The Social Security Fund, Aadhaar and Exemptions

Section 141(2), separate accounts. A separate account shall be established and maintained for the funding under each of clauses (i), (ii) and (iii).

Section 141(3), ring fencing. The Fund shall be expended for the purposes for which each separate account has been established and maintained.

Sub-sections (2) and (3) together are the point of the section and they are easy to state in an answer: the money is not pooled. Aggregator contributions collected for gig workers are kept in their own account and spent on the purpose that account exists for. Without that, contributions taken from platforms for platform workers could be spent on something else.

Section 141(4). The Fund is established and administered in the manner prescribed by the Central Government.

Section 141(5), the State Fund. The State Government shall establish a Social Security Fund for the welfare of unorganised workers, credited with:

• (i) amounts from the composition of offences under this Code relating to the State Government; and
• (ii) such other sources as the State Government prescribes,

administered and expended for the welfare of unorganised workers as the State Government prescribes.

Note the narrower object of the State Fund. The Central Fund is for unorganised, gig and platform workers; the State Fund is for unorganised workers only.

And note the name clash. Section 115 of the OSH Code also establishes a "Social Security Fund", credited with amounts from compositions and penalties under that Code. They are different funds under different Codes, and Module IV teaches the other one.

Section 142: Aadhaar

Section 142(1), when identity must be established. An employee, unorganised worker or any other person shall establish his identity, or the identity of his family members or dependants, through the Aadhaar number, for:

• (a) registration as a member or beneficiary;
• (b) seeking benefit, whether in kind, cash, medical sickness benefit, pension, gratuity, maternity benefit or any other benefit, or for withdrawal of fund;
• (c) availing services of a career centre; or
• (d) receiving any payment or medical attendance as an Insured Person, himself or for his dependants.

"Aadhaar" has the meaning in section 2(a) of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act 2016.

The proviso, foreign employees. A foreigner employee shall obtain and submit an Aadhaar number for establishing his identity as soon as possible on becoming a resident within the meaning of section 2(v) of that Act.

Section 142(2). The Aadhaar number shall be issued in accordance with section 3 of that Act.

Section 142 has been in force since 3 May 2021, by S.O. 1730(E) of 30 April 2021, longer than any other provision of this Code and four and a half years before the general commencement. That is a striking fact and it is the kind of detail that makes an answer look researched. It is also the reason S.O. 5319(E) skips from section 141 to section 143: section 142 was already law.

The reach of the section is wide. It is not only registration: seeking any benefit, withdrawing from a fund, using a career centre and receiving medical attendance as an Insured Person all require it.

Section 143: power to exempt an establishment

Section 143(1), the power. Notwithstanding anything in the Code, the appropriate Government may by notification, and subject to conditions prescribed by the Central Government which may include eligibility conditions before the grant and conditions to be complied with after it, grant exemption to an establishment or class of establishments, including a factory or establishment under the control of the Central or a State Government or a local body, or to employees or a class of employees, from any or all of the provisions of the Code or a scheme, and may renew it.

The proviso, compulsory consultation. No such exemption shall be granted or renewed:

• in respect of the Provident Fund Scheme, Pension Scheme and Insurance Scheme, without prior consultation with the Central Board; and
• in respect of Chapter IV, without prior consultation with the Corporation,

and the Board or Corporation shall forward its views to the appropriate Government within the prescribed time.

Section 143(2), post-exemption conditions, which for the three schemes are specified in the schemes themselves.

Section 143(3), duration. The exemption is initially for three years from the date of publication of the notification, extendable by the appropriate Government to the extent prescribed by the Central Government; for the three schemes, as those schemes specify.

Section 143(4), the substantive test. This is the heart of the section. An exemption shall only be granted if the employees so exempted are otherwise in receipt of benefits substantially similar or superior to the benefits provided in the Code or the scheme.

Section 143(5), the board of trustees. For administering the fund, managing investments and maintaining accounts of contributions, withdrawals and interest for each employee, a board of trustees shall be constituted by the employer, which shall be a legal entity which can sue and be sued, on conditions prescribed by the appropriate Government as part of the conditions of exemption; for the three schemes, as those schemes specify.

Three things make section 143 examinable. The test is comparative: the workers must already be doing as well or better. The duration is three years, renewable. And breach of a condition is a criminal offence under section 133(p), punishable by fine, so an exemption is a conditional licence rather than a release.

Section 144: deferment in a pandemic

Notwithstanding anything in Chapter III or Chapter IV, the Central Government may by order defer or reduce:

• the employer's contribution; or
• the employee's contribution; or
• both,

payable under Chapter III or Chapter IV, for a period up to three months at a time, in respect of an establishment to which that Chapter applies, for the whole of India or any part of it, in the event of a pandemic, endemic or national disaster.

Four elements worth naming: it applies to Chapters III and IV only; it may defer or reduce; the limit is three months at a time, so it can be repeated; and the trigger is a pandemic, endemic or national disaster.

A worked example

Helios Textiles employs six hundred people. It has run its own provident fund trust for twenty years, paying a rate of return and a set of benefits better than the statutory scheme.

Can it be exempted? Yes, in principle. Section 143(1) allows the appropriate Government by notification to exempt an establishment from any or all of the provisions of the Code or a scheme.

On what condition? The substantive test in section 143(4): the employees must be otherwise in receipt of benefits substantially similar or superior to those the Code or the scheme provides. Better benefits are exactly the case the section is for.

Who must be consulted? For the Provident Fund, Pension and Insurance Schemes, the Central Board, which must forward its views within the prescribed time: the proviso to section 143(1). Had Chapter IV been in issue, the Corporation.

For how long? Three years from publication of the notification, extendable: section 143(3).

What must Helios set up? A board of trustees, constituted by the employer, which is a legal entity that can sue and be sued, to administer the fund, manage investments and maintain each employee's account: section 143(5).

Helios then stops filing the returns the exemption requires. That is an offence under section 133(p), failing or making default in complying with a condition of an exemption granted under section 143, punishable with a fine up to fifty thousand rupees.

Now a worker, Bhavna, wants to withdraw from the fund on leaving.

What must she produce? Her identity established through the Aadhaar number: section 142(1)(b) covers seeking a benefit and withdrawal of fund.

A Japanese engineer at Helios has no Aadhaar. By the proviso to section 142(1) a foreigner employee shall obtain and submit an Aadhaar number as soon as possible on becoming a resident within the meaning of section 2(v) of the Aadhaar Act 2016.

A pandemic closes the mills for a quarter. The Central Government may by order defer or reduce the employer's contribution, the employee's contribution or both, under Chapter III or Chapter IV, for up to three months at a time, for the whole of India or a part: section 144.

Meanwhile an aggregator's contribution under section 114(4) is collected. It goes into the Central Social Security Fund under section 141(1)(ii), into a separate account under section 141(2), and may be expended only for the purpose for which that account was established under section 141(3).

And a fine paid on composition of an offence relating to the State Government? Into the State Social Security Fund under section 141(5)(i), for the welfare of unorganised workers.

What this does NOT mean

The Social Security Fund is not one pot. Section 141(2) requires separate accounts for each source and section 141(3) confines expenditure to the purpose of each.

The Central and State Funds are not the same in scope. The Central Fund covers unorganised, gig and platform workers; the State Fund covers unorganised workers.

Section 141's Fund is not the OSH Code's Fund. Section 115 of the OSH Code establishes a fund of the same name under a different Code.

Section 142 is not confined to registration. It applies to seeking any benefit, withdrawing from a fund, using a career centre and receiving payment or medical attendance as an Insured Person.

An exemption under section 143 is not a release from obligation. It is conditional, time limited, renewable, requires a trust, and its breach is an offence under section 133(p).

Section 144 does not waive contributions. It allows deferment or reduction, for up to three months at a time, and only for Chapters III and IV.

Limits and criticism

Section 142 makes Aadhaar effectively mandatory for a benefit, including medical attendance as an Insured Person. Whether a statutory benefit already earned by contribution may be conditioned on producing an identity number is a fair question to raise in an essay, and the Code answers it only by stating the requirement.

Section 143 leaves almost everything to be prescribed: the eligibility conditions, the post-exemption conditions, the extension period and the trust conditions. The only fixed points are the three years and the substantially similar or superior test.

"Substantially similar or superior" is not defined, and it is compared against a scheme whose own contents are delegated.

Section 144's three month limit is renewable without any stated outer bound, so a long emergency could see contributions deferred indefinitely by successive orders.

Quick revision

• Section 141(1): the Central Government shall establish a Social Security Fund for unorganised, gig and platform workers, funded from section 109(3), section 114(3) and compositions relating to the Central Government plus other central labour law funds. (2) Separate accounts for each source; (3) expended only for that account's purpose; (5) a State Fund for unorganised workers, from State compositions and prescribed sources.
• Section 142: Aadhaar required for registration, seeking any benefit or withdrawing from a fund, using a career centre, and receiving payment or medical attendance as an Insured Person; a foreigner must obtain one on becoming a resident. In force since 3 May 2021.
• Section 143: exemption by notification, of an establishment, class or employees, from any or all provisions; prior consultation with the Central Board for the three schemes and the Corporation for Chapter IV; initially three years, extendable; only if benefits are substantially similar or superior; a board of trustees which is a legal entity must be constituted; breach of a condition is an offence under section 133(p).
• Section 144: the Central Government may defer or reduce the employer's or employee's contribution or both under Chapters III and IV, for up to three months at a time, for all or part of India, on a pandemic, endemic or national disaster.

Test yourself

1. Name the three sources of the Central Social Security Fund, and say why they are kept apart. Funding under section 109(3) for unorganised workers' schemes; funding under section 114(3) for gig and platform workers' schemes, which is where the aggregator contribution arrives; and amounts from the composition of offences relating to the Central Government together with any other Social Security Fund under another central labour law. Section 141(2) requires a separate account for each, and section 141(3) confines expenditure to the purpose for which each account was established, so money collected for one class is not spent on another.

2. For what purposes must identity be established through Aadhaar? Registration as a member or beneficiary; seeking any benefit, in kind, cash, medical sickness benefit, pension, gratuity, maternity benefit or otherwise, or withdrawal of fund; availing the services of a career centre; and receiving any payment or medical attendance as an Insured Person, for himself or his dependants: section 142(1).

3. What is the substantive condition for an exemption under section 143? That the employees so exempted are otherwise in receipt of benefits substantially similar or superior to those provided by the Code or the scheme: section 143(4).

4. Who must be consulted before an exemption is granted, and for how long does it run? The Central Board for the Provident Fund, Pension and Insurance Schemes, and the Corporation for Chapter IV: the proviso to section 143(1). It runs initially for three years from publication of the notification and may be extended: section 143(3).

5. What happens if an exempted employer breaks a condition of his exemption? It is an offence under section 133(p), failing or making default in complying with a condition subject to which exemption under section 143 was granted, punishable with a fine which may extend to fifty thousand rupees.

6. What may the Central Government do about contributions in a pandemic? Under section 144 it may by order defer or reduce the employer's contribution, the employee's contribution, or both, payable under Chapter III or Chapter IV, for a period up to three months at a time, for the whole of India or part of it, in the event of a pandemic, endemic or national disaster.