Presentation to the Parliamentary Standing Committee of Labour

5 November 2007

The Hon’ble Chairperson and Members
Parliamentary Standing Committee of Labour
New Delhi

Dear Hon’ble Members of Parliament,

Unorganised Sector Workers Social Security Bill, 2007

  1. Three fundamental questions need be answered while addressing the crises of insecurity of workers in the informal sector in India.
    1. Where do workers in the informal sector derive their insecurity from?
      From … seven essential securities which are often denied them: labour market security…; employment security…; job security…; work security…; skill reproduction security…; income security…; and representation security…
      page3, Decent Work and Informal Economy, Report VI, International Labour Conference, 90th Session 2002, International Labour Office, Geneva
    2. What is social security?
      Social Security caters to the universal human need for reassurance and support in times of unemployment, illness, disability, death and old age. The State bears the primary responsibility for developing appropriate systems for providing protection and assistance to its workforce and their families.
      p53, Chapter 6: Social Security, Annual Report 2005-2006, Ministry of Labour, Government of India
    3. What is the problem of social security in India?
      The Social Security schemes in India cover only a small segment of the organized work force, which may be defined as workers who are having a direct regular employer-employee relationship within an organization. The social security legislation in India derives their strength and spirit from the Directive Principles of the State Policy as contained in the Constitution of India.
      p57, Chapter 6: Social Security, Annual Report 2006-2007, Ministry of Labour, Government of India
  2. Legislation for both regulation of employment and provision for social security
    Social security is a necessary but insufficient provision for removing the insecurity of workers in the informal sector. In order to remove insecurities of workers in the informal sector concurrent and simultaneous legislation must be put in place to regulate employment and conditions of work in the informal sector, where in separate legislative protection be provided for agricultural workers and non-agricultural workers alongside legislation for universal social security.
  3. Criteria for Social Security Legislation
    Social security legislation that covers the poorest section of the workforce must be universal in its reach and coverage and must provide for such benefits that are caused by inability to access gainful employment. By implication, a universal social security benefit must be aimed at all citizens and not just workers. Core benefits as defined as the minimum provision of benefits must by their very nature be non contributory.
    These basic values were protected to some extent in the recommendations of the National Commission for Enterprise in the Unorganised Sector and have been considerably diluted in subsequent drafts by the Ministry of Labour.
  4. Definitions under the Bill
    1. On the definition of Agricultural Workers:
      By doing away with the definition of agriculture the bill has bundled agricultural workers with all other categories of informal sector workers. Agricultural workers represent the single largest category in the informal sector and are also the most deprived. Hence if legislation fails to understand and internalise the specificities of this category it is going to be unable to reach out to them.
    2. On Defining the Unorganised Sector:
      The present bill defines the Unorganised Sector as that comprising of ‘enterprise(s) owned by individuals or self- employed workers and engaged in the production or sale of goods or providing service of any kind whatsoever, and where the enterprise employs workers, the number of such workers is less than ten’ as opposed to the original definition that included all private enterprises employing less than 10 workers engaged in the production and sale of goods and services. The modification leads to the exclusion of the entire workforce that is informally employed in the organised sector from the purview of this Act thereby defeating the very purpose of this Act in the present context of increasing contractualisation and outsourcing of work in the organised sector.
      1. Protection under the provisions of the Employees’ Provident Fund Act 1952 becomes applicable to enterprises employing 20 or more employees. Hence either the EPF Act is amended to include coverage to enterprises employing 10 or more employees or the threshold of employment under the social security bill be raised to 20. Failing which it will create a situation wherein employees in enterprises employing between 10 and 20 employees will be covered by neither provision.
    3. Definition of a wage worker:
      The bill leaves the monetary ceiling of a wage worker to be decided upon the government. This is delegated legislation without precedent. Furthermore, in that powers in this matter under the bill are to be left to either the central or to state government it will leave the option of different state governments declaring different ceilings creating opportunities for states to have lower ceilings and thereby compete with one and another as ‘capital friendly’ states. In all existing labour legislation such ceilings are every bit a part of the legislative mandate. Not just must this mandate remain within the remit of the powers of legislature there is need to break new ground by shifting the ceiling from a monetary sum to a principal of wage payment. Hence we demand that the ceiling should be fixed at 4 times the floor level national minimum wage as recommended by the Ministry of Labour. This will allow for both uniformity as well as well as do away with the need for corrective amendments from time to time.
  5. Framing of Schemes
    The shift from the NECUS recommendation that ‘…the Central Government shall formulate a scheme to be called National Social Security Scheme for the unorganised workers consisting of the following national minimum social security benefit…’(section 4) to under the present bill: ‘The Central Government may formulate, from time to time, suitable welfare schemes for different section of unorganised sector workers on matters relating to…’ (section 3) marks a dangerous slide.
    It is critical to provide National Minimum Social Security Benefit and define the basis of it in terms of, in relation to and in quantitative proportion with the statutory minimum wage. The National Minimum cannot be in any way linked to either the contribution of workers or be subject to the availability of funds. In the event of funds raised through employers’ contributions, taxes and levies falling short, then the costs of the National Minimum must be met through the Central Government’s budgetary funds.
    In keeping with the principle of a National Minimum, wherein the National Minimum must be so defined as to exclude any contribution from workers, the phrase ‘shall be eligible for social security benefits under the scheme only upon payment of such contribution’ in Section 9 (4) be deleted.
  6. Benefits under the Bill
    Benefits provided under the Bill: Benefits under the Bill laid out in section 3(1) (a), (b) and © need to be spelt out clearly:
    In 3(1) (a) life and disability cover must include employment injury benefit, including provision for wages when recovering from employment injury.
    In 3(1) (b) health benefits must include hospitalisation charges and all benefits should include their dependents.
    In 3(1) © must be conceptualised as and provisioned for as a pension; wherein the computation of the pension must be clearly and unambiguously based on the principle [of 50% of last wages drawn] employed for Government employees’ pension. Therefore the pension must be linked to the statutory minimum wage.
    Standard pension calculation is at 50% of average emoluments drawn by a worker during the terminal year of employment. The formula is similar in the case of other employees in the formal sector. There should be no discrimination in evolving the pension formula between the formal and informal sectors. The difference can only be in the quantum of pension, and not in the formula for calculating pension. We therefore demand that this be the standard pension formula for all workers in the informal sector, with the proviso that the minimum pension payable to a worker in the informal sector in any state shall be as calculated based on the minimum agricultural wage in the state or the national floor level minimum wage or the wage as prescribed under the NREGA, whichever is higher. For the sake of calculation even if we are to take the floor wage as prescribed under the NREGA of Rs.60 per day, the minimum monthly pension of a worker in the informal sector would therefore be Rs. 60 × 30 × 0.5 = Rs. 900
    Further, this should include the provision of Provident Fund and Unemployment Insurance benefit to all workers.
    Based on the above norms other benefits under the Bill should be proportionately revised upwards. The provisions related to women workers should adequately compensate for the reproductive and nurturing responsibilities that society has placed upon them.
    In order for State Governments to strengthen the Central schemes, state schemes must be focused on expanding quality social security benefits and should not be confused with the Central Schemes. Hence 3(4) (a) and (b) be deleted as it must be included as a part of the National Minimum in 3(1). In addition state schemes must be focused, reinforce the principal of universality and be easy to implement. Hence (e) be removed as a part of workers education and not a component of social security. Further, 4(f) be given up as being one time, cumbersome to administer.
  7. Financing Social Security
    In keeping with the principle of the National Minimum workers should be exempt from contributing to the National Minimum. Further apart from contributions from Government and employers there must be provision for an additional special tax or levy that may be decided upon by legislature. Such a provision would be not just in keeping with the notion of the National Minimum but, also in consonance with the egalitarian objectives of a progressive society.
  8. Implementation of the Act
    No agency or authority is defined by the bill for the implementation of social security provisions. The National [Chapter III] and State Boards [Chapter IV] have purely recommendatory, advisory and review powers. The power to issue identity cards and has been grated to District Administration and record keeping to Panchayats and Urban Bodies. While this decentralisation is welcomed implementation of the social security provision needs to be handed over to specialised department of government, at every level – national, state and local, that is imbued with the spirit of social security as a universal right rather than an anti-poverty hand out. This gains particular importance in rural areas, with the hear-and-a-half experience behind us where, the implementation of the NREGA is very much seen at the district and the bloc level as a give away rather than a right guaranteed by parliament.
    In view of the Right to Information Act, 2005 the foregoing provisions must be complimentary to the Act reducing one step in the procedures for access to information.
    Furthermore, the legislation must open the space for direct participation by workers and their representative trade unions in formulating, implementation and monitoring of social security schemes at all levels.
  9. Dispute Resolution Machinery and Provisions for Violations of Legislation
    The bill provides no machinery for raising of disputes and dispute resolution. Nor does it provide for any penalties for violations of the act. Furthermore, it places the entire burden of proof of violation on beneficiaries.
  10. Enforcement of the Act
    There should be compulsory enforcement of employers to employ only registered workers, and violation should be made a criminal offence. However the benefits under the Social Security Bill should not be contingent on or linked to enforcement.
  11. Existing Social Security Schemes
    The Bill makes no reference to existing social security schemes of either the central or the state government. New social security legislation must protect existing schemes and no new scheme should be created under this bill that in anyway results in an entitlement that is less than an existing scheme.
  12. Representation of Trade Unions
    The composition of advisory boards assumes an enormous role of experts. The Bill envisages no role for trade unions. Social security is a right in a representative democracy and hence, workers cannot be represented at large [clause 5(2)c(i) and 6(2)c(i)] but must be represented through the democratically verified strength of the membership of trade unions.
  13. Delegated Legislation
    In view of the absence of a statutory body for the implementation of social security provision, the lack of a dispute resolution machinery and the absence of any punitive deterrents against violations of the legislation the powers the executive is seeking from the legislature are excessive and unprecedented.
    In the matter of defining the wage ceiling under the preview of the bill (4.3 above) it has already been pointed out that the legislature is seeking to extend its powers in areas where the legislature hitherto enjoys powers.
    In addition, without defining minimum social security entitlements the executive is seeking to ensure that it enjoys uncontrolled remit over what aspects social security will be contributory and non-contributory and by how much through sections 12(2)(a) and 13(2)(d).
  14. In view of the foregoing while underscoring the urgency of legislation extending social security provisions for workers in the informal sector the NTUI calls upon you to ensure that government:
    1. comes out with a detailed report on representations received by it with regard to various drafts of the social security bill and the process and procedure through which it arrived at the present bill;
    2. reviews the bill in light of all comments and opinions received by it and by this committee;
    3. expeditiously comes out with a new bill based on the recommendations received by it and the comments and opinions on various versions of the bill;
    4. allows open and democratic debate before moving the bill in Parliament
    5. completes the process in a time bound manner, spelt out in (i) – (iv) above, with the objective of putting in place a widely accepted legislation by the Budget Session of Parliament 2008.

Yours truly,
for New Trade Union Initiative,

M. Subbu Gautam Mody
Treasurer Secretary

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