DU SOL B.Com 3rd Year Human Resource Management Notes Chapter 18 Social Security
Define social security and explain its types.
Meaning Of Social Security:
Social security means the security, as provided by the society to its members, against the contingencies, they cannot meet out of their small means effectively. Such contingencies imperil the ability of the working men to support himself and his dependents in health and decency. It has been realised after World War II that the state exists for the general wellbeing of the people, it must be the state responsibility to provide social security to its citizens.
International Labour Organaisation has defined the social security as, “that security that society furnishes, through appropriate organisations, against certain risks to which its members are exposed.” These risks are ignorance, want, disease, squalor and unemployment. The man requires freedom from these, contingencies and the provisions against these risks can be labelled as social security measures.
Social security is a very comprehensive term and includes in its schemes of social insurance and social assistance as well as some schemes of commerical insurance. Social insurance scheme protects an individual from falling to the depths of poverty and nursery while social assistance is one of the device according to which benefits are given as a legal right to workers who are eligible for such assistance. Commerical insurance includes all voluntary efforts and covers individual risks only.
Types of Social Security Schemes. In a modem Welfare State comprehensive social security schemes take care of person from “womb to tomb”. These schemes may be of two types:
(a) Social assistance schemes, and
(b) Social insurance schemes.
(a) Principal features of social assistance schemes are as follows:
- The entire cost of the scheme is met by the State;
- Assistance is given as of legal right to certain prescribed categories of individuals only;
- In assessing the person’s need his other incomes and resources are taken into account;
- Assistance is given to bring the person’s total income to a certain predetermined minimum level.
No account is taken of his previous earnings of customary standard of living.
(b) Principal features of social insurance schemes are as follows:
- These are financed by contributions made by employers, workers and the State;
- Surplus funds not needed to pay current benefits are invested to earn further income;
- A person’s right to receive benefit is directly related to his making regular contributions and not to the assessment of his income or need.
In all countries, the social security schemes include both types of the plans-social,assistance as well as social insurance. In India also, we have both types of security plans.
Explain the need and significance of social security in India.
Need And Significance Of Social Security:
Although social security measures had been introduced in many countries decades ago; in India they were introduced only after the independence of the country, because of the lack of official sympathy and the weakness of trade unions. Thus, the, importance of social security measures in India cannot be exaggerated.
It is well established fact that ours is a poor country and the wages of our workers are so low and so niggardly as to permit anything but a below subsistence standard. In some parts of the country, it is too low to maintain a minimum standard.
Sir William Beveridge has rightly remarked that “the more you are poor, the more you need social security… Really social security is a measure to increase the national welfare.” It is, therefore, an open fact that social security measures are urgently needed to Indian workman.
Indian workman is composed of social evils like disease, unemployment, ignorance, illiteracy, squalor and illiteracy which endanger the safety of their life. They find themselves unable to fight against these contingencies due to their low earnings, high prices, high birth and death rates etc.
The worries for maintaining himself and his dependents ultimately affects the efficiency of the worker to a great extent. The provisions of social security measures may prove to be of great help to the workers in emergencies. Many social evils such as beggary, dishonesty, prostitution etc. take place only in poverty and can be removed through social security schemes.
The object of social security schemes are compensation, maintenance and prevention. Following are the benefits from social security schemes :
- Medical care.
- Protection from misery and distress.
- Unemployment coverage.
- Moral, social and mental upliftment.
- Proper nutrition of children.
- Provision of maternity benefits.
The adequate provision of social benefits for workers is particularly significant in an underdeveloped economy like India, to build a new economic and social order based on sound foundations of justice, liberty, equality and security.
Examine the working of the various social security measures adopted in India since independence.
Working Of The Various Social Security Measures:
Social security measures in India were negligible before the Independence of the country. After Independence several social security measures have been introduced in following respects :
- Compensation in case of industrial accidents and injury.
- Protection against illness.
- Maternity benefits to women workers.
- Provident funds.
- Oldage pensions and gratuity.
- Health insurance.
Some of the important social security measures are given below :
1. Workmen’s Compensation Act, 1923. The Act provides for the compensation to those workmen who sustain personal injuries by accidents arising out of and in the course of their employment. The Act applies to all permanent employees employed in railways, factories, mines, plantations, mechanically propelled vehicles, construction work and certain other hazardous occupations.
The Act does not cover those employees who are in clerical or administrative capacity in armed forces, on casual work. The State Governments are empowered to extend the application of the Act to other classes of persons or diseases also.
The employer is liable to pay, under this act, the compensation in case of personnel injury caused by accident arising out of and in the course of employment. No compensation is, however, payable if the incapacity does not last for more than three days or is caused by the default of the worker, not resulting in death.
Besides bodily injury, compensation is also payable in the case of certain occupational disease as given in Schedule III. The State Governments are empowered to add any other disease to the list of diseases.
The amount of compensation payable depends on the nature of injury and the average monthly wages of the worker concerned. For this purpose, injury has been divided under three categories :
- causing death,
- total or partial permanent disablement, and
- temporary disablement.
The rates of compensation are fixed for all types of injuries according to wage- ranges. No compensation is paid for first three days if the period of disablement does not exceed 28 days.
The Act does not apply to those workers who are covered under the Employees State Insurance Scheme.
2. Employees State Insurance Act, 1948.
In order to provide sickness benefits to workers, the Employees State Insurance Act was passed in 1948. The Act applies to all non-seasonal factories run with power and employing 20 or more persons.
It covers all types of employees – manual, clerical, supervisory and technical – not drawing a salary of more than Rs. 10,000 p.m. (w.e.f. 1.10.2006). The scheme is compulsory and contributory. Compulsory in the sense that all workers covered under the Act must be insured and contributory in the sense that it is financed by the contributions from employees and employers.
The administration of the scheme has been entrusted to an autonomous body called the Employees State Insurance Corporation.
Insurance Corporation – The corporation is managed by a governing body of 40 persons representing the Union and the State Governments, Parliament, employers and employees’ organisations and the medical profession. This body elects a standing committee consisting of 13 members.
A third body called Medical Benefit Council is constituted consisting of 26 members to advise the corporation on matters relating to medical benefits. State wise regional boards have also been constituted.
The scheme is financed by the Employees State Insurance Fund which consists of Contributions from, employers and employees, grants, donations and gifts from Central and State Governments, local authorities or any individual or body. The rate of contribution of employees depends upon its daily wages.
The scheme provides five types of benefits to the insured workers and their dependents. These benefits are :
(i) Medical benefit – An insured person or (where medical benefit has been extended to his family) a member of his family who requires medical treatment is entitled to receive medical benefit free of charge. Such medical benefit may be given either in the form of out-patient treatment or as in patient treatment in a hospital which may be either run by the ESI Corporation or by any other agency.
(ii) Sickness Benefit – An insured worker is entitled for cash payment for 91 days per year during his sickness. The daily rate of sickness benefit is calculated at half of average daily wages. Workers suffering from long term disease, like T.B., leprosy etc., are also entitled to get sickness benefit at 62.5% of the average wage which he would have earned had he been well and at work.
(iii) Maternity Benefit – An insured woman is entitled to receive maternity benefit (which is twice the sickness benefit rate) for all days on which she does not work for remuneration, during a period of 12 weeks Of which not more than 6 weeks shall precede the expected date of confinement. In case of miscarriage, the benefit shall be given for 6 weeks after miscarriage.
(iv) Disablement Benefit – An insured person is entitled to receive disablement benefit for any injury arising out of and in the course of his employment. If the disablement is temporary for not less than 3 days, excluding the day of accident, he is entitled to receive compensation according to the First Schedule of the Act.
If the disablement is permanent – whether total or partial – he is entitled to receive compensation according to the Second Schedule to the Act. Artificial limbs are also provided at the cost of Corporation to those who lose their limbs as a result of employment injury. Spectacles, dentures, pace-makers, etc., are also provided to insured person free of cost, depending upon the nature of the case.
(v) Dependant’s Benefit – If an insured person meets with an accident in the course of his employment and dies as a result thereof, his dependant, i.e., his widow, legitimate (or adopted) sons and legitimate unmarried daughters get pension. The widow gets it throughout her life or till remarriage. The sons get it up to the age of 18 years or until they marry, whichever is earlier.
(vi) Funeral Benefit – The eldest surviving member of the family of a deceased insured person is entitled to receive payment for the expenditure incurred on funeral. However, this amount cannot exceed Rs. 2500. The amount should be claimed within 3 months of the death of the insured person.
3. Maternity Benefits Act – Before Independence, many states passed the Maternity Benefits Acts but there war, only one Central Act in this respect – Mines Maternity Benefits Act 1941. After independence two Central Acts – Employees State Insurance Act 1948 and Plantation Labour Act 1951 – were also passed. With a view ta achieve uniformity, Central Government passed in 1961 the Maternity Benefits Act. The Act applies to all mines, plantations and factories except those covered by the Employees State Insurance Scheme.
The expectant mothers are entitled for 12 weeks leave i.e., 6 weeks up to and including the day of delivery and 6 weeks immediately following that day, if they have put in 100 days service during twelve months preceding the date of expected delivery. A payment of Medical Bonus of Rs. 25/- by the employer if pre-natal and post-natal care is not provided free of charge.
4. CoalminesProvident Fund and Bonus Act 1948 – The Coalmines Provident Fund and Bonus Act was passed in 1948 to make the old age provisions for all coalmine workers. The act was amended in 1950, 1951 and 1965. Under this Act two different schemes, i.e., the Coalmines Provident Fund Scheme and the Coalmines Bonus Scheme are in application and these schemes have been amended several times.
Under the Provident Fund Scheme the employers contribute 8% of their total emolument to the fund and an equal contribution is made by the employees. In June 1963 a provision was made in the scheme whereby the members are allowed to contribute voluntarily up to another 8% of their emoluments.
The scheme is administered by a Board of Trustees, consisting of equal members of representatives of the Government, employers and employees. A Special Reserve Fund was set up to make the payment to outgoing members. A Death Relief Fund has also been set up to ensure a guaranteed minimum payment of Rs. 750 to the dependents off the deceased whose accumulations in the fund are less than the amount at the time of death. The employees Family Pension Scheme 1971 also applies to. coalmine workers.
5. Employees Provident Fund Act 1952 – The Act was passed in 1952 covering factories employing 50 or more workers in 6 major industries, viz., iron and steel, textiles, engineering, cement, paper and cigarettes. By an amendment in 1960, the scheme was extended to all factories of five years standing and with 20 or more workers. An exception has been made for new undertakings, for a period of 3 years.
Establishments employing between 20 and 50 persons are also exempted for 5 years. The scheme is contributory and compulsory. The employees and employers contribute 614% of the total emoluments. The employees may, however, contribute 10% of the basic wages and dearness allowance including cash value of food concessions and retaining allowances payable to the employees. The employers make a matching contribution.
The scheme covers every employee who has completed one year’s continuous service and actually worked for 240 days in that period.
A SPECIAL RESERVE FUND was made for making the payment to outgoing members. A Death Relief Fund has also been set up for affording financial assistance to the nominees of the deceased whose pay does not ‘ exceed Rs. 1000 p.m. at the time of death. The quantum of benefit is the amount by which the amount falls short of Rs. 1250
6. Family Pension Scheme 1971 – This was launched for industrial workers covered by Provident Fund Schemes. Under this scheme, a financial assistance i.e., pension is provided to workers monthly after retirement till he survives and to his widow thereafter till she survives. The scheme is financed by the Central Government and the provident fund. The amount of family pension ranges between 225 p.m to Rs. 750 p.m. depending upon his/
her wages at the time of death.
7. Payment of Gratuity Act 1972 – Under this Act, employees in factories, mines, oil fields, plantation, ports, railways etc. in which 10 or more workers are employed are entitled to gratuity after completing 5 years of service at the rate of 15 days wages for each completed years of service subject to a maximum of 20 months wages or Rs. 3,50,000 whichever is lower. 15 days wages means last drawn wages (including D.A.) divided by 15/26. The Act covers only those employees whose salary does not exceed Rs. 3,500 p.m.
8. Old-Age Pensions Scheme – Various State Governments – U.P., Kerala, Andhra Pradesh, Tamilnadu etc. have introduced a scheme of old-age pension to persons of 60 years of age and are poor and destitute. It is open to all.
9. Compulsory Group Insurance – The scheme was introduced by the Central Government with cooperation of the Life Insurance Corporation and applies to certain groups of workers. The employees and employer both contribute towards the premium.
If the member dies while in service, the claim received by the employer is paid to the heir of the deceased. The U.P. Government has introduced the scheme for teachers, lawyers and police employees. The Government of Haryana has also taken certain steps.
10. Deposit-linked Insurance Scheme 1976 – This scheme was launched on 1st August 1976 for the benefit of employees covered under Employees Provident Fund Scheme, and Coalmines Provident Fund Scheme.
Under this scheme, a legal heir Of the deceased or the nominee under provident fund schemes will get the average amount of balance in the provident fund account of the deceased in three years preceding death or Rs. 35,000 whichever is less. This scheme is financed by the Government and the employers.
11. Employees’Pension Schemes 1995. The scheme was introduced for industrial Workers w.e.f. 19th November 1995. Under the scheme, Pension is payable to a worker on superannuation or retirement at the rate of 50% of pay of the employee has completed 33 years of contributory service.
A minimum 10 years service is required for entitlement to pension. The scheme also provide for the grant of family pension on death of the employer ranging from Rs. 450 to Rs. 2500 per month depending upon the salary and the length of service on the date of death. In addition, children pension at the rate of 25 percent of widow pension is also payable subject to a minimum of Rs. 115 per child for a maximum of two children.
The scheme is financed by diverting the employer’s share of provident fund representing 8.33 p.c. of the monthly wage to the pension fund. In addition the central Government also contributes to the scheme at the rate of 1.15 p.c. of the wage of the employee.
Workers covered under the scheme are those who are contributories . under the, provident fund scheme.