New Labour Codes: Unions Flag Fall In Social Security Cess

Labour unions and activists have written to the central government, saying that the new labour codes will lead to lower social security benefits for the informal sector, especially construction workers.

After missing three deadlines, largely owing to state assembly elections, the four new labour codes—the Code on Wages, Industrial Relations Code, Social Security Code, and the Occupational Safety, Health and Working Conditions Code—are likely to be implemented in 2022-23.

As of now, 24 states have come up with draft rules for the Code on Wages; 20 for Industrial Relations Code; 18 states for Social Security Code; and 13 for the Occupational Safety, Health and Working Conditions Code.

The National Campaign Committee For Central Legislation on Construction Labour flagged the increase in construction value limit to collect cess earlier this month, stating it will hurt worker welfare.

“Earlier cess was collected from constructions valued above Rs 10 lakh. Now, this limit has been raised to Rs 50 lakh; hence the cess will be reduced considerably,” it said in a letter to the Ministry of Labour & Employment. “Registration of beneficiaries may also be adversely effected in case of construction workers working on smaller sites.”

The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, and the Building and Other Construction Workers' Welfare Cess Act, 1996, mandates 1% cess collection on the cost of construction. This money is to be used for the welfare of workers in the informal construction sector.

Total corpus collected under BOCW Act stood at Rs 52,000 crore as of the year ended March 2021, according to a notification by the Ministry of Labour and Employment in April. Of this, states were asked to use Rs 31,000 crore for Covid-19 relief measures.

As many as 13 labour laws, including the BOCW Act and Inter-State Migrant Workmen Act, were merged into the Code on Occupational Health and Safety and service conditions, according to Sasi Kumar, general secretary of Construction Workers Federation of India.

He said some laws on workers in the construction sector were merged with the Code on Social Security. “If (the new) labour codes are implemented, BOCW Act and Cess Act will cease to operate.”

According to the newly notified Code on Social Security, the cess "shall be paid by an employer in advance, on the basis of his self-assessment duly certified by Chartered Engineer at the time of approval or before the commencement of the work".

Earlier, under The Building and Other Construction Workers' Welfare Cess Rules, 1998, an assessing officer was authorised to indicate the cess amount payable by the employer, after scrutinising information furnished by the latter.

“64 clauses of the BOCW Act have now been reduced to nine under the social security code; while 15 of those under the 1998 rules are now down to seven,” Subhash Bhatnagar, coordinator of the National Campaign Committee for Construction Labour, said.

He said a majority of the BOCW Act focused on the safety of construction workers. Bhatnagar was part of the team that helped draft and implement the 1996 BOCW Act.

BloombergQuint's emailed queries to the Ministry of Labour and Employment didn't elicit a response.

An officer in the ministry, who didn't want to identified since the person is not authorised to speak to the media, said labour is a concurrent subject and states are yet to come up with their rules. Once the rules are in place, the officer said, there will be consultations over the cess.