Social Security for Unorganised Workers

1. life and disability cover;
2. health and maternity benefits;
3. old age protection;
4. education; and
5. any other benefit as may be determined by the Central Government.

Section 109(2), the State Government's list. The State Government shall frame and notify, from time to time, suitable welfare schemes for unorganised workers, including schemes relating to:

1. provident fund;
2. employment injury benefit;
3. housing;
4. educational schemes for children;
5. skill upgradation of workers;
6. funeral assistance; and
7. old age homes.

Learn which list is which, because that is exactly how this is examined. The division is not random. The Centre takes the four that need national uniformity and pooled risk: life and disability, health and maternity, old age, education. The State takes the seven that are delivered locally and vary with local conditions: provident fund, employment injury, housing, children's schooling, skills, funerals and old age homes.

Note also the word "shall" in both sub-sections. The obligation to frame schemes is stated as a duty, not a power. What is left open is when, what the scheme contains and how much it pays.

Section 109(3), funding a Central scheme. A scheme notified by the Central Government may be:

• wholly funded by the Central Government; or
• partly by the Central and partly by the State Government; or
• partly funded by both and partly through contributions collected from the beneficiaries or the employers, as specified in the scheme; or
• funded from the corporate social responsibility fund within the meaning of the Companies Act 2013; or
• any other source.

Section 110: funding a State scheme

Section 110(1). A scheme notified by a State Government under section 109(2) may be:

• (a) wholly funded by the State Government; or
• (b) partly by the State Government and partly through contributions collected from the beneficiaries of the scheme or the employers, as specified in the scheme; or
• (c) funded from any source including the corporate social responsibility fund referred to in section 109(3), or any other source specified in the scheme.

Section 110(2) and (3), Centre to State. The State Government may seek financial assistance from the Central Government for the schemes it frames, and the Central Government may provide such assistance for such period and on such terms and conditions as it thinks fit.

The asymmetry is worth a sentence of criticism. The State is given the seven costliest heads in section 109(2), including provident fund, housing and employment injury, and its only route to Central money is a discretionary assistance which the Centre "may" provide on terms it decides.

Section 111: record keeping

The Government formulating and notifying the scheme shall provide in it the form and manner of keeping the records, electronically or otherwise, relating to the scheme, and the authority by whom those records shall be maintained.

The proviso. Such records shall, as far as may be possible, bear continuous number for the purpose of proper management of the scheme and for avoiding any duplication and overlapping in records.

A short section with a real point behind it. A worker who is registered twice, or under two schemes with two numbers, is a worker whose entitlement nobody can verify and whose benefit can be paid twice or not at all. The continuous numbering requirement is the beginning of a single identity across schemes, which is also what section 142's Aadhaar provision and section 113's registration are for.

A worked example

Lakshmi sells vegetables from a handcart in Solapur. She works alone.

Is she an unorganised worker? Her enterprise is owned by a self-employed worker and employs nobody, so it is an unorganised sector enterprise under section 2(85). She is a self-employed worker under section 2(75) in that sector, so she is an unorganised worker under section 2(86).

Do Chapters III to VII reach her? No. There is no establishment over the First Schedule thresholds, no employer and no wages, so provident fund, insurance, gratuity, maternity benefit and employees' compensation do not apply to her.

What does the Code give her? A place in Chapter IX. Under section 109(1) the Central Government shall frame schemes on life and disability cover, health and maternity benefits, old age protection and education; under section 109(2) the State Government shall frame schemes on provident fund, employment injury benefit, housing, education of children, skill upgradation, funeral assistance and old age homes.

How does she actually get anything? She must be registered under section 113, taken in the next chapter, and she is then eligible to avail the benefit of the concerned scheme framed under this Chapter.

Suppose no scheme covering vegetable vendors has yet been notified in Maharashtra. Then the honest answer, and the one that earns marks, is that she has no benefit to claim. Sections 109 and 110 are enabling: they oblige Governments to frame schemes and say how those schemes may be funded. Until a scheme exists and is funded, Chapter IX gives her recognition rather than money.

Who pays for a State scheme covering her? Under section 110(1) it may be wholly funded by the State, partly by the State and partly by contributions from beneficiaries or employers, or from any source including the corporate social responsibility fund. The State may seek financial assistance from the Centre, which may provide it on its own terms.

How is she kept track of? The scheme itself must provide the form and manner of record keeping and the authority who maintains the records, and the records must as far as possible bear continuous number to avoid duplication and overlapping: section 111.

Now change the facts. Lakshmi takes a job at a firm of forty employees, in a post which no part of Chapters III to VII covers and which is outside the industrial disputes legislation.

Is she still an unorganised worker? Yes. The second limb of section 2(86) includes a worker in the organised sector who is not covered by the Industrial Disputes Act 1947 or by Chapters III to VII of this Code.

What this does NOT mean

Chapter IX does not confer benefits directly. It obliges Governments to frame schemes and states how they may be funded. The benefit comes from the scheme.

"Unorganised worker" is not the same as "poor" or "informal". It is defined by section 2(86), and includes a residual class of organised sector workers whom nothing else covers.

"Unorganised sector" is not merely a small enterprise. Section 2(85) requires it to be owned by individuals or self-employed workers and, if it employs anyone, to employ fewer than ten.

The Centre's list and the State's list are not interchangeable. Section 109(1) and section 109(2) name different subjects, and an answer that swaps provident fund into the Central list is wrong.

Section 111 is not about individual records. It requires the scheme to provide the form, manner and maintaining authority, with continuous numbering to prevent duplication.

Limits and criticism

This is the central criticism of the whole Code and it belongs in any essay on it. Chapters III to VII create rights, enforceable against a named employer through a named authority. Chapter IX creates a power to make schemes. The workers who most need social security are the ones given the weakest form of it.

The heavier list is the State's. Provident fund, employment injury benefit and housing are expensive, and section 110(2) gives the State only a discretionary request to the Centre.

Funding may come from beneficiaries themselves. Section 110(1)(b) allows a scheme to be funded partly by contributions collected from the beneficiaries, who by definition are among the poorest workers.

No timetable is stated. Both sub-sections of section 109 say "from time to time", so the duty to frame schemes has no date attached to it.

Quick revision

• Section 2(85) unorganised sector: owned by individuals or self-employed workers, employing fewer than ten if it employs anyone. Section 2(86) unorganised worker: a home-based, self-employed or wage worker in that sector, and an organised sector worker not covered by the Industrial Disputes Act 1947 or Chapters III to VII.
• Section 109(1), CENTRAL schemes: life and disability cover; health and maternity benefits; old age protection; education; and any other benefit determined by the Central Government.
• Section 109(2), STATE schemes: provident fund; employment injury benefit; housing; educational schemes for children; skill upgradation; funeral assistance; old age homes.
• Section 109(3) and section 110(1), funding: wholly by the Government concerned; partly by Centre and State; partly by contributions from beneficiaries or employers; from the corporate social responsibility fund; or any other source.
• Section 110(2) and (3): the State may seek, and the Centre may provide, financial assistance on such terms as it thinks fit.
• Section 111: the scheme provides the form and manner of records and the maintaining authority; records to bear continuous number as far as possible, to avoid duplication and overlapping.

Test yourself

1. Define "unorganised sector" and "unorganised worker". An unorganised sector is an enterprise owned by individuals or self-employed workers engaged in the production or sale of goods or providing service of any kind, and where it employs workers, the number is fewer than ten: section 2(85). An unorganised worker is a home-based worker, self-employed worker or wage worker in the unorganised sector, and includes a worker in the organised sector who is not covered by the Industrial Disputes Act 1947 or Chapters III to VII of the Code: section 2(86).

2. Which schemes must the Central Government frame under section 109(1)? Schemes on life and disability cover, health and maternity benefits, old age protection, education, and any other benefit the Central Government determines.

3. Which must the State Government frame under section 109(2)? Schemes relating to provident fund, employment injury benefit, housing, educational schemes for children, skill upgradation of workers, funeral assistance and old age homes.

4. How may a State scheme be funded? Wholly by the State Government; partly by the State Government and partly through contributions collected from the beneficiaries of the scheme or the employers as specified in the scheme; or from any source including the corporate social responsibility fund or any other source specified in the scheme: section 110(1).

5. Can a State compel the Centre to pay for its schemes? No. Under section 110(2) the State may seek financial assistance, and under section 110(3) the Central Government may provide it for such period and on such terms and conditions as it deems fit.

6. Why must records under a Chapter IX scheme bear a continuous number? For the proper management of the scheme and for avoiding any duplication and overlapping in records: the proviso to section 111.

7. An unorganised worker in a State where no relevant scheme has been notified asks what he is entitled to. What is the honest answer? That Chapter IX is enabling. Sections 109 and 110 oblige the Central and State Governments to frame and fund welfare schemes and say what those schemes may cover, and section 113 provides for his registration, but until a scheme covering him is framed and funded there is no benefit for him to claim under the Chapter.