Code on Social Security, 2020

The Code on Social Security, 2020 is a single law that brings together India's main social security laws. Social security means protection for workers against life's risks: old age, illness, injury, death, job loss and childbirth. Instead of nine separate laws, employers and workers now follow one Code. It also, for the first time, gives legal recognition to gig and platform workers.

Why was it needed?

India had many labour laws, made at different times with different definitions. The word "wages" alone meant different things in different laws. Employers found it hard to follow all of them, and many workers fell through the gaps. The Second National Commission on Labour (2002) recommended grouping labour laws into a few simple codes. The government decided on four labour codes.

Where did it come from?

The Code was passed by Parliament in September 2020. It received the President's assent on 28 September 2020. It came into force, along with the other three codes, on 21 November 2025. The four labour codes are:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Code on Social Security, 2020
• Occupational Safety, Health and Working Conditions Code, 2020

Which laws did it replace?

It merged nine laws:

1. Employees' Compensation Act, 1923
2. Employees' State Insurance Act, 1948
3. Employees' Provident Funds and Miscellaneous Provisions Act, 1952
4. Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
5. Maternity Benefit Act, 1961
6. Payment of Gratuity Act, 1972
7. Cine-Workers Welfare Fund Act, 1981
8. Building and Other Construction Workers Welfare Cess Act, 1996
9. Unorganised Workers' Social Security Act, 2008

How does it work?

The Code is organised into chapters, each for one kind of protection. Chapter III covers the Provident Fund, and applies to establishments with 20 or more employees. The Code sets up or continues several bodies:

• Central Board of Trustees of the EPFO for PF, pension and EDLI.
• Employees' State Insurance Corporation for health and sickness benefits.
• National and State Social Security Boards for unorganised, gig and platform workers.
• Building and Other Construction Workers' Welfare Boards, funded by a cess (a special tax) on construction.

What are the key changes?

• One definition of "wages": Wages mean basic pay, DA and retaining allowance. Allowances left out of wages (like HRA or conveyance) cannot be more than 50% of total pay. If they are, the extra is added back to wages. This stops employers from shrinking PF by keeping basic pay very low.
• Gig and platform workers: A gig worker works task by task (like a delivery rider). A platform worker gets work through an app. For the first time, national law names them. Aggregators (companies running such apps) must contribute 1% to 2% of their annual turnover, capped at 5% of the amount paid to these workers, to a social security fund.
• Gratuity for fixed-term employees: Gratuity is a lump sum paid by the employer when a worker leaves after long service. Fixed-term employees now get it on a pro-rata basis (in proportion to the time worked) without waiting the usual five years.
• Wage ceiling by notification: The PF wage ceiling can be changed by government notification under the Code. The ₹25,000 ceiling was notified in this way.
• Aadhaar-based registration and a national database of unorganised workers (the e-Shram portal).

Commonly confused concepts

• Code on Social Security vs Code on Wages: The Code on Wages deals with minimum wages, payment of wages, bonus and equal pay. The Social Security Code deals with PF, pension, insurance, gratuity and maternity benefits.
• Gig worker vs platform worker: Every platform worker is a gig worker, but not every gig worker uses an app. A freelance photographer is a gig worker; a ride-hailing app driver is a platform worker.
• Unorganised worker vs gig worker: Unorganised workers include home-based, self-employed and wage workers in small units. Gig workers are a separate category defined in the Code.

Issues, criticism and the way forward

• Rules and delay: The Code was passed in 2020 but came into force only in November 2025, because states also had to frame rules. Labour is in the Concurrent List, so both the Centre and states make laws on it.
• Gig worker benefits still to take shape: Critics point out that the Code allows schemes for gig workers but does not guarantee specific benefits.
• Thresholds: PF still applies only to units with 20 or more employees, leaving out many small workplaces.
• Worker unions' concerns: Some trade unions argue that merging laws may dilute some protections. The government's position is that the Code widens coverage and makes compliance simpler.
• Way forward: Faster registration on e-Shram, clear schemes for gig workers, and regular revision of wage ceilings and benefit limits.

Concepts to Know

• Social security: Protection given by law to workers and families against risks like old age, illness, injury, death or loss of income.
• Aggregator: A company that connects customers with service providers through a digital app, like food delivery or cab apps.
• Cess: A tax collected for one specific purpose, like the welfare of construction workers.
• Concurrent List: A list in the Seventh Schedule of the Constitution with subjects on which both Parliament and state legislatures can make laws.
• Pro-rata: In proportion. If a benefit is for 5 years and you worked 2 years, you get 2/5 of it.