Only a small fraction of the global population has access to social security benefits. Speaking numbers, ILO data suggests that only one in five people (20% of people) across the globe have adequate social security coverage.
More than 50% of the global population don’t have access to any kind of social security protection. Further, the regional inequalities are significant with Central Asia and Europe having the highest coverage, Africa has the lowest social security coverage. In South Asia and Sub-Saharan Africa, only 5-10% of the working population has some form of social security coverage.
The increasing informalization of work is concerning. Why? Lack of social security protection is higher in informal economies, especially in the developing world. The most industrialised countries have almost universal social security protection. However, the increasing informalization of work is causing the levels of social protection to reduce even in those countries.
In India, for instance, there is no universal social security system. Since more than 90% of India’s workforce is engaged in informal employment, their access to social security is close to nil or unrecorded, even when it exists.
Since women depend more on the informal economy for their livelihood, the global gender disparity in social security coverage is significant. Further, the disabled and elderly populations are the most vulnerable populations that lack sufficient social security protection.
The International Labour Organisation (ILO) and UN conventions view social security as a basic human right that should be available and accessible to every individual. Why is it so critical? Keep reading to find out.
An Overview of Social Security
Social security is a system/ programme, often established by legislation, to provide a level of financial stability and security to individuals and their families. It is usually based on compulsory or voluntary contributions to social security from the employer, employee and/or the government. This system aims to provide healthcare, retirement, disablement, retirement, insurance and other benefits to employees and their families.
Social security is not confined to just retirement benefits and is more than just a retirement program. While the definition and components of social security widely differ from country to country, in India it includes one or more of the following:
- Healthcare benefits including curative and preventive medical care
- Retirement benefits including pension
- Maternity benefits
- Disability benefits
- Survivorship benefits, etc.
Social security is not as exorbitant as is portrayed to be; social security benefits are modest. For instance, with just a payment of Rs.488, you can ensure your employees and their families get comprehensive healthcare benefits.
Why Is Social Security So Critical?
Maintain Standard of Living Even in the Face of Socio-Economic Eventualities
People, regardless of their earning levels, gain access to life insurance, disability and unemployment benefits through social security schemes like EPF and ESIC in India. The EPF (Employee Provident Fund) is a contributory scheme wherein both employers and employees contribute. Among its many benefits, it offers access to
- a lump-sum amount on retirement
- monthly pension
- life insurance benefits of up to Rs.7 lakhs
- monthly pensions to dependents of the deceased employee
- unemployment allowance if the beneficiary is laid off
- 75% advance withdrawal of amount available in their PF account in case of contingencies
The Employees’ State Insurance Corporation (ESIC) scheme offers sickness, medical, maternity and disability benefits to employees and their families. They can avail free treatment at ESIC hopsitals/dispensaries with no cap on expenditure, reducing their out-of-pocket expenses in case of hopsitalization, accident, injury or major illness. ESIC also offers disability benefits to employees in case of permanent or temporary disablement due to work accident/ injury.
By providing access to these benefits, you can ensure that employees and their families have a safety cushion to fall back on in case of death, injury, layoff or unemployment that leads to an involuntary loss of income. As an employer, you are essentially helping them to tackle the risks of any socio-economic eventuality rather than helping them on a need basis.
Enable Equitable Healthcare Access to Workers and Their Families
Social security is so critical because it enables equitable access to healthcare to workers and their families, promoting human dignity and social inclusion. Without social security, employees, especially those in informal employment, will have to pay out of pocket for medical expenses including sickness, hospitalization, maternity and so on.
Apart from the financial burden, employees will get access to the right treatment at the right time, improving their overall health. They will not have to postpone treatment or not get it all due to the lack of resources.
Schemes such as ESIC in India offer a whole array of medical benefits to individuals and their families. The medical benefits include but are not limited to cash-free access to out-patient consultations, imaging, hospitalization, laboratory testing, immunization, medication, etc. This scheme also offers access to maternity benefits, disability allowance and much more.
Ushers Valuable Benefits to Employers
Social security is critical, not just for employees, but employers too. It generates significant business value and so, employers should pay social security benefits. These are the powerful benefits for employers paying social security to workers, whether or not mandated by laws or regulatory bodies.
- Lower absenteeism owing to access to proper, timely healthcare of employees and their families
- Lower attrition due to improved worker trust and loyalty toward the employer
- Improved employee dedication and focus as they feel cared for and valued by the employer
- Employer brand improves as employees offer positive feedback and are more satisfied
- Employer will be seen as socially responsible
- Attract a better pool of candidates owing to the improved employer brand
Progressive, Guaranteed Benefits to Workers
Unlike personal savings and investments, social security offers guaranteed progressive benefits to workers. When they earn more, their social security benefits increase accordingly. So, they can keep pace with inflation and ensure they don’t fall into poverty when there is an economic crisis or downturn. Further, they are guaranteed returns and income as they age, not subject to investment risks or market fluctuations.
So, social security provides them the much-needed cushioning to meet any contingencies and cost of living fluctuations.
The incidence of poverty among informal workers as they age is high. Without savings, pensions or retirement benefits, they are pushed into poverty and necessitated to keep working to make ends meet. And since a large section of informal workers are women, the incidence of poverty among aging women is much higher.
Social security is critical because it enables us to reduce these gender gaps and prevent the aging population from falling into poverty.
Improves Workers’ Quality of Life
Social security payments, though marginally increasing what an employer pays, have a multiplier effect on the employees’ quality of life. Their out-of-pocket expenses reduce, enabling them to divert their money to areas that are often overlooked. For instance, they may finally have the money needed to fix a leaky roof or send their children to skill training classes or replace their torn pair of footwear.
Many employees, especially in informal employment as domestic workers, drivers, platform workers, etc., aren’t left with enough income after their monthly expenses. So, they don’t typically save enough. With social security, they will be able to maintain a decent amount of savings to use in case of emergencies.
Case in point: The pandemic and the plight of informal and migrant workers
When the global pandemic hit in 2020, the informal and migrant workers were worst hit. Due to the lockdown and other restrictions, several of them didn’t have work or income. Without savings to tide over the period of unemployment and involuntary loss of income, we saw their mass exodus back to their villages.
If these informal workers had access to social security, they would have been able to tide over the crisis better.
Ushers Greater Societal Progress and Equity
Social security is critical as it drives societal progress, equity and inclusion. As discussed earlier, it lifts several families and elderly, especially women, from the clutches of poverty. Even when someone is above the poverty line, a sudden hospitalization or family emergency or natural disaster pushes them into poverty. Social security offers financial security to these vulnerable sections of society.
It wouldn’t be an exaggeration to say that social security is a critical asset for employees, especially those in informal employment and their families. To know more about social security and how you can start paying it to your employees, visit our TankhaPay website now.