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The Unorganised Sector Worker's Social Security Bill, 2007 - Legislative Brief [2007] INPRSLS 10 (10 September 2007)

Legislative Brief

The Unorganised Sector Workers’ Social Security Bill, 2007

The Bill was introduced in the Rajya Sabha on 10th September, 2007 and was referred to the Standing Committee on Labour (Chairperson: Shri S. Sudhakar Reddy).

Highlights of the Bill

• The Unorganised Sector Workers’ Social Security Bill, 2007 provides for an enabling framework for welfare schemes targeting unorganised sector workers.

• The central government may formulate welfare schemes for different sections of unorganised sector workers regarding life and disability cover, health and maternity benefits, old age protection, and any other benefit decided by the government.

• The state government may formulate welfare schemes related to the provident fund, employment injury benefits, housing, educational schemes for children, skill upgradation of workers, funeral assistance, and old age homes.

• This Bill establishes boards at the central and state levels to advise and help in formulating, implementing and monitoring social welfare schemes for unorganised sector workers.

• Every unorganised sector worker shall be registered by the district administration and issued a portable smart card carrying a unique identification number.

Key Issues and Analysis

• The National Commission for Enterprises in the Unorganised Sector (NCEUS) recommended two separate Bills for agricultural workers and unorganised non-agricultural workers. This Bill does not differentiate between agricultural and non-agricultural workers.

• The two NCEUS draft Bills included both conditions of work and social security benefits. This Bill does not address conditions of work.

• In order to register as an unorganised worker, an individual must be 14 years of age and declare himself an unorganised worker. There is no process to verify such declaration.

• The Bill does not specify any time limit within which the district administration must issue an identity card.

• Whereas the Bill sets a salary limit to define a self-employed worker and a wage worker, there is no such salary limit in the definition of a home-based worker.

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Priya Parker

priya@prsindia.org

November 20, 2007

PRS Legislative Research  Centre for Policy Research  Dharma Marg  Chanakyapuri  New Delhi – 110021

Tel: (011) 2611 5273-76, Fax: 2687 2746

PART A: HIGHLIGHTS OF THE BILL¹

Context

In India, existing social security schemes primarily cover the organised sector, i.e., government servants and the private sector under the Employees’ Provident Fund and New Pension Scheme. The Bill estimates that workers in the unorganised sector constitute more than 94% of the total employment in the country. Certain welfare programmes already exist at the state and central levels. The centrally-sponsored National Old Age Pension Scheme, for example, provides Rs 200 per month to all persons of 65 years and above living below the poverty line.² About 0.4 per cent of unorganised sector workers receive social security benefits like Provident Fund.³ The government set up the National Commission for Enterprises in the Unorganised Sector (NCEUS) to study the status of workers in the unorganised sector.Error: Reference source not found The commission made a number of recommendations to address the social security and minimum conditions of work for both agricultural and non-agricultural workers in the unorganised sector and suggested two Bills – one for each sector.

This Bill provides an enabling framework for welfare schemes targeting unorganised sector workers. It establishes boards at the central and state levels to advise and help in formulating, implementing and monitoring social security schemes. It also establishes a registration system to provide unorganised sector workers with portable identification cards.

Key Features

Enabling Framework for Social Security Schemes

• The Bill enables the central government to formulate welfare schemes for unorganised sector workers regarding (i) life and disability cover; (ii) health and maternity benefits; (iii) old age protection; and (iv) any other benefit decided by the government. Eleven existing social security schemes for the unorganised sector workers are listed in this Bill.¹ The central government may modify this list by notification. The Bill also enables state governments to formulate welfare schemes related to (i) the provident fund; (ii) employment injury benefits; (iii) housing; (iv) educational schemes for children; (v) skill upgradation of workers; (vi) funeral assistance; and (vii) old age homes.

• Any notified scheme may be wholly funded by the central or state government or both, and could require contributions by the beneficiaries of the schemes or their employers.

• Welfare schemes introduced under this Bill will not affect existing welfare schemes of any state that may be more beneficial to unorganised sector workers.

Creation of State and National Social Security Advisory Boards

• The Bill establishes a national level Social Security Advisory Board to: (a) recommend ‘suitable’ welfare schemes for different sections of unorganised sector workers; (b) advise the central government on the implementation of this Bill; (c) monitor relevant centrally administered welfare schemes; and (d) review state level record keeping functions and expenditures under various schemes. The national board will consist of an appointed chairperson, a member secretary, and 31 nominated members.

• The Bill also establishes state level Social Security Advisory Boards. The state boards will have similar functions as the central board at the relevant state and district levels. Each state board will consist of an appointed chairperson, a member secretary, and 26 nominated members.

Registration and Smart Cards for Unorganised Sector Workers

• Unorganised workers must apply for registration with the district administration. An individual must be 14 years or older and should declare that he is an unorganised sector worker. Upon registration, the district administration will issue a portable smart card carrying a unique identification number.

• If a scheme requires contribution from the registered unorganised worker, he will be eligible for social security benefits under that scheme only if he has made the required contribution.

PART B: KEY ISSUES AND ANALYSIS

Separate Legislation for Agricultural and Non-agricultural Workers

The NCEUS proposed two separate draft Bills regarding the conditions of work and social security for the unorganised sector. In its Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector, the Commission talks about the need for separate Bills for agricultural workers and unorganised non-agricultural workers in order to address “the specific issues being faced by the two different sets of workers.” The Commission’s two draft Bills each address conditions of work as well as social security benefits. The current Bill addresses only benefits and does not include conditions of work. One argument for this approach is that it targets the worker regardless of where he is working. Due to seasonal work, many workers, such as migrant labour, may qualify as an agricultural worker in one season and an unorganised worker in another.

Table 1: Comparison of Commission Bills and Bill as Introduced in Parliament

Sources: Draft Agricultural Workers’ Conditions of Work and Social Security Bill, 2007 (NCEUS); Draft Unorganised Non-agricultural Workers’ Conditions of Work and Social Security Bill (NCEUS); The Unorganised Sector Workers’ Social Security Bill, 2007; PRS.

International Comparison

Like India, many countries have social security programmes and contributory schemes for organised and government employees.⁴ Few other countries have formalised the concept of social security for an ‘unorganised’ or ‘informal’ sector because the percentage of the population employed in the unorganised sector is much smaller. Social welfare programmes tend to target unemployment, disability and old-age⁵ rather than an ‘informal’ or ‘unorganised’ sector.

Table 2: Some Government Schemes for Social Security in Other Countries

Sources: “Social Security Programs Throughout the World”, the Social Security Administration of the United States; National Congress of Communist Party of China official website; British Health and Welfare System,” British Council; “At a Glance Pension Report”, BBC; “Dimensions of the Social Security Challenge in Brazil”, World Bank; PRS.

Registration of Unorganised Workers

Verification of identity

T

Clause 9(1)(a)

T

Clause 9(3)

The Bill does not set a specific time limit within which the administration must issue the registration to the worker.

Definitions

Self-employed Worker and Wage Worker

T

Clauses 2(j), 2(m)

U

Clause 2(l)

The Bill defines an ‘unorganised sector worker’ as “a home-based worker, a self-employed worker or a wage worker in the unorganised sector”. This phrase is ambiguous; it is unclear whether the home-based and self-employed workers must also be in the unorganised sector to qualify. Also, whereas the Bill sets a “monthly earning” to define self-employed worker and wage worker, there is no such limitation in the definition of a home-based worker.