NEW DELHI: The government may not roll out all provisions of the Code on Social Security (CSS) in one go, given the industry’s concerns of the “financial burden” from the implementation of a few provisions designed to help platform and gig workers, official sources said.
The CSS, one of the four labour codes which the Centre is keen to implement throughout the country, was passed by Parliament in 2020.
Some sectors of the industry, including those heavily dependent on platform and gig workers, have urged the government to have a relook at certain provisions in CSS, which they feel, are likely to significantly increase their operational costs and dent viability.
The government is, however, unlikely to make any major changes in the CSS immediately, but may consider rolling out some provisions in phases. Financial impact of the relevant CSS measures on the industry would be assessed to examine whether these would indeed need to be tweaked, said the sources.
According to sources, the industry is especially concerned about the potential increase in financial liabilities, for sectors with a large workforce or those operating with “tight-profit margins”. Provisions such as expanded coverage under social security benefits, mandatory contributions for gig and platform workers, and enhanced gratuity requirements are seen as significantly raising compliance costs.
For instance, the requirement that 50% of the total compensation of employees will be considered as “basic wages” for the purpose of calculating social security contributions such as employees’ provident fund, will result in an increase in the quantum of contributions required to be made while also decreasing the employee’s take home salary in the short term, say sources.
Additionally, the CSS also provides for payment of gratuity to fixed term workers, even if they haven’t completed the presently stipulated service tenure threshold of five years, which is also likely to result in an increase in the financial burden, they say.
Rahul Sundaram, partner, IndiaLaw LLP said that the increased cost of labor compliance under the CSS may render Indian industries less competitive globally, particularly in sectors “sensitive to cost dynamics”.
Vaibhav Bhardwaj, partner at Khaitan & Co explained that the CSS allows the Centre to frame social security schemes for gig/platform workers on matters relating to life and disability cover, accident insurance, etc. “At present, major organisations already employ a vast gig workforce; hence, if these schemes are notified, and the government decides that they are to be wholly or partly funded by ‘aggregators’, a rise in the financial outlay can again be expected,” he said.
Rohitaashv Sinha, partner, King Stubb & Kasiva said: “the increased burden might deter investments, reduce competitiveness, and impact the informal sector’s transition into formalized structures.”
Source: The Financial Express
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