Tuesday 12 April 2016

Social Security: Leaving the informal Sector untouched

India’s social security system is composed of a number of schemes and programs. Generally, India’s social security schemes cover the following:

·         Pension

·         Health insurance and medical

·         Maternity

·         Gratuity

·         Disability

While a great deal of the Indian population is in the unorganized sector and does not have an opportunity to participate in each of these schemes, Indian citizens in the organized sector (which include those employed by foreign investors) and their employers are entitled to coverage under the above schemes.

 The applicability of mandatory contributions to social insurances is varied. Some of the social insurances require employer contributions from all companies, some from companies with ten and more employees, and some from companies with twenty or more employees, and some from companies with twenty or more employees.


The Employees’ Provident Fund Organization, under the Ministry of Labor and Employment, ensures superannuation pension and family pension in case of death during service. Presently only about 35 million out of a labor force of 400 million have access to formal social security in the form of old-age income protection. Out of these 35 million, 26 million workers are members of the Employees’ Provident Fund Organization, which comprises private sector workers, civil servants, military personnel and employees of State Public Sector Undertakings.

Four main types of pension (all monthly) are offered:

•           Pension upon superannuation or disability;

•           Widows’ pension for death while in service;

•           Children’s pension; and

•           Orphan’s pension

In addition, there are separate pension funds for civil servants, workers employed in coal mines and tea plantations in the Assam, and for seamen.

Health Insurance and Medical

India has a national health service, but this does not include free medical care for the whole population. The Employees’ State Insurance Act creates a fund to provide medical care to employees and their families, as well as cash benefits during sickness and maternity, and monthly payments in case of death or disablement for those working in factories and establishments with 10 or more employees.

In case of sick leave, the employer will pay half salary to the employees covered under the Employees’ State Insurance Act.


The Workmen’s Compensation Act requires the employer to pay compensation to employees or their families in cases of employment related injuries resulting in death or disability.

In addition, workers employed in certain types of occupations are exposed to the risk of contracting certain diseases, which are peculiar and inherent to those occupations. A worker contracting an occupational disease is deemed to have suffered an accident out of and in the course of employment and the employer is liable to pay compensation for the same.


The Maternity Benefit Act requires an employer to offer 12 weeks wages during maternity as well as paid leave in certain other connected contingencies.

Every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of average daily wage (the average of the woman’s wages payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she is absent on account of maternity), including the day of her delivery and for the six weeks immediately following that day.


For establishments with ten or more employees, the Payment of Gratuity Act requires the payment of 15 days of additional wages for each year of service to employees who have worked at a company for five years or more.

India has a very basic social security system catering to a fairly small percentage of the country’s workforce. Traditionally, Indians relied on their extended families for support in the event of illness or other misfortunes. However, due to migration, urbanization, and higher social mobility, family bonds are less tight and family units much smaller than they used to be.

India’s growth story of the last two decades has had one recurring theme: that the pattern of economic growth is accentuating insecurities. Yet, there continues to be a deep divine over whether the gains from the growth ought to be ploughed back to achieve social security for everyone. Social security has come to be linked to be job benefits, trying it to one’s status as a worker in the formal or the informal economy when, fundamentally, it originates from the notion of ensuring everyone protection against vulnerability and deprivation.

India does not yet explicitly recognize a national minimum social security cover. A close look at India’s record in providing social security shows that while only a fraction of citizens enjoy any “protection” at all.

In provisions aimed at “promotion”, social security through nutrition, work, entitlements for all, recent evidence gives reasons for cheer, but even these are being threatened with fund cuts and further shrinking.

Arpita Raut
( PG MEDIA 2015-2017)

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