The Social Security Fund under the OSH Code

Some words this chapter uses

Appropriate Government is defined in section 2(1)(d), so both the Central and a State Government may establish such a fund for the establishments for which it is the appropriate Government.

Composition is the settlement of a penalty or offence under section 114 by payment of a fixed proportion of the maximum.

Unorganised worker, by the Explanation to section 115, has the meaning assigned to it by section 2(m) of the Unorganised Workers Social Security Act 2008.

Expended means spent.

Section 115: the fund

Section 115(1), establishment and the two named sources. There shall be established by the appropriate Government a social security fund for the welfare of the unorganised workers, to which there shall be credited:

• the amount received from composition of the offence as specified in section 114(4); and
• the amount of the penalty as specified in section 111(6).

Section 115(2), other sources. The fund may also be funded by such other sources as may be prescribed by the appropriate Government.

Section 115(3), administration and expenditure. The fund shall be administered and expended for the welfare of the unorganised workers in such manner as may be prescribed by the appropriate Government, including the transfer of the amount in the fund to any fund established under any other law for the time being in force for the welfare of the unorganised workers.

The Explanation. Unorganised worker has the meaning assigned to it under clause (m) of section 2 of the Unorganised Workers Social Security Act 2008.

Four points, and they are the whole section.

Establishment is mandatory. The words are there shall be established. Sub-sections (2) and (3), by contrast, work through what is prescribed.

Only two sources are named, and both are money paid by employers under Chapter XII: composition under section 114(4) and penalties under section 111(6). Anything else must be prescribed.

The beneficiaries are unorganised workers, and the definition is imported from another Act rather than from this Code, which is itself worth noticing: the OSH Code does not define an unorganised worker at all.

The fund may be emptied into another fund. Sub-section (3) expressly permits transfer of the amount to any fund established under any other law for the welfare of unorganised workers, so the money may end up in a fund established under the Code on Social Security 2020 or under a State enactment.

The other fund of the same name

This is the point on which marks are most often lost, and it should be set out plainly.

The fund in this section, OSH Code section 115. Established by the appropriate Government. For the welfare of unorganised workers. Fed by composition money under section 114(4) and penalties under section 111(6), and by whatever else is prescribed. Administered and expended as prescribed, and transferable to another welfare fund.

The fund in the other Code, Code on Social Security 2020 section 141. Established by the Central Government, with corresponding State funds. For the social security and welfare of unorganised workers, gig workers and platform workers. Fed by the sources that section names, each kept in a separate account, and ring fenced, so that the Fund is expended for the purposes for which each separate account was established.

Three differences to state.

The beneficiaries are not the same. Section 115 names unorganised workers only. Section 141 covers unorganised workers, gig workers and platform workers.

The sources are not the same. Section 115 is fed by money paid for breaking the OSH Code. Section 141 is fed by the sources set out in that Code, and keeps them in separate accounts.

The structure is not the same. Section 141 ring fences each account to the purpose for which it was established; section 115 permits the whole amount to be transferred to another fund altogether.

They may of course meet. Section 115(3) allows the amount in this fund to be transferred to a fund established under any other law for the welfare of unorganised workers, and the fund under section 141 of the Code on Social Security is such a fund.

A worked example

An officer appointed under section 111 imposes a penalty of one lakh rupees on Sangli Textiles for failing to maintain registers, and the company pays it. Separately, the company compounds an offence under section 97(2) for sixty thousand rupees.

Where does the one lakh go? Under section 111(6) the amount of penalty imposed and received is credited to the fund established under section 115(1), and section 115(1) requires that fund to be established for the welfare of the unorganised workers.

And the sixty thousand? Under section 114(4) the amount of composition received is credited to the same fund, expressly for the unorganised workers.

A worker in the mill asks whether he will get any of it. Not under these sections. The fund is for unorganised workers as defined in section 2(m) of the Unorganised Workers Social Security Act 2008, and a worker in a registered textile mill is unlikely to be one. The one route by which money from a penalty reaches a person harmed is the proviso to section 103, under which a court, imposing a fine for a contravention that resulted in death or serious bodily injury, may direct not less than fifty per cent of it to be given as compensation to the victim or his legal heirs.

The State already runs a welfare board for unorganised workers. Under section 115(3) the fund may be administered and expended in the prescribed manner including the transfer of the amount in the fund to any fund established under any other law for the time being in force for the welfare of the unorganised workers.

The State wants to add a share of licence fees to the fund. Under section 115(2) the fund may also be funded by such other sources as may be prescribed by the appropriate Government.

A student is asked about "the Social Security Fund" in an examination on this subject. Both Codes have one. This is OSH Code section 115, fed by penalties and composition. The other is section 141 of the Code on Social Security 2020, for unorganised, gig and platform workers, with separate accounts and ring fenced expenditure.

What this does NOT mean

The fund is not optional. Section 115(1) says there shall be established.

It is not the same fund as Code on Social Security section 141. Different Code, different beneficiaries, different sources, different structure.

It is not fed by contributions from workers or by a cess. Its two named sources are composition money and penalties under this Code.

It does not compensate the workers of the establishment that paid into it. It is for unorganised workers as defined by the Unorganised Workers Social Security Act 2008.

It is not ring fenced. The whole amount may be transferred to another fund for the welfare of unorganised workers.

Section 115 does not define an unorganised worker. The Explanation borrows the definition from section 2(m) of the 2008 Act.

Limits and criticism

The two sources will not fill a fund. Penalties under section 111 and composition under section 114 are collected from a small number of establishments by a thin inspectorate, and section 110(1) requires most contraventions to be met first with a thirty day notice to comply, which ends the matter without any payment at all. A welfare fund for the largest part of the workforce cannot rest on that.

Everything except the establishment of the fund is prescribed. How it is administered, on what it is spent, who decides and to whom it may be transferred are all left to rules, and the Code sets no purposes, no scheme and no accounting or audit requirement.

There is no representation and no publication. The section provides for no board, no worker representation, no annual statement of receipts and expenditure, and no report to a legislature. Compare the elaborate governance provisions the Code on Social Security 2020 attaches to its own bodies.

The transfer power can hollow it out. Sub-section (3) permits the transfer of the amount in the fund to another fund, which is sensible administration but means the fund created by this Code may hold nothing and answer for nothing.

And the money passes the injured worker by. The person who suffered from the contravention receives nothing from either source. The only compensatory provision in Chapter XII is the proviso to section 103, which applies on conviction, is discretionary, and does not apply where the matter is settled administratively under section 111 or compounded under section 114.

Quick revision

• Section 115(1): the appropriate Government shall establish a social security fund for the welfare of the unorganised workers, credited with the amount from composition of offences under section 114(4) and the penalty under section 111(6).
• Section 115(2): it may also be funded by such other sources as may be prescribed.
• Section 115(3): it shall be administered and expended 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.
• Explanation: unorganised worker as defined in section 2(m) of the Unorganised Workers Social Security Act 2008.
• Do not confuse it with Code on Social Security section 141, which is established by the Central Government for unorganised, gig and platform workers, with separate accounts and ring fenced expenditure.
• The only provision in the OSH Code by which penalty money reaches a person harmed is the proviso to section 103, on conviction.

Test yourself

1. Who establishes the fund under section 115, and for whom? The appropriate Government, and it is established for the welfare of the unorganised workers. The establishment is mandatory: the section says there shall be established.

2. What are its two named sources? The amount received from composition of offences, as specified in section 114(4), and the amount of penalty, as specified in section 111(6). It may also be funded from such other sources as may be prescribed.

3. How is "unorganised worker" defined for this section? By the Explanation, it has the meaning assigned to it under clause (m) of section 2 of the Unorganised Workers Social Security Act 2008. The OSH Code does not define the expression itself.

4. May the money be moved elsewhere? Yes. Section 115(3) permits the fund to be administered and expended in the prescribed manner including the transfer of the amount in the fund to any fund established under any other law for the time being in force for the welfare of the unorganised workers.

5. Distinguish this fund from the Social Security Fund under the Code on Social Security 2020. This fund is established by the appropriate Government under OSH Code section 115 for unorganised workers, and is fed by penalties and composition money paid under the OSH Code. The other is established by the Central Government under section 141 of the Code on Social Security 2020 for unorganised workers, gig workers and platform workers, is fed by the sources that section specifies, keeps a separate account for each, and is ring fenced so that it is expended for the purposes for which each account was established.

6. Does a worker injured by the contravention receive anything from this fund? No. The fund is for unorganised workers as defined by the 2008 Act, who need not be workers of the establishment concerned. The only route by which penalty money reaches a person harmed is the proviso to section 103, under which a court imposing a fine for a contravention resulting in death or serious bodily injury may direct that not less than fifty per cent of it be given as compensation to the victim or his legal heirs, and that does not apply to sums collected under section 111 or compounded under section 114.

7. Give two criticisms of section 115. Any two of: its two named sources cannot fill a welfare fund for the unorganised workforce, particularly since section 110(1) requires most contraventions to be met first with a thirty day notice to comply which ends the matter without payment; everything but the establishment of the fund is left to rules, with no stated purposes, scheme, accounting or audit; there is no governing body, no worker representation and no requirement to publish receipts and expenditure; and the transfer power in sub-section (3) allows the whole amount to be moved to another fund, so the fund created by the Code may hold nothing.