and "aggregator" [2][4].
• There is a Social Security Fund for unorganised, gig and platform workers [2][4].
• A National Social Security Board looks after the welfare of gig and platform workers [4].
• Benefits covered: life and disability cover, accident insurance, health and maternity benefits, and old-age protection [4].

• Size of the gig workforce (NITI Aayog): over 1 crore workers in 2024-25, projected to reach 2.35 crore by 2029-30 [4].

• e-Shram portal:

• Launched on 26 August 2021 to build the National Database of Unorganised Workers (NDUW) [4].
• Each worker gets a Universal Account Number (UAN) on self-declaration (the worker's own statement, with no employer proof needed) [4].
• Registrations: 30.98 crore, including 3.37 lakh platform workers, as of 3 August 2025 [4].

• Top states: Uttar Pradesh (8.39 crore), Bihar (3.00 crore), West Bengal (2.64 crore) [4].

• Union Budget 2025-26: platform workers were promised e-Shram registration, identity cards, and health cover under AB-PMJAY worth ₹5 lakh per family per year. As of August 2025, this cover had not yet been launched [4].

• How big the gap is: in 2019-20 only 59 million of 535 million workers (about 11%) were formal.

Don't confuse with

• Informal sector vs informal employment: informal sector describes the enterprise (its size and registration). Informal employment describes the job: the ILO calls a job informal when, by law or in practice, it is not fully covered by formal arrangements such as social security [5]. So a temporary computer operator in a government office works in a formal establishment but has informal employment and no social security.
• Contributory vs non-contributory schemes: in contributory schemes, workers or employers pay in (for example, PF). In non-contributory schemes, the government pays. The ILO's 2012 floor asks countries to combine both [5].
• Gratuity vs provident fund vs pension: gratuity is a one-time lump sum when a worker leaves, retires or dies. PF is monthly savings that the employer and employee both pay into. Pension is a regular monthly payment after retirement.
• Registration vs coverage: registering on e-Shram gives a worker a UAN and an entry in a database. It does not by itself give any benefit. For example, the AB-PMJAY cover for platform workers was still not launched as of August 2025 [4].

Prelims Hooks

• Gratuity = 15 days' wages × completed years of service. You need 5 years' service, or only 1 year for fixed-term employees under the Code on Social Security (Labour Codes in force from 21 Nov 2025) [2][3].
• The Code on Social Security, 2020 merged nine laws, including the EPF Act 1952, the ESI Act 1948, the Maternity Benefit Act 1961, the Payment of Gratuity Act 1972 and the Unorganised Workers' Social Security Act 2008 [4].
• The Code is the first law to define "gig worker", "platform worker" and "aggregator". Aggregators pay 1-2% of turnover, capped at 5% of what they pay these workers [2][4].
• e-Shram: launched 26 August 2021; gives a UAN on self-declaration; 30.98 crore registrations as of 3 August 2025 [4].
• ESIC now covers all of India, not only notified areas. Units with fewer than 10 employees can join voluntarily [2].
• Trap: "All workers in a public-sector office have social security." Wrong. Temporary or contract staff in a formal establishment can still have informal employment with no benefits.

Mains Points

• Low coverage is the core problem of Indian labour:
• Only about 11% of jobs were formal in 2019-20, and firms hire more contract labour after 1991 → most workers face old age, illness and job loss with no safety net → GDP growth has not brought matching growth in decent work (work with fair pay, security and social protection).

• Bringing workers into PF and ESIC also raises productivity and brings more firms into the tax net.

• The Labour Codes (2025) are a trade-off:

• For workers: appointment letters stating benefits, gratuity after one year for fixed-term workers, benefits for contract workers from the principal employer, and cover for gig workers [2][3].

• The concern: easier fixed-term hiring may favour employers. The real test is how well states write their rules and enforce them.

• Portable, universal cover for informal and gig workers:

• The e-Shram UAN (30.98 crore workers) [4] lets benefits follow a migrant worker from one state to another.
• The aggregator levy fits the ILO floor idea of mixing contributory and non-contributory funding [2][5].
• The gap: a registration is not the same as a benefit. For example, the promised AB-PMJAY cover for platform workers had not been launched as of August 2025 [4].

Related concepts

• Organised sector
• Unorganised sector
• Job security
• Overtime
• Paid leave
• Provident fund
• Gratuity
• Pension
• Trade unions
• Collective bargaining

Read more

• Organised and unorganised sectors: definitions, conditions and social security