Labor Law: Social Security

Meaning

Social Security as a concept has become increasingly important in modern society especially as countries across the globe attempt to move closer to becoming states. The provision for social security is an important building block for any welfare state, it establishes a baseline which builds infrastructure for a safety net while economies undergo large scale changes; both technical and social but also can be in terms of potential benefits in terms of greater efficiency and higher productivity.[1] The crux of social security can be understood as a protection extended by public structures to its members through a series of public or part private-part public or public funded measures against the socio-economic hardships that may otherwise be caused by the stoppage or substantial reduction of earnings resulting from illness, maternity leaves, injury, occupational diseases, unemployment and old age.[2] 

From an international point of view, the International Labour Organisation (ILO) has laid down the primary understanding of social security for the world community. The body is responsible for the better understanding of social security and even giving it the status of qualified fundamental right ensured to all human beings who find themselves temporarily or permanently out of vocation. The Constitution of the International Labour Organisation has referred to the need and protection of the working force in a country against disease, injury and sickness caused in due course of their employment, pension after retirement, protection of the rights and interests of the workers who belonged to countries other than the home country. Hence, the right to Social Security went from a mere concept to being officially recognised for the first time.[3] Thereafter, the UN General Assembly, while deliberating upon the magna-carta of human rights; the  Universal Declaration of Human Rights (UDHR) way backed in 1948 also saw the right to Social Security as fundamental by stating that every member of the society has a right to social security.[4] 

History of Social Security

The annals of social security in its current form that is social insurance and social assistance finds its roots in 19th-century Europe specifically in Great Britain, the French country and Germany where it was initiated. Germany is most commonly believed to be the first state globally to introduce an old-age social insurance scheme which came into force in 1889, the scheme was passed under the rule of Chancellor Otto Von Bismarck. At the time, the German economy was well known for their efficiency and thus the original rationale by Chancellor Otto Von Bismarck behind the scheme was to ensure the prosperity of the German workers and efficiency of the national economy.[5] Even though the policies brought forth by Chancellor Bismark were revolutionary at the time, they were closer to social insurance than a holistic social security program. In comparison,  the social security plan that came into being in the USA in the year 1935 in the aftermath of the civil war led America to undertake the pension programme. However, the closest illustration to present-day social security can be seen in France where “Social Assistance” provided by the professional entities to their members who had crossed a certain age. Soon this system of “Social Assistance” came to a halt in the late 18th century (1791) with the abolition of the corporation by the “Allarde Decree”. This sparked the need for revolution and became one of the reasons for the start of the French revolution. [6] 

From an international standpoint, WW-1 proved to be a turning point for the acceptance of social security programs, the International Labour Organisation was formed keeping in mind the provisions laid down in the Treaty of Versailles. The treaty extended many benefits to the working class including the right of social security. The ILO in 1944 adopted a declaration covering many aspects of social security for the working class.[7]  

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History of Social Security in India

Traditionally, India did not possess a formal or government-backed social security system but this responsibility fell upon the familial structure and in some cases the community that the individual was a member of,With the gradual urbanisation, extensive family structures began to be replaced with smaller nuclear units, this meant a clear weakening of family bondage and the need for institutionalised and State regulated social security arrangements to tackle the growing problem in a systematic manner to ensure greater good of the people.

Working of a Social Security Program

An institutionalized social security system presupposes the interventionist role of the government machinery on the basis of redistribution grounds. Social security measures are generally seen in the form of income and maintenance measures intended to provide for a minimum standard of living for those deprived of the same due to unemployment owing to factors outside their control. The two primary elements of any social security scheme around the globe are the provision of a ‘ minimum living standard to those who are deprived of the same and ‘selective redistribution of income’ to a selected target group to reduce income and lifestyle inequalities. 

From the perspective of workers, social security would involve providing such schemes or services or facilities and amenities, which can enable the workers to lead a decent standard of life and having economic security to fall back upon in the event of losing a job for whatsoever may be the reason in the circumstances beyond their control. The workers are entitled to be given basic wages or salaries along with other services, which will allow them and the members of their family to lead a decent life. 

The American Illustration – In the United States, social security programs can be understood as an insurance policy where salaried employees and workers pay into the program, typically through their wages being withholding where they work. So essentially, a portion of one’s salary goes to paying for the social security program much like how a premium is paid for an insurance policy.

This materializes by workers around the country paying social security taxes into the scheme and money received via these taxes circulates back out as monthly income to persons who qualify to be beneficiaries. Social Security is different from company pensions, wherein the latter are “pre-funded.” in such retirement programs, the money is collected progressively in advance so that it will be available to pay today’s workers during their retired years. Very often, the company matches the amount contributed by the employee to these pre-funded retirement programs making them increasingly popular. 

Social Security in India

Under the Indian Constitution

While attempting to understand social security in India, it is pertinent  to  understand the nature of the Indian state. The Indian Republic is a welfare state that emerged from colonial rule and thus carried many colonial influences. A great place to begin is the Indian Constitution which levies a responsibility on the Indian Government to provide for social security to all its citizens. The State discharges its duty as an agency of the society acting on their behalf in order to help those who are in need.[8]

Drawing inspiration from the supreme law of the land, the Indian and International Labour Organisation’s Convention on Social Security[9] (ratified by India in 1964), a few of the domestic legislation enacted for social security in India are Employees’ State Insurance Act (1948), Workmen’s Compensation Act (1923), Employees’ Provident Fund and Miscellaneous Provisions Act (1952), Maternity Benefit Act (1961), etc. A social security branch was recently established under the umbrella of the Labour and Employment Ministry with the primary goal of assisting in the legislative process of more worker friendly policies especially for social security arrangements for employees occupied in the organized sector. 

Existing Legislations and Schemes in India

Workmen’s Compensation Act (1923)[10] – The Workmen Compensation act is India’s first tryst with social security, passed under the colonial era the Act even today is applicable to the workers of more than fifty hazardous occupations. The legislation provides for two main contingencies namely disablement due to employment injury and death due to employment injury. A lump-sum compensation amount is paid to the disabled worker or the dependents as the case may be during both the contingencies.

The law functions upon a scheme of employer’s liability which makes it’s working rather tricky as in the absence of a strong worker’s union very often the dependent receive a nominal amount if anything at all. In such situations, the dependents are only left with one remedy that is to approach the State Labour Department concerned and seek their intervention which goes up to either litigation or arbitration, both of which are time-consuming. Even after arbitration and/or litigation, there is no way by which the State authorities are in a position to enforce the payment of compensation.

Employees’ State Insurance Act (1948)[11] – The Employees’ State Insurance Act primarily targets non-seasonal factory workers working in larger units employing ten or more persons. The qualification for the benefits under the Act is for those workers who are employed in factory units covered under the Scheme and drawing wages up to Rs.6,500 per month. 

The Scheme follows a dual financing method wherein contributions are received from both the employers and the employees. Employees contribute @ 1.75% of their wages, while the employers contribute 4.75% of the wages of workers covered under the Act. Low paid employees drawing wages up to Rs. 40 per day are not required to contribute. The State governments contribute a minimum of 1/8th share (floor limit) of the expenditure on medical care in their respective States. 

Maternity Benefit Act (1961)[12] – The Maternity Benefit Act extends to all organizations including factories, mines and to every shop or establishments in which ten or more persons are working at present. Under the Maternity Benefit Act, the State Governments are also empowered with the permission of the central government, add certain establishments to the list which come under the jurisdiction of this Act. Pursuant to this Act, women workers are entitled to paid holidays not exceeding 12 weeks in the case of maternity and during this period they are eligible to receive full wages. 

The Act much like the Workmen’s Compensation Act is also based on an employer’s liabilities. Similar to the Workmen’s Compensation Act for the proper distribution of benefits enshrined under the Act, employer cooperation and goodwill are crucial. In cases where the employers are cooperative and where workers unions are strong, benefits under the Act can be implemented seamlessly. In all other cases, it becomes increasingly difficult for female workers to receive benefits enshrined in the provisions of this Act. It is not uncommon for female workers to be discharged well before their due date of confinement and very often they are not paid anything till resume their work. 

References 

1. Planning Commission of India, Report of the Working Group on Social Security for the tenth five-year plan (2002-2007). 
2. Ibid.
3. International Labour Organization, International Standards on Social Security, https://www.ilo.org/global/standards/subjects-covered-by-international-labour-standards/social-security/lang–en/index.htm.
4. The Universal Declaration of Human Rights, 1948 (General Assembly Resolution 217A), Article 22.
5. Kar, Dr. Sujit, History of Social Security of Unorganized Workers — With Special Reference to India (February 3, 2015). 
6. Ibid.
7. Ibid.
8. The Constitution of India, article 41, 42 &43.
9. Government of India, Ministry of Labour and Employment, List of International Labour Organization Conventions ratified by India.
10. The Workmen’s Compensation Act, 1923. 
11. Employees’ State Insurance Act, 1948. 
12. Maternity Benefits Act, 1961.

BY SAHARSH PANJWANI | VIVEKANANDA INSTITUTE OF PROFESSIONAL STUDIES