The Social Security Fund under the OSH Code

In one line

The money employers pay in penalties and in compounding their offences under this Code goes into a fund for unorganised workers.

In exam wording: section 115 of the Occupational Safety, Health and Working Conditions Code 2020 requires the appropriate Government to establish a social security fund for the welfare of unorganised workers, to which shall be credited the amount received from composition of offences under section 114(4) and the amount of penalty under section 111(6), permits the fund to be funded from such other sources as may be prescribed, and provides for its administration and expenditure for the welfare of unorganised workers in the prescribed manner, including transfer of the amount to any fund established under any other law for the welfare of unorganised workers, "unorganised worker" having the meaning in section 2(m) of the Unorganised Workers Social Security Act 2008.

Why the law has this at all

The section answers a question every penal statute raises and few answer: where does the money go?

Ordinarily a fine goes to the consolidated fund of the Government and disappears into general revenue. Section 115 does something different. The penalties an officer imposes under section 111, and the sums paid to compound offences under section 114, are earmarked and credited to a fund for the welfare of unorganised workers.

Two ideas are worth drawing out of that, because the section is short and an examiner is asking for the reasoning.

The money follows the mischief, but not to the people harmed. A penalty paid by a factory for failing to keep registers, or for a contravention that injured a worker, goes to a fund for unorganised workers, who by definition are not the workers of that factory. The Code treats the money as a public resource for the least protected part of the workforce rather than as compensation.

It gives the enforcement machinery a purpose the employer can see. An employer who compounds an offence is not merely paying the State; he is paying into a welfare fund. Whether that changes anybody's behaviour is doubtful, but it is the Code's own answer to the criticism that composition is a way of buying out of a prosecution.

And there is a real gap that should be stated. The Code's own penal provisions produce one payment to a person who has been harmed: the proviso to section 103, under which a court may direct not less than fifty per cent of the fine to be given as compensation to the victim or his legal heirs. That is a court's direction on conviction. Everything collected administratively, under section 111, and everything collected by composition, under section 114, goes to this fund instead.