Over 45 crore workers in the country can soon avail an all-inclusive universal social security cover. The insurance will offer protection against all potential risks, similar to systems prevailing in the West.
The social security will cover death and disability, loss of income, unemployment, and medical bills/illnesses for all workers. The government will sponsor the cost of the social security insurance for the poor.
The Labour Ministry has confirmed that social security contributions will be mandatory for employed individuals. However, the deductions may be lower than the current values that add up to 30% of an individual’s income. The lower limit is expected to ensure that there is no major deduction in the take-home salary of the lower income group.
The social security cover for citizens who fall into the BPL category will be paid from the taxpayer’s contributions. The coverage will be provided under four major risk categories, and these will be introduced gradually.
How it would work
Currently, about 25% of the basic salary of an employed individual (including employer and employee contributions) will be moved to the provident fund of the employee. The contribution for insurance is an additional 6%. This takes the total contribution to more than 30%.
In the future, the policy may have differential rates based on the income slabs. The deductions will be significantly lower for people below the set income bracket. However, those above the set income slab will continue to pay as before.
The new policy is part of the social security code being finalised by the labour ministry. This will subsume 17 existing legislation items that govern social security coverage in India. The ministry is yet to consult stakeholders regarding the first draft of the policy.
The Government intends to build state departments that would run the scheme on a decentralised basis. At the Centre, there will be an independent department for social security into which the state departments report.