SOCIAL SECURITY | INDIA

 SOCIAL SECURITY

Social security is the protection which society provides for its members through a series of public measures. It is against economic and social distress.

It could be caused by the stoppage of substantial prediction of earning resulting from sickness, maternity, unemployment, old age, etc.

The main feature of social security are:

To solve the problems of insecurity

To protect the workers from various contingencies of life

It is a collective effort of employee, employer and government

It is an idea to provide social justice.

 

The Workmen’s Compensation Act, 1923

This is one of the important social security legislations. It aims to provide financial protection to workmen and their dependents in case of accidental injury by means of payment of compensation by the employees.

The workmen’s compensation supports dependents like widows, minor legitimate or adopted son and unmarried daughter.

It considers for the disability of the workers to be total where if in capabilities a worker for all work he was capable of doing at the time of the accident resulting in such disablement.

 

Employee’s State Insurance Act, 1948

Provide medical facility and unemployment insurance to industrial workers during their sickness.

It is compulsory and contributory in nature.

It is applicable to all factories that employ more than 20 workers. It has the benefits of medical, sickness, maternity, disabled and dependent benefits.

 

Maternity Act, 1961

It is to protect the dignity of motherhood by providing complete and health care to woman and her child.

It gives her the assurance that her rights will be looked after while she is at home to care for her child.

Provisions of the Act entitle maternity leave even to women engaged on casual basis or on muster role basis on daily wages.

Cash benefits will be 84 days leave with pay before/after delivery.

A medical bonus of Rs. 1000/-

An additional leave will pay upto one month (proof of illness required)

 

Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 applies to factories and other establishments employing more than ten or more persons.

Every factory, mine, oil field, port and Railway Company.

Employee means any person employed on wages in an establishment to do any skilled, semi skilled, unskilled, supervisory, etc.

According to Sec.4(1) of the Payment of Gratuity Act, 1972, gratuity is paid after termination of employee after rending continuous service not less than 5 years on his superannuation or his retirement or resignation or on his death or disablement due to accident or disease.

Gratuity = Monthly salary X 15 days X no. of years of service/26

 

The Employee’s Provident Fund and Miscellaneous Provisions Act, 1952

The institutions should compulsory contribute provident funds, pension and insurance for employees i.e.

a.   Employee’s Provident Funds Scheme, 1952

b.   Employee’s Deposit Linked Insurance Scheme 1976

c.   Employee’s Pension Scheme, 1995.

It is to extend the reach and quality of publicly managed old age income security programs.

Eligible for provident fund in for an employee of the company to whom the employee’s basic salary and DA should be more than Rs. 15,000/-

Employee’s deposit linked insurance is basically a ‘Life Insurance’ for all covered employees under EPF MP Act, 1952.

Here deposit means average deposit in EPF A/c. when an employee dies while in service his or her family will get some compensation based on deposit in EPF Account.

On behalf fo Employees, the employer has to pay @0.50% of (basic+DA) or more upto Rs.15,000/- as  its monthly contribution with total contribution which makes eligible employee’s nominee to get the claim in the case of death while in service.

The amount received as the employer’s contribution and also the Central Government’s contribution to the ‘Insurance Fund’ under sub-section 2 and 3 of Sec. 6C shall be credited to an account called the ‘Deposit-Linked Insurance Fund Account’.

 

Social security benefits and welfare measures

Medical care or sickness benefit scheme

Employment injury benefit scheme

Maternity benefit scheme

Old age benefit including pension

Housing schemes

Educational schemes

Integrated insurance schemes

Survivor’s benefit scheme, etc.

 

TYPES OF RISK

Pure risk: Pure risk is a situation that holds out only the possibility of loss or no loss. For e.g. if you leave your house in the morning and leave for office by motorcycle you cannot be sure whether or not you will be involved in an accident, that you are running a risk. There is the uncertainty of loss. If you are involved in any one of these situations, you will suffer loss.

Types of pure risks:

Personal risk: Is the risk which affects an individual directly. It involves the likelihood of sudden and complete loss of income or assets or gradual reduction of income. This risk can be classified into four main types:

Risk of Premature death: It is generally believed that the average life span of human beings is 70 years. Anybody who dies before 70 years could be regarded as having died prematurely. A family breadwinner who dies prematurely has children to educate, dependents to support, mortgage loan to pay, etc.

Risk of old age: Post retirement, older people do not get sufficient income to meet one’s financial needs. Even some of the workers who plan for the future and make sufficient savings for old age may face the effect of inflation on savings. Higher rate of inflation can cause great financial and economic distress to retired people as it may reduce their real incomes.

Risk of poor health: Poor health can bring serious financial and economic distress to an individual. Without good health, nobody can plan for their future savings and can’t maximise their economic income. Poor health resulst in loss of earned income and high medical expenses.

Risk of unemployment: Unemployment is a situation where a person who is willing to do and is looking for work to do cannot find work to do. It always brings financial insecurity to people. In these cases, the person would lose his/her earned income. He may suffer from financial hardships. It may fully deplete his savings and expose himself to financial insecurity.

Speculative risk: is a risk where both profit and loss are possible. It is not normally insurable. It is common in business undertakings. It is a risk which faces break-even situations. For e.g. it includes taking part in exporting to a new market, betting on horse races, etc.

Property risk: Property owners face the risk of having their property stolen, damaged or destroyed by various causes. A property may suffer direct loss, indirect loss, losses arising from extra expenses of maintaining the property or losses brought about by natural disasters.

Natural disasters such as floods, earthquakes, storms, fire, etc. bring enormous property losses as well as affect human lives.

Liability risk: means that the person will be responsible for an injury to another person or their property. For e.g. if you injure your neighbor or damage his/her property, the law would impose fines on you and you may have to pay heavy damages. The risk amount under this risk doesn’t have any maximum upper limit. For e.g. If you ride a motorcycle valued Rs. 50,000 and negligently cause serious bodily harm to another person, that person can sue you for any amount of money… Rs. 70,000 and above, depending on the nature of the injury. If the motorcycle is fully damage by you then you are supposed to pay the actual value of the motorcycle. In this case your financial and economic security will be greatly endangered.

Fundamental risk: is a risk which is non discriminatory in its attack and effect a group risk cause by bad economy, inflation, unemployment, war, political instability, flood, drought, earthquake, etc.

This affects a large population and the risk lies with the society rather than the insurance. This can be handled by social insurance.

Particular Risk: affect only the individual and not everybody in the community. For e.g. if a bicycle is stolen the full impact of the loss of the bicycle is felt by you. The theft of a bicycle is a particular risk. Particular risks are the individual’s own responsibility and not that of the society of community as a whole. The best way to handle particular risk by the individual is the purchase of insurance cover.

Static risk: is a risk that involves losses brought by irregular action of nature of mistakes of man. It is an unchanging economy. For e.g. if all economic variables remain constant, some people with fraudulent tendencies would still go out, steal, abuse their positions, etc. it involves destruction of assets or change in their possession as a result of dishonesty. Example of static risk includes theft and bad weather.

Dynamic risk: is mainly speculative risk in changes in price level, income, taste of consumers, technology, etc. which can bring about financial losses to members of the economy. It is beneficial to the society. For e.g. technological changes which brings higher production at a cheaper price. It affects large number of individuals.