LABOUR LAW-II PROJECT

SOCIAL SECURITY AND SECOND NATIONAL COMMISSION

ON LABOUR IN INDIA

NAME : S.VINEETH

CLASS : B.A.,B.L(HONS) IV YEAR- B

REG.NO : H13116

DATE OF SUBMISSION :

MARKS FOR SUBMISSION :

SNO TITLE PAGE
NO
1 INTRODUCTION

2 DEFINITION OF SOCIAL SECURITY

3 EVOLUTION

4 SOCIAL SECURITY IN INDIA

5 SOCIAL SECURITY LEGISLATIONS

6 ROYAL COMMISSION ON LABOUR

7 FIRST LABOUR COMMISSION

8 SECOND LABOUR COMMISSION

9 RECOMMENDATIONS

10 CONCLUSION
INTRODUCTION:

In India, the modern social security measures were planned and

implemented after independence. They were too meagre and limited to the
organized sector workers only, which constituted about 8 per cent of the total
workforce, despite a majority of the workforce (about 93% in 2004-05) comes in
the unorganized sector (self-employed or casual workers). Importantly, the need to
ensure social security for all, especially those in the unorganized sector, is an
overarching concern recognized in the Eleventh Five-Year Plan (2007-12). The
Constitution of India provides strength and spirit to the social security for
organized and unorganized workers through its Directive Principles of the State
Policy. Social security legislations came into existence as a part of industrial policy
after large-scale industrialization. Some social security benefits in the form of Acts
for the organized workers working in the big industrial units (factories, mills, etc.)
were also enacted during the British period. But major social legislations were
passed only after independence. The concept of Social Security is multi-
dimensional in its contents and complexion. It emerged through a long period of
evolution. It varies from country to country and time to time. Indeed it has
different meaning not only in different countries rather different categories of
persons as well as even within the same country. In USA, the term is used first in
1935 to denote old age, survivors, invalidity and health insurance schemes which
function under the control of Federal governments. In New Zealand the term social
security is used in reference to the functions of department of social security and a
comprehensive scheme of benefits and health care services for the workers
regulated and governed by the relevant provisions of social security act of 1938.
While in Britain the term social security includes social assistance and social
insurance schemes and it is inclusive of national insurance schemes, industrial
injury scheme and also social assistance schemes, under which even supplementary
benefits are provided to the workers. It also includes the scheme of family
allowance under which childrens allowances are provided to survivors and
dependents of deceased workers. In Austria instead of term social security the term
social service has been coined under which all schemes maintaining income of the
workers in case of invalidity, old age etc. excepting the scheme of workmen
compensation are covered.

DEFINTION OF SOCIAL SECURITY:

There is no commonly accepted definition of social security. The western

concept of social security has greatly influenced the discourse about social
security. International Labour Organisation (ILO) has defined social security in
the following words, " The expression has acquired a wider interpretation in some
countries than in other but basically it can be taken to mean the protection which
society provides for its members, through a series of public measures, against the
economic distress that otherwise would be caused by the stoppage or substantial
reduction in earnings resulting from sickness, maternity, employment injury,
unemployment, invalidity, old age and death; the provision of medical care, and
the provisions of subsidies for families with children." The above definition led to
considerable degree of questioning in developing countries. It is inadequate and
narrow for developing countries. This definition assumes that most persons are
generally in a state of employment, and that the employment ensures them enough
earning to meet their basic needs. In most of developing countries, this view is
unjustified. Another inadequacy stems from the fact that the components of social
security listed in the definition are based on the experience of developed countries.
Thus, there is a need to redefine the concept of social security in a broader way to
adequately capture the true situation of societies in developing countries, thereby
paving the way to more realistic analyses of their social security problems and the
various ways in which these could be addressed. Further, the search for a more
comprehensive notion of social security arose simultaneously with the increasing
globalisation of the world.

EVOLUTION OF SOCIAL SECURITY:

Social security is a device provided by society against a number of insecurities

arising out of natural (e.g. death or sickness), social (e.g. slums), individual (e.g.
incapacity) and economic (e.g. inadequate wages and unemployment) causes.
Thus, social security is as old as society itself, but its forms have been changing
according to the needs and the level of social consciousness of the people. Before
the industrial revolution, the requirements of social security were met by
institutions like the joint family, church, guilds and caste. The family was the first
line of defence and it constituted the original cell of security. Measures adopted by
different societies for protecting the needy individuals have been manifold.
Beginning with individual acts of charity and philanthropy, these devices
progressed to include mutual benefit schemes, both formal and informal. Then
followed State sponsorship and State participation, finally culminating in the
present pattern where social security measures form a major plank of Govt, policy
in many countries. In the early stages, workers sought protection against the
contingencies they were exposed to, through small savings, employers liability or
private insurance. Later, protective legislation became common on the theory that
the employers who set up a factory, created an environment which was likely to
cause injury to his workpeople and the loss sustained by the victim should be a
charge on the employer. Public authorities and Private Corporation beyond a
particular size had the capacity to discharge this liability, but all wage earners did
not necessarily work in big undertaking. Small employers, who were predominant,
found it difficult to give benefits to their workmen, particularly when claims were
made in a bunch in respect of any accident. Insurance companies came forward to
take over the employers liability in return for a premium, but this did not turn out
to be a satisfactory arrangement. Mutual-aid societies of workers grew up with the
object of helping their members in times of sickness with simple medical care and
payment for funeral, if death occurred, in return for periodic contributions. These
were the earliest social insurance institutions though their arrangements lacked
system. Gradually they were brought under Govt, supervision. Trade unions often
acted as mutual aid societies but they could afford to disburse benefits only for
comparatively brief spells as they depended solely on the contributions of their
members. The societies could not safely undertake old age or life insurance.
Insurance office under the guarantee of the State, which offered facilities for three
branches of insurance to persons of small means, was the next stage. Life insurance
could not adapt itself satisfactorily to the exigencies of social security operations,
but insurance companies played an important role in supplementing the protection
afforded by social security schemes. These traditional approaches gave rise to two
main currents in the movement towards social security social assistance
representing the unilateral obligation of the community towards its dependent
groups and social insurance based on compulsory mutual aid. Social assistance
programmes provide benefits, sufficient to meet the minimum needs of person of
small means. These are financed wholly from the general revenues of the State.
The first risk to be covered was that of old age but gradually non-contributory
benefits were introduced for invalids, survivors and unemployed persons as well. A
major feature of most social insurance schemes is that are financed mainly through
contributions by employees and employers; in some cases, subsidy is granted by
the State. The benefits to insured persons are linked to their contributions. Most of
these programmes are compulsory and specifically defined categories of workers
and their employers are required by law to participate in the programmes. While in
industrialised countries in the west, the movement was old, in Asian countries,
social insurance which was followed is really quasi-social security measures. They
are essentially a saving scheme. Joint contributions by employees and employers
are held over for repayment with interest later when defined contingencies occur.

SOCIAL SECURITY IN INDIA:

Most social security systems in developed countries are linked to

wage employment. In India our situation is entirely different from that obtaining in
developed countries. The key differences are: i) We do not have an existing
universal social security system ii) We do not face the problem of exit rate from
the workplace being higher than the replacement rate. Rather on the contrary lack
of employment opportunities is the key concern, iii) 90% of the workforce is in the
informal sector which is largely unrecorded and the system of pay roll deduction is
difficult to apply. Even today 1/8th of the worlds older people live in India. The
overwhelming majority of these depend on transfers from their children.
Addressing social security concerns with particular reference to retirement income
for workers within the coverage gap has been exercising policy makers across the
world. In India the coverage gap i.e. workers who do not have access to any formal
scheme for old-age income provisioning constitute about 90% of the estimated
workforce of 400 million people. Hence the global debate and evaluation of
options for closing the coverage gap is of special significance to India. The gradual
breakdown of the family system has only underscored the urgency to evolve an
appropriate policy that would help current participants in the labour force to build
up a minimum retirement income for themselves.
SOCIAL SECURITY LEGISLATIONS IN INDIA:

The principal social security laws enacted in India are the following:

The Employees State Insurance Act, 1948 (ESI Act)

It covers factories and establishments with 10 or more employees

and provides for comprehensive medical care to the employees and their families
as well as cash benefits during sickness and maternity, and monthly payments in
case of death or disablement.

The Employees Provident Funds & Miscellaneous Provisions Act, 1952:

It applies to specific scheduled factories and establishments

employing 20 or more employees and ensures terminal benefits to provident fund,
superannuation pension, and family pension in case of death during service.
Separate laws exist for similar benefits for the workers in the coal mines and tea
plantations.

The Workmens Compensation Act, 1923:

It requires payment of compensation to the workman or his

family in cases of employment related injuries resulting in death or disability.

The Maternity Benefit Act, 1961:

It provides for 12 weeks wages during maternity as well as paid

leave in certain other related contingencies.
The Payment of Gratuity Act, 1972:

It provides 15 days wages for each year of service to employees

who have worked for five years or more in establishments having a minimum of 10
workers. Separate Provident fund legislation exists for workers employed in Coal
Mines, Seamen and for Tea Plantation workers in Assam

ROYAL COMMISSION ON LABOUR:

The Government of India during the pre Independence period pursued a

policy of reform and repression in the matters related to labour conditions in the
colonial days. The Government appointed in 1928 the Royal Commission on
Labour with H. H. Whitley as the chairman and N. M. Joshi and Dewan Chaman
Lal as members. The terms of reference of the commission were: To enquire into
and report on the existing of labour in industrial undertakings and plantations in
British India on the health, efficiency, and the standard of living of the workers and
on the relations between employers and to make recommendations. The report of
the Royal Commission on Labour came out in 1931. It is considered a monumental
work. The recommendations of the Royal Commission were generally progressive.
Not much was immediately done to give effect to those recommendations in view
of the circumstances prevailing at that time. One of the recommendations of the
Royal Commission was to make the appointment of the Labour Officers in order to
establish liaison with employers and to ensure that they followed sound
recruitment practices. These officers were expected to ensure that employees were
provided good working conditions, canteen facilities for meals, fair price shops,
recreation, medical, and housing facilities etc. It was as early as 1931 that the
Report of the Royal Commission on Labour recommended the provision of a
canteen facility to the industrial workers. The Royal Commission on Labour in its
report found that labourers do not migrate to the city for its attractions or a better
way of life. It was found that economic pressure in the village forced them to move
to the city. Almost after more than 75 years later, the findings are found to be
relevant in the 21stcentury. Few industrial workers would remain in industry if
they could secure significant food and clothing in the village. They are pushed and
not pulled to the city. The migration of rural population towards big cities
continues even to day. The Second Would War, the Quit India movement and other
circumstances led to the steep rise in prices of commodities and the scarcity of
essentials. Conciliation Board was appointed in 1940 to go into the demand of
dearness allowance raised by the textile and also by the railway employees In the
year 1942, the Government decided to set up a tripartite machinery as a national
counterpart of the International Labour Organization for discussion on labour
matters. The first Indian Labour Conference was held in August 1942. In the field
of labour legislation in India, Trade Union Act, (Amendment) 1947, the Industrial
Employment (Standing orders) Act 1946, the Bombay Industrial Relations Act,
1946 and the Industrial Disputes Bill 1947 were passed.

FIRST LABOUR COMMISSION:

The National Commission on Labour (NCL) was set up in 1966 to study

the industrial relations situation in the country and to make recommendations for
improvement. The recommendations of the National Commission on Labour had
far reaching implications on labour policy in different fields. The National
Commission on labour submitted its report in 1969. It has observed that the
concern of the state in labour matter emanates from its obligations to safeguard the
interest of workers and employees so as to ensure the social welfare facilities at a
reasonable price. Its involvement in the process is determined by the level of social
and economic advances. In India the polices on industrial relations are influenced
by the Constitution of India, the instruments of ILO and the policies on industrial
relations announced. The reports and recommendations of inquiry such as the
Royal Commission on Labour, the National Commission on Labour, Rural
Reforms committee are useful for providing inputs in shaping government policies.
In a democratic set up industrial relations polices are shaped by basic philosophy
for governance of the people based on human values for freedom and human
rights. In India the state and central government endeavors to correct through
effective industrial relation an imbalanced, disordered, and maladjusted social and
economic order with a view to reshaping the complex socio economic
relationships following technological and economic progress. In the process it
protects some and restrains others depending on the situation. Government
intervention in India becomes necessary in view of alarming industrial unrest, poor
conditions of work and workers and lack of strong trade union movement. The
Directive Principles of the Indian Constitution require the Government to intervene
in industry to safeguard the interest of the working class and to increase
productivity. Certain laws applicable throughout the country such as the
Plantations Labour Act 1952, the Minimum Wages Act 1948, the Payment of
Bonus Act 1965, The Contract Labour Act 1970, the Payment of Gratuity Act
1972, The Bonded Labour (Abolition) Act 1975 and the Equal Remuneration Act
1976 have been enacted to protect the economic and social interests of the working
class. Labour policy during all the Eleven Five Year Plans is related to the well
being of the working class. The National commission on Labour (NCL) was set up
in 1966 to study the industrial relations situation in the country and to make
recommendations for improvement. The report came out in 1969. The
recommendations include the categorization by NCL of industries as essential and
non essential for the purpose of strikes and lockouts. The NCL recommended the
constitution of Industrial Relations Commission on permanent basis both at the
state level and the centre for adjudication in industrial disputes, conciliation, and
certification of unions. It laid down the procedure for the settlement of disputes
and for the recognition of trade unions. The strengthening of trade unions, the
strengthening of collective bargaining, statutory formulation of grievance
procedure are the other major recommendations of the first National Commission
on Labour. The first National commission on labour was constituted on 24.12.1966
which sublimated its report in August 1969 after a detailed examination of all
aspects of labour problems both in the organized and unorganized sectors.

SECOND LABOUR COMMISSION:

After the submission of the report of the first NCL in 1969, a lot of
changes have taken place in the last century in techonology, social, economic,
politico legal, and in international environment of industry. The initiation of
several economic reforms during the 1990s, further necessitated a review of
industrial relations scenario, labour laws and other related matters and bring the
desired changes to deal with the challenges of future. The need for setting up of the
Second National Commission on Labour was felt. During the period of three
decades since the setting up of the first National Commission on Labour there has
been an increase in the number of workforce and other factors due to the growing
pace of industrialization. After the implementation of new economic policy in
1991, changes have taken place in the economic environment of the country which
have in turn brought about radical changes in the domestic industrial climate and
labour market. Changes have occurred at the work places like character of
employment, changes in hours of work, and overall change in the scenario of
industrial relations. These changes have resulted in uncertainties in the labour
market requiring a new look to the labour laws. In the light of the above position,
the government resolved on 15 -10-1999 to set up the second National
Commission on Labour so that a high powered body could dispassionately look
into these aspects and suggest appropriate changes in the labour legislation and
labour policy. With this background the central Government set up the second
National Commission on Labour in 1999 under the chairmanship of Ravindra
Varma. The commission was entrusted to suggest, among other things,
rationalization of the existing labour laws in the organized sector so as to make
them more relevant in the changing economic conditions under the impact of
globalization. It is a well acknowledged fact that both foreign investment and
export growth are being constrained by the existing labour laws which do not allow
any room for a direct linkage between increase in wages and productivity growth.
The existing labour laws are so inflexible that employers are reluctant to hire
labour because they would not be able to fire surplus labour in the future. Unless
the labour laws are changed higher manufacturing growth will not automatically
result in greater employment. They will be constrained to undertake downsizing or
restructuring for fear of trouble from the trade unions. Thus a thorough review of
the provisions of the Industrial Disputes Act and other labour legislations is called
for in order to impart greater flexibility to the labour market and thereby encourage
more employment and attract larger amounts of foreign investment. The second
National Commission on Labour was expected to formulate an umbrella law to
ensure protection to workers in the unorganized sector which in the absence of
growth in job opportunities in the organized sector, is expanding at a rapid pace,
absorbing school dropouts, women, and children. It is of the utmost importance to
look after the welfare and interests of the 32 crore workers in the unorganized
sector because they are often made to suffer silently. They are not always paid
minimum wages and even their low salaries are not paid on time besides being
subject to deduction by way of commissions to middlemen. The terms of reference
of the second National Commission on Labour are (a) to suggest rationalization of
existing laws relating to labour in the organized sector and (b) to suggest an
umbrella legislation for ensuring a minimum level of protection to the workers in
the unorganized sector. The commission took into account (i) follow up
implications of its recommendations (ii) The emerging economic environment
involving rapid technological changes requiring response in terms of change in
methods, timing and conditions of work in industry, trade and services,
globalization of economy, liberalization of trade and industry and emphasis on
international competitiveness and the need for bringing the existing laws in tune
with the future labour market needs and demands (iii) The minimum level of
Labour protection and welfare measure and the basic institutional frame work for
ensuring the same and (iv) improving the effectiveness of measures relating to
social security, occupational health and safety, minimum wages and linkage of
wages with productivity, and in particular the safeguards and facilities required for
women and handicapped persons in employment. The second National
Commission on Labour submitted its report to the Government in July 2002.

RECOMMENDATION OF THE COMMISSION:

The Commission has suggested the recommendations on social security. The main
recommendations amongst the other are(VERBATIM):

Our Commission accepts the need to consider social security as a

fundamental human right. (8.30)
We recommend a system in which the State bears the responsibility for
providing and ensuring an elementary or basic level of security, and leaves
room for partly or wholly contributory schemes. This will mean that the
 responsibility to provide a floor will be primarily that of the State, and it will
be left to individual citizens to acquire higher levels of security through
assumption of responsibility and contributory participation. Such a system
will temper and minimise the responsibility of the State, and maximise the
role and share of individual and group responsibility. Thus, there will be
three levels in the system. (8.32)
The Task Force on Social Security recommended that 'wage ceiling and
employment threshold can and should be uniform with a provision for
raising the wage ceiling and its eventual removal and lowering employment
threshold and its ultimate removal. The Commission also agrees with it.
(8.93)
The term 'workman' may be replaced by the term 'employee' so as to make
the Workers' Compensation Act applicable to all categories of employees;
the term 'employee' may be
Defined to mean any person employed in any employment specified in
Schedule II; the entries in Schedule II may be revised so as to make it
applicable to all classes of employees progressively; and restrictive clauses,
wherever they occur in the Schedule, may be omitted. (8.96)
The Workmen's Compensation Act should be converted from an employers'
liability scheme to a social insurance scheme, its coverage should be
progressively extended to more employments and classes of employees, and
the restrictive clauses in Schedule II of the Act should be removed. (8.97)
The management of ESI Scheme should be professionalised (8.113)
The PF Act be made applicable to all classes of establishment subject to
such exception.(8.117)
 The Commission suggests that EPFO organised an enquiry into the working
of all exempted funds by an independent agency and review the entire
scheme of granting exemptions from the provisions of the EPF Act. (8.126)
The Payment of Gratuity Act may be integrated with the EPF Act and
converted into a social insurance scheme. (8.149)
An unemployment insurance scheme could play substantial role in coping
with unacceptable levels of employment resulting from the implementation
of structural adjustment programmes and other economic reforms. (8.175)
The National Renewal Fund (NRF) was established in Feb-92 to provide a
form of wage guarantee which had to be used for re-training, re-deployment,
counselling etc. but in practice, NRF has mostly been utilised for
implementing the VRS. There is need to restructure this fund to serve as a
wage guarantee fund. (8.179)
A provision be made for Payment of Educational Allowance to all
employees (8.182).
The insurance companies be required to develop too or more plans providing
coverage for major risks faced by people leaving it to individual to choose
from among them according to their capacity. (8.242)
A National Scheme for pension for physically handicap be introduced
(8.365).
A National Scheme be drawn up for payment of pension to leprosy affected
persons, mentally sick people on the same lines as the pension for physically
handicap person. (8.380)
Able bodied beggars should be given training and help to get employment.
(8.386)
A permanent commission for disaster management should be set up on the
lines of election commission. (8.393)
 The Commission strongly recommends the constitution of high powered
national security authority preferably under the Chairmanship of a Prime
Minister of India. (8.415).
A social security fund of India and social security of each State may be set
up. (8.433)
There will be three kinds of social security schemes : 1) social insurance
type of contributory scheme, 2) subsidised insurance / welfare fund type of
partly contributory and partly socially assisted schems and 3) social
assistance scheme which will be wholly non-contributory. (8.343)
CONCLUSION:

The policies and laws must be framed in such a way that they are mostly
concentrated for the benefit of unorganized workforce. There should be proper
mechanism by which the public is made aware about the existing social security
schemes. The existing laws should be implemented strictly by the state labour
departments with the help of Social security officers/inspectors and the defaulting
employers should be punished. Labour officials should meet management
members and trade union leaders when they visit in factories to know the problems
of the workers. Effective Coordination must be there between the government,
employers and employees. The trade unions work as backbone of an establishment
and well wisher of workers, their opinion should be taken in formulation and
implementation of labour policies , Political commitment should be there and more
budget should be provided for social security schemes, , more use of information
and technology, all the benefits should be transferred directly into the accounts of
beneficiaries no cash/cheque payments should be made, there is multiplicity of
schemes e.g. JSY,IGMSY with same benefit all the schemes with similar benefits
should be merged into one, all the schemes should be right based. More NGOs
should be involved. More efforts should be made for public private partnership.
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3. Social Security In Inda: Constitutional And Legal Framework. Available from

http://shodhganga.inflibnet.ac.in/bitstream/10603/6251/9/09_chapter%205.pdf.

4. NSAP, Ministry of rural development. Available from http://nsap.nic.in/.

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