Social Security Systems – Upcoming Labor Reforms In India

Prime Minister Narendra Modi, in a bid to revive the struggling Indian economy amidst COVID-19 lockdown, announced a 20 lakh crore stimulus package recently. The package breakup was addressed by Finance Minister Nirmala Sitharaman in a series of conferences to explain the intent of the stimulus package announced by the PM as well as the important areas, sectors, and people it aims to benefit. The FM also announced a few measures that are in the pipeline and that will completely overhaul the current Indian social security system when they come into effect.

The economic stimulus package that accounts for about 10% of the GDP of India is expected to address a number of issues that needed financial aid after the lockdown was imposed in late March this year. It has been more than two months since the first lockdown was announced, and it took another three lockdowns for the government to come up with something substantial to boost the Indian economy, address the concerns of migrant workers, and help those sectors that are in dire need of cash flow. The PM announced this package highlighting its emphasis on four key areas – land, labour, liquidity, and laws.

You might also be interested to read: Putting India Back To Work Safely

The FM announced several welfare measures for laborers, including the universalization of minimum wages. A ‘National Floor Wage’ is in the offing to deal with disparity in wages regionally. Universalization of wages along with timely payments will be applicable for both organized and unorganized sectors. The proposed labor code also suggests giving appointment letters to all workers. This move will promote formalization on a large scale.

The government’s move to introduce  social security schemes for gig workers and informal workers is a much awaited and welcomed statement. The FM acknowledged the fact that gig working is now an urban phenomenon and that people who are a part of this type of employment most definitely need to benefit from social security schemes.

Another announcement that was made considering the future of work post COVID-19 and that aims to strengthen the social security system is ESIC coverage for employees. The extension of ESIC coverage to all districts and all establishments employing 10 or more employees as against those in notified districts/areas only. This social security measure also intends to cover employees who are working in small business units and are exposed to risks associated with hazardous activities at the workplace. The FM made it clear that businesses with less than 10 employees will be offered ESIC benefits on a voluntary basis. Also, gratuity and social security benefits will start accruing as soon as an employee completes one year in an organization as opposed to the 5 years that they are required to complete in the current scenario. To curb unemployment in India, the government also introduced a re-skilling fund for retrenched employees.

The social security system of India has always been a matter of concern but nothing has been done to make it work for those workers that could do with schemes like Employee Provident Fund (EPF) and Employees’ Pension Scheme (EPS) to benefit them in times of financial uncertainties like this. “India needs a dose of labor reforms, education reforms, social security reforms, financial sector reforms and fundamentally structural governance reforms to unleash and break the regulatory cholesterol that is holding us back,” as stated previously by Manish Sabharwal, Chairman and Co-Founder, TeamLease Services. 

It seems that the government of India has opened its treasure to not only get the economy back on track sooner rather than later but also provide the much-needed relief and help to the people in need amidst these unprecedented times. It took a pandemic for the government to bring major reforms in the country but it still remains to be seen how much time these social security schemes and labor reforms that are introduced as work-in-progress take to materialize and actually start benefiting the people.

You might also be interested to read: Rs 20 Lakh Crore Stimulus Package Announced For Putting India Back To Work


  • “Full break-up of all five tranches announced by FM Nirmala Sitharaman” by Express Web Desk on 17 May 2020
  • “Proposed Labour Code offers universal minimum income, modifies definition of migrant workers: FM Nirmala Sitharaman” by Moneycontrol on 15 May 2020

Related Topics:

Comments are closed.