Universal social security proposals stumble over potential wage costs Universal social security proposals stumble over potential wage costs

Universal social security proposals stumble over potential wage costs
29 Jan 2018

Proposals for universal social security payments from the Indian labour ministry are said to be facing opposition from other government departments on the grounds they would raise overall wage costs.

Central ministries and the states have increasingly been hiring contract workers to save money as there is no requirement to pay them the minimum wage. According to Seventh Pay Commission data, the union government is one of the biggest users of temporary staff or contract employees.

But a social security programme would require the employers of contract workers to help pay for the scheme. As a result, some government bodies are opposing the plan, an official has told the Economic Times

The draft code

  • There will be mandatory pensions, maternity benefits and insurance — both death and disability — for all;
  • The government will bear the cost for the poorest 20% of the population;
  • Those who are employed will have to share costs with their employers;
  • Those who are self-employed will have to pay a lump sum to participate.

In the organised employment sector, about 25% of basic salary, including employee and employer contributions, currently goes to a provident fund. Another 6% goes to insurance, taking the total contribution to more than 30%.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

Proposals for universal social security payments from the Indian labour ministry are said to be facing opposition from other government departments on the grounds they would raise overall wage costs.

Central ministries and the states have increasingly been hiring contract workers to save money as there is no requirement to pay them the minimum wage. According to Seventh Pay Commission data, the union government is one of the biggest users of temporary staff or contract employees.

But a social security programme would require the employers of contract workers to help pay for the scheme. As a result, some government bodies are opposing the plan, an official has told the Economic Times

The draft code

  • There will be mandatory pensions, maternity benefits and insurance — both death and disability — for all;
  • The government will bear the cost for the poorest 20% of the population;
  • Those who are employed will have to share costs with their employers;
  • Those who are self-employed will have to pay a lump sum to participate.

In the organised employment sector, about 25% of basic salary, including employee and employer contributions, currently goes to a provident fund. Another 6% goes to insurance, taking the total contribution to more than 30%.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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