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Code on Social Security, 2020: What It is, What Changed, and What Employers Must do

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The Code on Social Security, 2020 is the law that now governs PF, ESI, gratuity, maternity benefits, and social security for gig and platform workers in India. It came into force on 21 November 2025 along with the other three labour codes, replacing nine older laws with one. If your company handles payroll, benefits, or contract staff, this Code now sets your rules.

This guide explains what the Social Security Code covers, which laws it replaced, what actually changed, and what employers should do during the transition.

What is the Code on Social Security, 2020?

The Code on Social Security, 2020 is one of India’s four labour codes, which together merge 29 older central labour laws into four modern ones. This Code handles the social security side: provident fund, state insurance, gratuity, maternity benefits, employees’ compensation, and welfare funds. Earlier, you tracked nine separate laws with nine sets of definitions and forms. Now you work under one law with one framework.

The other three codes cover wages, industrial relations, and workplace safety. Together they form the biggest rewrite of Indian labour law since independence, as explained in our guide to the four labour codes in India.

Is the Code in Force Now?

Yes. The government brought all four labour codes into force on 21 November 2025. But this is a transition, not an overnight switch. The central and state governments are still finalising the detailed rules under the codes, and until those rules are notified, the existing rules, schemes, and notifications under the old Acts continue to operate.

In practice, your duties do not change today. Your PF, ESI, gratuity, and maternity processes continue at the same rates while the new framework settles in. Follow your current compliance calendar, and track your state’s rules under the Code as they are notified, as part of your wider statutory compliance.

The Nine Acts Merged Into the Code

The Code on Social Security replaces these nine central laws:

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

The core benefits under each of these continue under the Code: the 26-week maternity leave, the PF contribution structure, ESI cover, and gratuity all carry forward. What changes is the framework around them, and a few substantive rules explained below.

Two laws people often place here by mistake do not belong to this Code: the Factories Act, 1948 went into the Occupational Safety, Health and Working Conditions Code, and the Minimum Wages Act, 1948 went into the Code on Wages.

Who is Covered Now?

The Code’s biggest achievement is widening who counts. Along with regular employees, it brings in groups that older laws left out:

• Gig workers: people doing short-term, flexible work outside a traditional employer relationship, such as delivery partners
• Platform workers: people earning through online platforms, such as ride-hailing drivers
• Unorganised sector workers: the large workforce in small units and informal work
• Interstate migrant workers: workers who move between states for work, now clearly inside the social security net
• Fixed-term employees: staff on time-bound contracts, now with benefits matching permanent employees, including gratuity
• Construction and film industry workers: covered through the welfare cess and welfare fund provisions carried into the Code

For gig and platform workers, this is the first time Indian law has promised social security. The promised cover includes life and disability benefits, accident insurance, health and maternity benefits, and old age protection. Governments will deliver these through schemes framed under the Code.

Key Changes under the Social Security Code

Here is the before-and-after at a glance:

1. The New Definition of Wages

The Code uses a common definition of wages across all four labour codes. In simple terms, the listed allowances cannot exceed 50% of total pay. That generally means basic pay plus dearness allowance must be at least half of the total. For companies with allowance-heavy salary structures, this can increase PF and gratuity outgo. Review your CTC structures with your compliance team before your state’s rules kick in.

2. Gratuity for Fixed-Term Employees

Under the old gratuity law, an employee needed five years of continuous service. The Code changes this for fixed-term employees: they earn gratuity on a pro-rata basis for the term they serve, with no five-year condition. A one-year fixed-term contract now carries a gratuity cost that employers must budget for.

3. The Social Security Fund and Aggregator Contributions

The Code creates a Social Security Fund to finance schemes for gig, platform, and unorganised workers. The fund draws from central and state governments, corporate social responsibility (CSR) contributions, and aggregators. Aggregators are platforms that engage gig workers, such as app-based delivery and ride-hailing companies. They must contribute 1% to 2% of their annual turnover to the fund. The contribution is capped at 5% of the amount paid or payable to their gig workers.

4. Digital Records and Aadhaar-Based Registration

The Code requires you to maintain records and returns electronically. Worker registration, including for gig and unorganised workers, runs through Aadhaar-seeded systems. For employers, this means payroll and benefits data must live in systems that can produce digital returns, not in paper registers.

5. Career Centres Replace Employment Exchanges

The old employment exchange notification duty becomes a duty to report vacancies to career centres, modernising a 1959-era process.

6. Tighter Timelines and Penalties

The Code raises penalties for non-compliance, including for failure to pay contributions. It also limits inquiries into past PF dues to a five-year window, so old matters cannot drag on forever. Repeat offences attract higher punishment. For some first-time defaults, you can compound the offence, which means settling it by payment.

Criticisms Worth Knowing

The Code has real gaps that experts continue to flag. Coverage thresholds still exist, so workers in the smallest establishments can remain outside mandatory benefits. This goes against the National Commission on Labour’s recommendation of universal coverage. The definitions of gig worker and platform worker overlap, so it is not always clear which scheme applies to whom. Several gig worker benefits also depend on schemes that governments must still frame and fund. The promise on paper is ahead of delivery on the ground. Treat these as areas to watch, since clarifications will come through rules and scheme notifications.

What Employers Should do Now

• Continue current PF, ESI, gratuity, and maternity compliance without change, since existing rules operate during the transition
• Review salary structures against the 50% wages definition and model the PF and gratuity impact
• Budget for pro-rata gratuity on fixed-term contracts
• Move any remaining paper registers to electronic records
• If you operate as an aggregator, plan for the 1% to 2% turnover contribution
• Track your state’s rules under the Code as they are notified, alongside the maternity, gratuity, and PF processes you already run

A payroll platform that keeps wages, benefits, and statutory filings on one record makes this transition mostly invisible. With factoHR’s payroll software, the system applies rule changes for you, instead of your team editing spreadsheets.

Conclusion

The Code on Social Security, 2020 is now the law of the land, and its direction is right: one framework instead of nine, and social security extended to workers who never had it. For employers, the practical work is not dramatic. Benefits continue as before during the transition, and the real preparation lies in salary structure reviews, fixed-term gratuity budgeting, and digital records. The organisations that handle those three quietly now will find the full switchover uneventful when their state’s rules arrive.

FAQs

Is the Code on Social Security, 2020 in Force?

Yes. It came into force on 21 November 2025, along with the other three labour codes. Detailed central and state rules are still being finalised, and until they are notified, the existing rules and schemes under the old Acts continue to operate, so employer duties today remain unchanged.

Which Acts are Merged into the Code on Social Security?

Nine central laws: the Employees’ Compensation Act 1923, ESI Act 1948, EPF Act 1952, Employment Exchanges Act 1959, Maternity Benefit Act 1961, Payment of Gratuity Act 1972, Cine Workers Welfare Fund Act 1981, BOCW Welfare Cess Act 1996, and the Unorganised Workers’ Social Security Act 2008.

How does the Code Benefit Gig and Platform Workers?

For the first time, Indian law promises them social security: life and disability cover, accident insurance, health and maternity benefits, and old age protection through government-framed schemes. A Social Security Fund finances these, with aggregators contributing 1% to 2% of annual turnover, capped at 5% of payments made to their gig workers.

How does the Code Change Gratuity for Fixed-Term Employees?

Fixed-term employees now earn gratuity on a pro-rata basis for the period they serve, without the five-year service condition that applies otherwise. Even a one-year contract earns proportionate gratuity, so employers must budget gratuity cost into every fixed-term hire.

What is the New Definition of Wages, and why does It Matter?

The common definition across the labour codes generally requires basic pay plus dearness allowance to be at least 50% of total remuneration. Since PF and gratuity are calculated on basic plus DA, allowance-heavy salary structures may see higher statutory outgo, which is why employers should review CTC structures now.

What Should Employers do Differently after the Code?

Nothing changes overnight, because existing rules continue during the transition. The smart preparation: review salary structures against the wages definition, budget pro-rata gratuity for fixed-term staff, digitise records, and track your state’s rules under the Code as they are notified.

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