Labour Laws and Practice · Law of Welfare and Working Condition

Social Security Fund and Welfare Funding under Section 115 of OSH Code 2020

Updated 11 October 2026 · Fact-checked

Section 115 of the OSH Code, 2020 requires the appropriate Government to set up a social security fund for the welfare of unorganised workers. It is credited with composition money under section 114(4) and penalties under section 111(6). Other sources may be prescribed, and the fund is spent as prescribed.

Understand Social Security Fund and Welfare Funding

The OSH Code, 2020 punishes breaches of safety and working-condition duties through penalties, prosecution and compounding. Section 115 decides where some of that money goes. It does not go into general revenue. It goes into a welfare fund for unorganised workers.

The appropriate Government (Central or State, depending on the subject) establishes the fund. Section 115(1) names two credits: the amount received from composition of offences under section 114(4), and the amount of penalty under section 111(6). Section 115(2) adds that the fund may also be funded by other sources the appropriate Government prescribes.

Section 115(3) deals with use. The fund is administered and spent for the welfare of unorganised workers, in the manner the appropriate Government prescribes. This includes transferring money from the fund to any fund set up under another law for the welfare of unorganised workers.

The Explanation gives the meaning of unorganised worker. It has the same meaning as in clause (m) of section 2 of the Unorganised Workers Social Security Act, 2008. The OSH Code does not define the term itself.

The link with composition matters. Under section 114, certain penalties and offences can be compounded by a notified officer. Section 114(1) fixes the sum at 50% of the maximum penalty for a penalty, and 75% of the maximum fine for an offence. Section 114(4) sends that amount to the section 115 fund. Section 133(2) lets the rules cover the manner of compounding, other sources of the fund, and how the fund is administered and spent.

Key rules to remember

Fund established by: Appropriate Government establishes the social security fund for the welfare of unorganised workers; Section 115(1). Remember it is for unorganised workers, not all workers.
Statutory credits: Composition amount (section 114(4)) + penalty amount (section 111(6)); Both are named in section 115(1). Do not say all fines or all penalties go in without citing these two.
Other sources: Such other sources as may be prescribed by the appropriate Government; Section 115(2). The word 'may' makes it optional and dependent on rules.
Use of fund: Administered and spent for unorganised workers' welfare in the prescribed manner, including transfer to any fund under another law for their welfare; Section 115(3).
Meaning of unorganised worker: As in section 2(m), Unorganised Workers Social Security Act, 2008; Explanation to section 115.
Composition sums: Penalty: 50% of maximum penalty. Offence: 75% of maximum fine; Section 114(1)(a) and (b). Not available for repeat breaches within three years of an earlier compounded or convicted penalty or offence (section 114(5)).
Rule-making power: Rules on other sources of fund and on administering and spending the fund; Section 133(2), items (zzk) and (zzl). Compounding manner is item (zzj).

How to solve Social Security Fund and Welfare Funding questions

Use this method for any question on the fund, whether theory or a short case.

1Identify the provision: name section 115 and the Code, and say who sets up the fund (the appropriate Government).
2State the purpose: welfare of unorganised workers, with the meaning taken from section 2(m) of the Unorganised Workers Social Security Act, 2008.
3List the sources: composition amount (section 114(4)), penalty amount (section 111(6)), and other prescribed sources (section 115(2)).
4If the facts involve compounding, compute the composition sum: 50% of maximum penalty or 75% of maximum fine, then say it is credited to the fund.
5Check section 114(5): if the same breach recurs within three years of an earlier compounded or convicted one, compounding is not available.
6State how the fund is used: as prescribed, including transfer to another fund for unorganised workers' welfare (section 115(3)).
7Conclude clearly, and add the practical point: rules under section 133(2) fix the detailed manner.

Quickest way: Four-line recall of section 115

When to use it: When you have under ten minutes for a short note or a 5-mark question.

Who: appropriate Government establishes the fund.
For whom: unorganised workers (Unorganised Workers Social Security Act, 2008, section 2(m)).
Inflow: compounding money (114(4)), penalty (111(6)), other prescribed sources.
Outflow: prescribed manner, including transfer to another unorganised workers' welfare fund.

Common mistakes in Social Security Fund and Welfare Funding

Saying the fund is for all workers of an establishment.
The word 'welfare' makes students think of every employee.
Fix: Write 'unorganised workers' and cite the meaning in the 2008 Act.
Saying every fine and penalty under the Code is credited to the fund.
Students generalise from the two named credits.
Fix: Cite exactly section 114(4) composition amounts and section 111(6) penalties, plus other prescribed sources.
Mixing up the composition percentages.
Both 50% and 75% appear in section 114(1).
Fix: Penalty means 50% of the maximum penalty. Offence means 75% of the maximum fine.
Forgetting that the Central or State Government may each be the appropriate Government.
Students assume a single national fund.
Fix: Write 'appropriate Government' as in the text.
Ignoring the repeat-breach bar when compounding.
Students stop after the percentage.
Fix: Check section 114(5): no compounding for a repeat within three years of an earlier compounded or convicted penalty or offence.

Worked examples

Example 1

Explain the sources and purpose of the social security fund under section 115 of the OSH Code, 2020.

Show the solution

Provision: section 115(1) requires the appropriate Government to establish a social security fund for the welfare of unorganised workers.
Sources: the amount received from composition of offences under section 114(4) and the amount of penalty under section 111(6) are credited. Section 115(2) allows other sources as prescribed.
Meaning of unorganised worker: as in clause (m) of section 2 of the Unorganised Workers Social Security Act, 2008.
Use: section 115(3) says the fund is administered and spent for their welfare in the prescribed manner, including transfer to a fund under any other law for their welfare.
Rules: section 133(2) allows rules on other sources and on administering and spending the fund.

Answer: The fund is an Government-established welfare fund for unorganised workers, fed by composition amounts, penalties and prescribed sources, and spent as prescribed, including by transfer to another unorganised workers' welfare fund.

Example 2

A penalty under section 94 of the OSH Code is compounded by a notified officer. For illustration only, assume the maximum penalty is ₹1,00,000. This is an assumed figure, not the actual maximum under section 94; in an exam or in practice, check the real maximum in the Code. The employer has no earlier compounded or convicted penalty in the last three years. How much is paid, and where does it go?

Show the solution

Section 114(1) lists "any penalty under ... section 94" among the matters that may be compounded. Note the wording: some provisions in that list are penalties and others are offences (for example, section 97(2) is an offence). Section 94 is listed as a penalty, so the penalty rate applies.
Section 114(5) does not bar compounding, as there is no earlier compounded or convicted penalty within three years.
For a penalty, the composition sum is 50% of the maximum penalty under section 114(1)(a). On the assumed maximum: 50% × ₹1,00,000 = ₹50,000.
Under section 114(4) the amount is credited to the fund under section 115(1) for unorganised workers.
Under section 114(2), on compounding the employer is discharged and no further proceedings lie for that penalty.

Answer: On the assumed maximum of ₹1,00,000, the employer pays ₹50,000, which is credited to the social security fund for unorganised workers, and is discharged from that penalty. The real sum is 50% of the actual maximum penalty under section 94, which you must check in the Code.

Exam tips

Quote section numbers for the links: 114(4) and 111(6) into 115(1). Examiners reward this precision.
For a computation, show the percentage, the base amount and the result, then say where the money goes.
Always state the repeat-breach bar in section 114(5) when compounding appears in the facts.
Use the Code's own words: write 'appropriate Government' and 'unorganised workers', not 'the Government' or 'all workers'.

Practice questions from Law of Welfare and Working Condition

Social Security Fund and Welfare Funding in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Social Security Fund and Welfare Funding: frequently asked questions

What is the social security fund under section 115 of the OSH Code?

It is a fund the appropriate Government establishes for the welfare of unorganised workers. It receives composition amounts, certain penalties and other prescribed sources.

Which penalties are credited to the fund under the OSH Code?

Section 115(1) names composition amounts under section 114(4) and penalty amounts under section 111(6). Do not claim every payment under the Code is credited unless the text says so.

How is the fund used?

It is administered and spent for unorganised workers' welfare in the manner the appropriate Government prescribes. This can include transferring money to a fund under another law for their welfare.

Who is an unorganised worker for section 115?

The OSH Code adopts the meaning in clause (m) of section 2 of the Unorganised Workers Social Security Act, 2008. Check that definition in your study material.