Understanding the Code on Social Security, 2020:

A Comprehensive Guide for Employers & Professionals

India’s labour law landscape underwent a major transformation with the introduction of the Code on Social Security, 2020. This landmark legislation consolidates multiple social security laws into a single framework, aiming to extend protection to a wider workforce, including those in the unorganised and gig economy.

What is the Code on Social Security, 2020?

The Code on Social Security, 2020 is a unified law designed to amend and consolidate existing social security regulations. Its primary objective is to ensure income security, healthcare access, and welfare benefits for employees across sectors—organised, unorganised, gig, and platform workers.

Key Objectives of the Code

Extend social security coverage to all categories of workers
Simplify and rationalize compliance for employers
Promote universal registration of establishments
Enable digital administration of benefits and records
Strengthen governance through dedicated social security bodies

Acts included in the Code on Social Security:

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
Employees’ State Insurance Act, 1948
Employees’ Compensation Act, 1923
Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
Maternity Benefit Act, 1961
Payment of Gratuity Act, 1972
Cine Workers Welfare Fund Act, 1981
Building and Other Construction Workers Welfare Cess Act, 1996
Unorganised Workers’ Social Security Act, 2008

Conclusion:

Sl.No	Query	Reply
Code on Social Security, 2020 (FAQ)
1	Does fixed-term employment cover contract labour engaged through contractors, or only direct employees of the principal employer?	Fixed Term Employment covers employees directly engaged by the employer.
2	Whether Gratuity calculation will be applicable prospectively or retrospectively?	Gratuity calculation will be applicable w.e.f. 21.11.2025 i.e. date of implementation of the Codes. Please refer to Sl. No. 8 of FAQ dated 30.12.2025available on MoLE website. Weblink: de4758d5bfeffc456d7de97a801891b0
3	How will the ESI coverage be governed until the finalization of Rules?	With effect from 21.11.2025, the definition of wages under the CoSS, 2020 shall apply. At present, Rs 21,000 per month wages notified for ESI coverage will be applicable.
4	For the calculation of gratuity, will wage components other than those specified under clauses (a) to (c) of included part and (a) to (k) of excluded part of Section 2(88) of the Code on Social Security, 2020, be included?	Any payment made to employee which is not part of components mentioned under section 2(88) of the Code on Social Security,2020 shall not be considered for calculation of gratuity.
5	For Fixed Term Employees (FTE), is gratuity payable on completion of exactly one year of service or more than one year of service is required for calculation of gratuity under the Labour Codes?	Fixed Term Employee (FTE) will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).
6	Whether States can levy cess on gig and platform workers, and if so, this will result in a dual financial burden on aggregators?	As per section 114(4) of the Code on Social Security, 2020, the contribution to be paid by the aggregators for the funding Schemes for gig workers and platform workers will be notified by the Central Government. The said contribution will be credited to Social Security Fund set up by the Central Government for social security and welfare of the gig workers and platform workers.
7	In case of contract labour, whether gratuity liability is to be borne by the Principal Employer or the Contractor?	As per the section 53 of the Code on Social Security, 2020, the employer (i.e. Contractor) will pay gratuity on rendering of five years continuous service at the rate of 15 days wages for each completed year of service based on the last drawn wages.
8	Whether gratuity for service rendered prior to 21 November 2025 will be calculated under the Payment of Gratuity Act,1972, and service on or after that date under the Labour Codes?	The employee will be paid gratuity based on the rate of wages last drawn by the employee at the time of superannuation or retirement or resignation or death etc, on and after 21.11.2025 as per the provisions of Code on Social Security, 2020.
9	What types of benefits or facilities will be considered as “remuneration in kind” under the definition of wages? Please provide illustrative examples.	Benefits under the terms of employment such as food coupons, ration items, mobile recharge etc. would constitute remuneration in kind.

Conclusion:

At Pragnaa, we see the Code on Social Security, 2020 as more than just a legal reform—it is a shift toward building a more accountable and inclusive workforce ecosystem. By bringing multiple legislations under one umbrella, the Code reduces complexity while expanding the scope of social security to previously uncovered segments like gig and unorganised workers.

However, compliance under this Code requires more than basic awareness. It demands structured processes, accurate documentation, and proactive monitoring. Organizations that treat this as a strategic priority—not just a statutory obligation—will be better positioned to mitigate risks and build long-term workforce stability.

Pragnaa supports businesses in navigating these changes with clarity and confidence. From compliance assessments to end-to-end implementation support, our focus is on helping organizations stay compliant, audit-ready, and future-ready.

As the labour law landscape evolves, one thing is clear—strong compliance is no longer optional; it is a business necessity.