Social Security

Social security is one of the key components of labour welfare. Labour welfare refers to all such services,amenities and facilities to the employees that improves their working conditions as well as standard of living. Social security benefits provided by an enterprise should protect not only their employees but also their family members through financial security including health care. Social security envisages that the employees shall be protected against all types of social risks that may cause undue hardships to them in fulfilling their basic needs.In India, provision for social security to the workers occupies a very important place in the industrial set up. It is included in our Constitution under the Directive Principles of State Policy. It thus makes the ‘State’ bear the primary responsibility for developing an appropriate system for protecting and assisting its workforce.

Hence, a Social Security Division has been set up under the Ministry of Labour and Employment. The division deals with framing of social security policy for the workers, administration of all the legislations relating to social security and implementation of the various social security schemes. Social Security to the workers is provided through the five Central Acts:- (i) The Employees’ State Insurance Act, 1948; (ii) Employees’ Provident Funds & Miscellaneous Provisions Act, 1952; (iii) The Workmens’ Compensation Act; (iv)The Maternity Benefit Act;and (v) The Payment of Gratuity Act. In addition, there are a large number of welfare funds for certain specified segments of workers such as beedi workers, cine workers, construction workers etc. The social security package broadly covers two categories of labour welfare measures:- (i) those relating to the medical facilities, compensation benefits and insurance coverage to the employees; (ii) those relating to the provident fund and gratuity provisions. It thus consists of all types of preventive, promotional and protective measures for labour welfare.

WHY DO WE NEED SOCIAL SECURITY
Social Security protects not just the subscriber but also his/her entire family by giving benefit packages in financial security and health care.
Social Security schemes are designed to guarantee at least long-term sustenance to families when the earning member retires, dies or suffers a disability. Thus the main strength of the Social Security system is that it acts as a facilitator – it helps people to plan their own future through insurance and assistance. The success of Social Security schemes however requires the active support and involvement of employees and employers. As a worker/employee, you are a source of Social Security protection for yourself and your family. As an employer you are responsible for providing adequate social security coverage to all your workers. Background information on Social Security

India has always had a Joint Family system that took care of the social security needs of all the members provided it had access/ownership of material assets like land. In keeping with its cultural traditions, family members and relatives have always discharged a sense of shared responsibility towards one another. To the extent that the family has resources to draw upon, this is often the best relief for the special needs and care required by the aged and those in poor health. However with increasing migration, urbanization and demographic changes there has been a decrease in large family units. This is where the formal system of social security gains importance. However, information and awareness are the vital factors in widening the coverage of Social Security schemes. Social Security Benefits in India are Need-based i.e. the component of social assistance is more important in the publicly-managed schemes-

In the Indian context, Social Security is a comprehensive approach designed to prevent deprivation, assure the individual of a basic minimum income for himself and his dependents and to protect the individual from any uncertainties. The State bears the primary responsibility for developing appropriate system for providing protection and assistance to its workforce. Social Security is increasingly viewed as an integral part of the development process. It helps to create a more positive attitude to the challenge of globalization and the consequent structural and technological changes. Provident Fund

Provident fund is a fund that provides benefits to the employees of a company (who are members of the fund), upon termination of their employment. Both the employees and the employer are required to make contributions to the fund in accordance with the predetermined rates. To become eligible for membership of the fund,a worker must have completed one year’s continuous service or have worked for 240 days during a period of 12 months.The employees have to contribute at a certain rate of the basic wage,dearness allowance and retaining allowances. Similarly,employers also contribute at the same rate.In India,the governing Act relating to provident fund is the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 (EPF & MP Act). It was enacted with the main objective of making some provision for the future of the industrial workers after their retirement and for their dependents in case of death. This Act applies to the whole India except Jammu & Kashmir. It is applicable to every establishment which is engaged in any one or more of the industries specified in Schedule I of the Act or any activity notified by Central Government in the Official Gazette and employing 20 or more persons.

The Act provides insurance to workers and their dependents against risks of old age,retirement,discharge,retrenchment or death of the workers.Presently, three schemes are in operation under the Act and are administered by theCentral Board of Trustees.The three schemes taken together provide to the employees an old age and survivorship benefits, a long term protection and security to the employee and after his death to his family members, and timely advances including advances during sickness and for the purchase/construction of a dwelling house during the period of membership. These three schemes are as follows:- * Employees’ Provident Fund Scheme, 1952 :- This seeks to provide financial security for employees in an establishment by providing a system of compulsory savings. The scheme covers employees getting wages not exceeding Rs. 6,500 per month. The scheme takes care of following needs of the members of the fund:- (i) Retirement;(ii) Medical Care;(iii) Housing; (iv) Family obligation;(v) Education of Children; and (vi) Financing of Insurance Polices.

However, a death relief fund has been set up under the Employees’ Provident Fund Scheme to provide relief to the nominees or heirs of the deceased member. * Employees’ Deposit Linked Insurance Scheme, 1976 :- The Central Government with the motive of providing additional Social Security in the form of Life Insurance to the family of the deceased member of the Provident Fund, introduced the Employees Deposit Linked Insurance Scheme. Under it,on the death of an employee,while in service,who is the member of the Employees’ Provident fund,the persons entitled to receive the provident fund accumulations would be paid an additional amount equal to the average balance in the provident fund account of the deceased during the preceding 12 months. * Employees’ Pension Scheme, 1995 (replacing the Employees’ Family Pension Scheme, 1971) :- A pension (also known as superannuation) is a retirement plan intended to provide a person with a secure income for life .It can also be defined payments or benefits attributable to employees at the time of retirement,during old age,at the time of permanent disablement or in the form of family pensions in case of death of the worker,etc.

The Employees Pension Scheme was introduced for the industrial workers wherein pension at the rate of 50 percent pay is payable to the employees on retirement on completion of 33 years contributory service. A minimum 10 years service is required for entitlement to pension. In case of death of an employee,the scheme provides for grant of pension to family members on the basis of salary and service of the employee.The scheme was financed by diverting a portion of the employers’ and employees’ contribution to the Employees Provident Funds with an additional contribution by the Central Government.

The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 (EPF & MP Act) is administered by the Central and State Governments along with the Central Board of Trustees and Committees and Employees Provident Fund Organization(EPFO). The Employees’ Provident Fund Organisation(EPFO), India, is one of the largest provident fund institutions in the world in terms of members and volume of financial transactions that it has been carrying on. It is an autonomous tripartite body under the control of Ministry of Labour, Government of India with its head office in New Delhi. The EPFO aims to extend the reach and quality of publicly managed old-age income security programs through its consistent efforts and ever-improving standards of compliance and benefit delivery system to its members. This way it seeks to contribute to the economic and social well-being of the country.

Compensation

Compensation may be defined as the amount payable by the employer to the employees for injuries sustained by them in the course of their employment. It covers the medical expenses or any other expenses incurred by the employees in the course of doing the work-related activities.Compensations are usually paid either as base pay and/or as a variable pay.The ‘base pay’ implies that the amount of compensation is based on the role played by an employee in the organization and in the market showing the expertise required to conduct that role.Under it,all retiral benefits like superannuation,provident fund,gratuity and house rent allowances are proportionate to basic salary. Whereas ‘variable pay’ means that the amount of compensation is based on the performance appraisal of an employee in that role,that is,how well they accomplish their goals.In India,the law governing the provisions of compensation is th e Workmen’s Compensation Act, 1923 (WC Act). The Act is administered by State Governments through Commissioners for Workmen’s Compensation.

The Act provides for the compensation to the workman or his family in cases of employment related injuries resulting in death or disability.It includes persons employed in factories,mines,plantation,mechanically propelled vehicles,construction works and certain other hazardous occupations.The amount of compensation to be paid depends on the nature of the injury and the average monthly wages and age of workmen.The minimum and maximum rates of compensation payable for death (in such cases it is paid to the dependents of workmen) and for disability have been fixed and is subject to revision from time to time.The Workmen’s Compensation Act, 1923 was amended by the Workmen’s Compensation(Amendment) Act,2000.Under this amendment,the workmen or their family members will get the compensation money at the enhanced rate if they die or get disabled.Many insurance companies have also designed certain policies relating to compensation insurance.

For example:- Workmen’s Compensation Insurance by United India Insurance Company Limited. :- Under it an employer is required to pay compensation to his workers who receive injuries or contract occupational diseases during the course of their work. Such compensation is payable under the Workmen’s Compensation Act. An employer may obtain an insurance policy to cover such liability. The premiums are payable usually on the basis of wages. It is also known as ‘Employers’ Liability Insurance’. This policy provides insurance against the following risks:- * Indemnity to insured against his liability as an ‘employer’ to accidental injuries (including fatal) sustained by the ‘workman’ whilst at work. * On extra premium-medical, surgical, and hospital expenses including the cost of transport to hospital for accidental employment injuries. * Liability in respect of diseases mentioned under the Workmen’s Compensation Act , on additional premium, which arise out of and in the course of employment.

Gratuity

Gratuity is a lump sum payment made to the employees based on the duration of their total service. The gratuity benefit is payable on cessation of employment (either by resignation, death, retirement or termination, etc) by taking the last drawn salary as the basis for the calculation. However, in case of death of the employee, his/her family members are given the amount. It is a form of gratitude provided to the employees in monetary terms for the services rendered by them to the organisation and is an important form of social security benefit. Gratuity payment liability of the employer tends to increase with a increase in the salary and tenure of employment. The employer may pay the gratuity proceeds from his current revenue. Some organisations have also set up a gratuity fund as a part of their financial planning. Also, many insurance companies have designed special schemes which relate to gratuity. For example, LIC( Life Insurance Corporation of India ) has Group Gratuity(Cash Accumulation)Scheme that provides convenient way of funding statutory obligation of an employer under thepayment of gratuity Act.The law governing gratuity in India, is the Payment of Gratuity Act, 1972 (P.G. Act).

The Act applies to factories, mines, oil fields, plantations, ports, railways, motor transport undertakings, companies, shops or other establishments. The provisions under the Act are:- * Employers are statutorily liable to pay amount of gratuity equivalent to 15 days of last drawn basic salary.It becomes payable to the employees who have completed five years of uninterrupted services in an organisation. After five years,if workers work more than 6 months but less than a year,then it is calculated as another one year. But if they work less than 6 months after five years,then it will not be considered as another year.For computing gratuity,number of working days in a month are considered 26 days.This is to done to provide benefit to the employees as it increases the amount of gratuity to be paid. The last drawn basic pay is divided by 26. The amount so obtained is multiplied by 15 to compute the amount of gratuity per year. * The gratuity received upto the limit of Rs. 3,50,000 is liable to be exempted from taxation under the Income Tax Act.

The exemption is, however, not available for payment of gratuity when the employee is still in service.Gratuity received from a previous employer is to be pooled with gratuity received from the present employer for computing exemption limit. * In case of any other employee,not covered under the Act,the gratuity received by an employee on retirement, death, termination, resignation or on his becoming incapacitated prior to his retirement is exempt from tax to the extent of the least of the following:- i. Rs. 3,50,000 ii. Gratuity actually received, or iii. Half month’s salary for each completed year of service. Average Salary is calculated on the basis of average salary of 10 months immediately proceeding the month in which an employee is retired.The salary for the purpose is calculated as basic salary plus dearness allowance plus commission on fixed percentage of profit. * Since the gratuity is a statutory service condition,the Act provides for the punishment of the employer who fails to pay it to an employee. Moreover,in case of misconduct of the employee involving financial loss to the management, an amount equal to the loss directly suffered by the employer by reason of such misconduct is liable to be forfeited from the gratuity due to the employee.

Insurance

Insurance may be defined as a contract in writing under which one party agrees to indemnify the other party against a loss or damage suffered by it on account of an uncertain future, in return for a consideration called ‘premium’. The person/business who gets its life/property insured is called ‘Insured/Assured’. The agency which helps in entering into an insurance arrangement is called ‘Insurer’ or ‘Insurance company’. The agreement or contract which is put in writing, is called a ‘policy’.Insurance cover for the employees of a company is an important aspect of social security benefits package. It includes insurance policies relating to medical benefits, compensation to worker’s as well as provident funds. Accordingly, many insurance companies have designed certain policies which provide such insurance cover to the employees. For example:- * Workmen’s Compensation Insurance by United India Insurance Company Limited. :- Under it an employer is required to pay compensation to his workers who receive injuries or contract occupational diseases during the course of their work. Such compensation is payable under the Workmen’s Compensation Act.An employer may obtain an insurance policy to cover such liability. The premiums are payable usually on the basis of wages. It is also known as ‘Employers’ Liability Insurance’.

This policy provides insurance against the following risks:- * Indemnity to insured against his liability as an ‘employer’ to accidental injuries (including fatal) sustained by the ‘workman’ whilst at work. * On extra premium-medical, surgical, and hospital expenses including the cost of transport to hospital for accidental employment injuries. * Liability in respect of diseases mentioned under the Workmen’s Compensation Act , on additional premium, which arise out of and in the course of employment.Similarly, Employers’ Liability Policy is provided by the New India Assurance Company Limited . Their policy covers statutory liability of an employer for the death of or bodily injuries or occupational diseases sustained by the workmen arising out of and in course of employment.The Government of India has enacted the Employees’ State Insurance Act, 1948 (ESI Act) which relates to employee insurance. The Act envisages an integrated need based social insurance scheme that would protect the interest of workers in contingencies such as sickness, maternity, temporary or permanent physical disablement, death due to employment injury resulting in loss of wages or earning capacity.

The Act also guarantees reasonably good medical care to workers and their immediate dependants. The Act provides several social security benefits which include medical benefits, maternity benefits,etc. The Act further absolved the employers of their obligations under theMaternity Benefit Act,1961 and Workmen’s Compensation Act 1923. The insurance scheme under the Act is tailored to suit the health insurance requirements of workers providing full medical facilities to the insured persons and their dependants.The Central Government has set up the Employees’ State Insurance Corporation (ESIC) to administer the schemes under the ESI Act. It is the premier Social Security Organization in the country.

The corporation comprises members representing Central and State Governments, Employers, Employees, Parliament and the medical profession. The functions of the Corporation are to provide medical care and treatment, cash benefits during sickness, maternity and employment injury and pension for dependents on the death of the workers due to employment injury.There is also an important Central Government Employees’ Group Insurance Scheme (CGEGIS) which provides the Central Government employees with the two fold benefit:- (i) insurance cover to help their families and (ii) lump sum payment to augment their resources on retirement. All the employees’ who had entered Central Government Service after 1st November,1980 are compulsorily covered under the scheme from the date it came into force i.e. from 1st January,1982.

Medical

Medical refers to the health care facilities provided by a business enterprise to its employees in case of their sickness, accident or diseases. The health care facilities may include a proper arrangement for the treatment of the employees and their dependents,on free or concessional rates.The organisations may provide for regular medical check-ups of its employees, atleast once a year. The employees may also be provided with:- (i) medical allowances;(ii) reimbursement of medical expenses: (iii) medical leave, etc.The Centre organises facilities for health care of its employees and pensioners living in the capital and other major cities through Central Government Health Scheme and public Hospitals. The medical facilities under the scheme are available to all the employees paid from the civil estimates and their family members residing in the area covered by the scheme. An employee can opt out of the scheme and avail of the medical facilities provided by the employer of his spouse. If an employee or a member of his family covered under the Scheme falls ill at a place not covered under CGHS, the treatment shall be admissible under Central Services (Medical Attendance) Rules, 1944.

These Rules are applicable to all government servants other than (i) those in Railway Service, and (ii) those of non-gazetted rank stationed in or passing through Kolkata, whose conditions of service are prescribed by rules made or deemed to have been made by the Central Government, when they are on duty, leave or foreign service in India or when under suspension.Medical facilities of a company also include the maternity benefits provided to the women employees. Accordingly, the Maternity Benefit Act, 1961 (M.B. Act) was enacted to provide medical facilities to pregnant women employees. The Act aims to achieve uniformity in matters relating to maternity protection and applies to all factories,mines and plantations,except to those on whom the Employees’ State Insurance Act, 1948applies. The Act provides that pregnant women workers should not be dismissed and discharged during the period of maternity leave. It contains provisions for:- (i) payment of cash maternity benefit to the women employees for certain periods before and after child birth: (ii) 12 weeks maternity leave; medical bonus and certain other benefits. The Act is administered by both the Central and State Governments.

Since, access to good medical care is usually quite expensive and involves huge costs, employers may also provide medical insurance to their employees. Many insurance companies have also designed certain policies which provide medical insurance cover to the employees. For example:- * Workmen’s Compensation Insurance by United India Insurance Company Limited. :- Under it an employer is required to pay compensation to his workers who receive injuries or contract occupational diseases during the course of their work. Such compensation is payable under the Workmen’s Compensation Act.An employer may obtain an insurance policy to cover such liability. The premiums are payable usually on the basis of wages. It is also known as ‘Employers’ Liability Insurance’.

This policy provides insurance against the following risks:- * Indemnity to insured against his liability as an ‘employer’ to accidental injuries (including fatal) sustained by the ‘workman’ whilst at work. * On extra premium-medical, surgical, and hospital expenses including the cost of transport to hospital for accidental employment injuries. * Liability in respect of diseases mentioned under the Workmen’s Compensation Act , on additional premium, which arise out of and in the course of employment.Similarly, Employers’ Liability Policy is provided by the New India Assurance Company Limited . Their policy covers statutory liability of an employer for the death of or bodily injuries or occupational diseases sustained by the workmen arising out of and in course of employment.A safe work environment and a healthy workforce play a very important role in building the foundation of a successful business organisation.