The Social Security Code, 2020 is the backbone of India’s new labour law framework. While other labour codes deal with salary, hiring, or working conditions, this code focuses on long-term financial and social protection for workers.
It governs:
- Provident Fund (PF)
- Employees’ State Insurance (ESIC)
- Gratuity
- Pension
- Maternity benefits
- Social security for gig and platform workers
For employees, this code defines how protected you are beyond your monthly salary.
For employers and HR teams, it determines statutory contributions, compliance, and cost planning.
For gig workers, it is the first formal recognition of social security rights.
This guide explains the Social Security Code in clear, practical terms, without legal jargon.
In short: What is the Social Security Code, 2020?
The Social Security Code, 2020 is a labour law that:
- Consolidates multiple social security laws into one code
- Standardises definitions and coverage
- Expands social security to unorganised and gig workers
- Clarifies employer and aggregator responsibilities
- Aims to create universal social protection
Its core objective is simple:
Every worker should have access to basic social security, regardless of job type.
Which old laws does the Social Security Code replace?
The Social Security Code merges nine major labour laws, including:
- Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- Employees’ State Insurance Act, 1948
- Payment of Gratuity Act, 1972
- Maternity Benefit Act, 1961
- Employees’ Compensation Act, 1923
Earlier, these laws operated independently, often creating overlaps, gaps, and confusion.
The new code creates one integrated system.
Why was the Social Security Code introduced?
To understand this code, it helps to see the problem with the earlier framework.
Issues with the old system
- Social security largely limited to organised sector
- Gig and platform workers excluded
- Different definitions across laws
- Compliance complexity for employers
- Lack of portability of benefits
As work models changed, social security laws failed to keep pace.
What the new code aims to fix
The Social Security Code was introduced to:
- Expand coverage to unorganised workers
- Recognise gig and platform workers
- Simplify compliance
- Improve benefit portability
- Strengthen social safety nets
In short:
Social security should not depend on having a traditional job.
Provident Fund (PF) under the Social Security Code (overview)
PF is the most widely used social security benefit in India.
What continues under the new code
Under the Social Security Code:
- PF remains mandatory for eligible establishments
- Contribution rates remain broadly the same
- Employer and employee contributions continue
- PF remains a retirement-focused benefit
The structure does not change overnight, but coverage and definitions improve.
What may change gradually
The code enables:
- Wider PF coverage
- Improved enforcement
- Better digital compliance
- Potential inclusion of more worker categories
The intent is expansion, not reduction.
ESIC under the Social Security Code (intro)
Employees’ State Insurance provides:
- Medical care
- Sickness benefits
- Disability benefits
- Dependents’ benefits
What the new code does
The Social Security Code:
- Retains ESIC structure
- Improves clarity on eligibility
- Enables expansion to more sectors
For low- and mid-income workers, ESIC remains a critical safety net.
Gratuity under the Social Security Code (important update)
Gratuity is one of the most valuable long-term benefits, especially for employees with long service.
What remains the same
- Gratuity payable after completing eligibility period
- Calculation based on last drawn wages
- Employer-funded benefit
What improves
- Wider coverage
- Clearer definitions
- Potential benefits for fixed-term employees
This makes gratuity more inclusive and predictable.
Maternity benefits under the Social Security Code (overview)
Maternity benefits continue to be protected.
The code ensures:
- Paid maternity leave
- Protection against termination
- Continuity of benefits
The intent is to protect women’s employment and health, not reduce benefits.
Salary Breakup & Take-Home Pay Calculator
Use this advanced calculator to convert your Cost to Company (CTC) into a detailed monthly and annual salary structure. It shows earnings, deductions, employer contributions, and your final take-home pay, including a comparison of income tax under the old and new tax regimes.
Open Salary Breakup CalculatorThis tool is designed for Indian salary structures and payroll practices.
Pension and old-age security (intro)
Pension schemes under the social security framework aim to:
- Provide income post-retirement
- Reduce dependency in old age
- Support long-term financial security
The Social Security Code strengthens the foundation for pension coverage, especially for informal workers.
Who is most impacted by the Social Security Code?
Highly impacted groups
- Private sector employees
- Contract and fixed-term workers
- Gig and platform workers
- Unorganised sector workers
Operational impact
- Employers
- HR and payroll teams
- Aggregator platforms
This code has the widest reach among all labour codes.
Compare Old vs New Salary Structure in Minutes 📊
Struggling to understand the real impact of the New Labour Codes on employee salary, PF, ESI, bonus, gratuity, take-home and CTC? Use this ready-to-use Excel comparison calculator to instantly evaluate Old Rule vs New Rule salary structure and make confident restructuring decisions.
Download Salary Comparison Excel @ ₹99
✔ Ideal for HR professionals, employers, startups & payroll consultants.
⚠️ Calculations are based on proposed labour code framework and practical industry logic.
Provident Fund (PF) under the Social Security Code 2020 (detailed view)
Provident Fund remains the core retirement benefit under India’s social security system, and the new code strengthens its reach and clarity.
What stays the same for PF
For most employees and employers:
- PF contribution rates remain unchanged
- Employee contribution is deducted from salary
- Employer contribution continues as statutory cost
- PF remains a long-term retirement savings tool
So, there is no sudden reduction or withdrawal of PF benefits.
What the Social Security Code improves for PF
The code enables:
- Uniform definitions across labour laws
- Better compliance monitoring
- Easier digital reporting and enforcement
- Expansion of PF to more worker categories
This is especially relevant for:
- Contract workers
- Fixed-term employees
- Workers in newly formalised sectors
The change is gradual, but the direction is clear: wider PF coverage.
Does PF become mandatory for more workers?
Potentially, yes.
The Social Security Code allows the government to:
- Notify PF coverage for additional establishments
- Bring more workers under the PF net
- Reduce exclusion of informal workers over time
However, this depends on government notifications, not automatic implementation.
ESIC under the Social Security Code 2020 (expanded clarity)
ESIC provides medical and income protection during illness or injury.
What ESIC continues to offer
- Free or subsidised medical treatment
- Sickness benefits
- Disability benefits
- Dependants’ benefits in case of death
These benefits remain unchanged in spirit.
What improves under the new code
The Social Security Code:
- Clarifies eligibility conditions
- Enables expansion to more sectors
- Improves coordination with healthcare infrastructure
For low-income employees, ESIC remains one of the most valuable protections.
Can ESIC coverage expand further?
Yes.
The code allows the government to:
- Extend ESIC to new establishments
- Include more categories of workers
- Improve access in underserved regions
Again, this happens through notifications, not overnight changes.
Gratuity under the Social Security Code (deep dive)
Gratuity is one of the most misunderstood benefits, and the new code brings clarity.
Who is eligible for gratuity?
Under the Social Security Code:
- Employees become eligible after completing the prescribed service period
- Fixed-term employees may be eligible even without completing five years, subject to rules
This is a significant improvement for contract-based employment.
How gratuity is calculated
Gratuity calculation broadly follows:
- Last drawn wages
- Length of service
The formula remains familiar, ensuring continuity for employees.
Why gratuity matters more under the new framework
Because:
- Wage definitions are more standardised
- PF and gratuity bases are clearer
- Long-term benefits increase for compliant salary structures
This aligns well with the Code on Wages.
Pension and retirement security under the Code
Pension schemes form the second layer of retirement security after PF.
What the Social Security Code enables
The code:
- Provides a legal framework for pension schemes
- Encourages wider participation
- Supports portability across jobs
This is crucial in an economy where people:
- Change jobs frequently
- Move between formal and informal work
Maternity benefits under the Social Security Code (detailed view)
Maternity benefits continue to be protected and preserved.
What remains protected
- Paid maternity leave
- Continuity of service
- Protection from termination during maternity period
The Social Security Code does not reduce maternity benefits.
Why maternity protection is critical
It ensures:
- Health and wellbeing of mother and child
- Employment continuity for women
- Reduced workforce dropout
This aligns with broader goals of workplace equality.
Impact on employers and HR teams
The Social Security Code increases responsibility for:
- Accurate classification of workers
- Correct statutory contributions
- Tracking eligibility across schemes
- Maintaining records and filings
HR and payroll systems must be robust and updated.
Gig and platform workers under the Social Security Code, 2020
One of the most transformative aspects of the Social Security Code is the formal recognition of gig and platform workers.
Who are gig and platform workers?
Gig and platform workers include:
- App-based delivery partners
- Ride-hailing drivers
- Freelancers working through digital platforms
- On-demand service providers
Earlier, these workers were outside the social security net.
What the Social Security Code changes
The code:
- Recognises gig and platform workers as a distinct category
- Creates a framework for extending social security benefits
- Separates them from traditional employer–employee relationships
This is a structural shift, even though implementation will be gradual.
Social security benefits for gig workers
The Social Security Code allows the government to notify schemes covering:
- Life and disability insurance
- Accident insurance
- Health and maternity benefits
- Old-age protection
These benefits are scheme-based, not automatic, and depend on notifications.
Important clarification
Gig workers are not treated as regular employees, but they are no longer invisible under labour laws.
This balances:
- Flexibility for platforms
- Basic protection for workers
Aggregator responsibilities under the Social Security Code
Digital platforms, referred to as aggregators, now have defined obligations.
Who qualifies as an aggregator?
Aggregators include:
- Ride-hailing platforms
- Food delivery apps
- Logistics and service platforms
- Any digital intermediary connecting workers and customers
What aggregators must do
The code requires aggregators to:
- Contribute to social security schemes
- Register eligible workers
- Share relevant data with authorities
The contribution rate is capped and will be notified by the government.
Why this matters
This ensures:
- Platforms share responsibility for worker welfare
- Social security is not funded solely by workers
- A sustainable contribution model
This is a first-of-its-kind framework in India.
Unorganised workers and portability of benefits
The Social Security Code also focuses on unorganised workers.
Key improvements
- Registration on a national database
- Aadhaar-based identification
- Portability of benefits across states
This is critical for:
- Migrant workers
- Daily wage earners
- Informal sector employees
Compliance responsibilities for employers
Employers must ensure:
- Correct classification of workers
- Timely PF and ESIC contributions
- Accurate records and filings
- Compliance with maternity and gratuity rules
Non-compliance can lead to:
- Penalties
- Interest and damages
- Legal action in serious cases
Role of state governments
Like other labour codes:
- The central law provides the framework
- States notify detailed rules and schemes
Employers and aggregators must track state-level notifications, especially for gig worker schemes.
New Labour Code–Compliant Payroll System (Excel)
A complete monthly payroll system designed as per the New Labour Code wage definition. Includes salary restructuring calculator, payroll register, PF & ESI workings, ECR formats, bank payment sheet, and payslip format — all in one Excel toolkit.
- Labour Code–aligned salary breakup calculator
- Monthly payroll processing & salary register
- PF, ESI, PT calculations & ECR support
- Ideal for HRs, employers, consultants & freshers
Price: ₹1,199 ₹2,499
Get Instant AccessIncludes free updates for 1 year and need-based support (up to 3 requests). Designed to assist payroll implementation under New Labour Codes.
Common myths vs facts about the Social Security Code
Myth 1: PF and ESIC benefits are reduced
Fact: Benefits remain protected. The focus is on expansion, not reduction.
Myth 2: Gig workers become employees
Fact: Gig workers remain independent but gain social security coverage.
Myth 3: Employer costs will skyrocket immediately
Fact: Changes are phased and depend on notified schemes.
Frequently Asked Questions (Social Security Code)
Does the Social Security Code replace PF and ESIC laws?
Yes. It consolidates PF, ESIC, gratuity, maternity and related laws into one unified framework.
Are gig workers eligible for PF?
Gig workers are covered under separate social security schemes, not traditional PF, unless notified otherwise.
Do employers still pay gratuity?
Yes. Gratuity remains an employer-funded benefit with clearer coverage and definitions.
Will maternity benefits reduce under the new code?
No. Maternity benefits remain protected and unchanged in substance.
Compliance checklist for employers and aggregators
To stay compliant:
- Identify worker categories correctly
- Ensure PF and ESIC compliance
- Track gratuity eligibility
- Follow maternity benefit rules
- Register gig workers where applicable
- Monitor central and state notifications
Proactive compliance reduces risk and cost.
Who benefits the most from the Social Security Code?
Major beneficiaries
- Private sector employees
- Contract and fixed-term workers
- Gig and platform workers
- Unorganised sector workers
- Employers with structured compliance
This code has the widest social impact among all labour reforms.
Final takeaway
The Social Security Code, 2020 is a landmark shift in India’s labour law landscape.
It:
- Expands social security beyond traditional employment
- Protects long-term financial wellbeing
- Recognises new forms of work
- Balances flexibility with protection
While implementation will be gradual, the direction is clear:
Social security in India is becoming broader, more inclusive, and future-ready.
What to read next
To complete your understanding of the new labour codes, read:
Together, these four pillars form a complete, modern labour law framework.
FAQ
What is the Social Security Code, 2020?
The Social Security Code, 2020 is a labour law that consolidates PF, ESIC, gratuity, maternity and pension laws to expand social security coverage to more workers.
Does the Social Security Code change PF and ESIC benefits?
No. PF and ESIC benefits remain protected, while the code focuses on standardising definitions and expanding coverage to more workers.
Are gig workers covered under the Social Security Code?
Yes. The Social Security Code recognises gig and platform workers and provides a framework for extending social security benefits through notified schemes.