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Labour Laws and Practice · Social Security Legislations

Employee Compensation and Social Security Fund under the Code

Updated 11 October 2026 · Fact-checked

Employee compensation is the employer's liability to pay for injury or death caused by work. The Social Security Fund under Section 141 is a separate Central Government fund for unorganised, gig and platform workers, fed by Section 109(3) and Section 114(3) funding and composition money. Answer by stating the provision, applying the facts, then concluding.

Understand Employee Compensation and Social Security Fund

The Code on Social Security, 2020 has two ideas you must keep apart. One is the employer's liability to compensate a worker hurt or killed because of work. The other is the money pool the government builds to protect workers outside regular employment.

This page's official text covers the second idea in detail. It does not contain the employee compensation provisions, so the compensation rules below are stated without section numbers. In plain words, if a worker suffers injury or dies from an accident arising out of and in the course of employment, the employer is generally liable to pay compensation as the Code provides. Check the rules on amounts, notice and claims in your study material and the Code before you write.

Now the fund. Section 141(1) requires the Central Government to establish a Social Security Fund for the social security and welfare of unorganised workers, gig workers and platform workers. Its sources are: (i) funding under section 109(3); (ii) funding under section 114(3); (iii) composition of offences under the Code relating to the Central Government, and any other Social Security Fund under another central labour law.

Section 141(2) says a separate account must be kept for each of these three sources. Section 141(3) says the money must be spent only for the purpose of the account it sits in. The fund is run in the manner the Central Government prescribes.

States have their own fund under Section 141(5), for unorganised workers only. It is credited with composition amounts for offences relating to the State Government and other sources the State prescribes. Gig and platform workers are not named in the State fund.

Key rules to remember

Central fund: purpose
Section 141(1): fund for unorganised workers, gig workers and platform workers
Established by the Central Government.
Three sources of the Central fund
(i) section 109(3) funding; (ii) section 114(3) funding; (iii) composition of Central offences and other central labour law funds
Learn them as clauses (i), (ii) and (iii).
Separate accounts
One account per source, spent only for that account's purpose (Section 141(2) and (3))
Money from one source cannot be used for another account's purpose.
Aggregator contribution rate
Not less than 1% and not exceeding 2% of annual turnover, as notified (Section 114(4))
Applies to aggregators in categories specified in the Seventh Schedule.
Cap on contribution
Contribution ≤ 5% of the amount paid or payable to gig and platform workers
This is a proviso to Section 114(4). Turnover excludes tax, levy and cess paid or payable to the Central Government.
Funding options for a scheme
Section 114(3)(a) to (f)
Central, Central plus State, aggregators, mixed with beneficiaries, CSR fund, or any other source.
State fund
Section 141(5): State fund for unorganised workers
Credited with State composition amounts and other prescribed sources.

How to solve Employee Compensation and Social Security Fund questions

Use this method for any question on compensation or the Social Security Fund.

  1. 1Identify the worker type: employee, unorganised worker, gig worker or platform worker. This decides the route.
  2. 2If it is injury or death at work, apply the employer's compensation liability and check that the harm arose out of and in the course of employment.
  3. 3If it is a fund question, name the fund: Central under Section 141(1) or State under Section 141(5).
  4. 4List the source of the money and place it in the right account under Section 141(2).
  5. 5For aggregator contributions, apply Section 114(4): 1% to 2% of turnover, then test the 5% cap on payments to workers.
  6. 6Check that the notification, Seventh Schedule category and commencement date conditions are met.
  7. 7State the conclusion with a figure or a clear yes or no, and a practical compliance point.

Quickest way: Fund question in four lines

When to use it: Use when time is short and the question asks about the fund or aggregator contribution.

  1. Write: Section 141 Central fund, three sources, separate accounts.
  2. Write the rate: 1% to 2% of turnover, capped at 5% of payments to workers.
  3. Apply to the facts: compute 1% and 2% bands, then the cap.
  4. Conclude with the lower of the two where the cap bites, and mention notification and commencement.

Common mistakes in Employee Compensation and Social Security Fund

  • Treating the Social Security Fund as a fund for all employees.

    The name sounds general.

    Fix: Say it is for unorganised, gig and platform workers only.

  • Merging the three sources into one pool.

    Students remember the fund but forget Section 141(2).

    Fix: State that a separate account is kept for each source and spent for its own purpose.

  • Applying the 2% rate as fixed.

    Only the upper limit is remembered.

    Fix: Say the rate is notified and lies between 1% and 2% of turnover.

  • Forgetting the 5% cap on payments to workers.

    The cap sits in a proviso.

    Fix: Always test the contribution against 5% of amount paid or payable to gig and platform workers.

  • Including taxes in turnover.

    Turnover is read as gross receipts.

    Fix: Exclude tax, levy and cess paid or payable to the Central Government.

  • Saying the State fund covers gig workers.

    Mixing Section 141(1) with 141(5).

    Fix: The State fund under Section 141(5) is for unorganised workers.

Worked examples

Example 1

A notified aggregator in the Seventh Schedule has annual turnover of ₹500 crore, excluding taxes. It pays or owes ₹20 crore to gig workers. The notified rate is 2%. What is the maximum contribution?

Show the solution
  1. Contribution at 2% of turnover = 2% × ₹500 crore = ₹10 crore.
  2. Cap: 5% of ₹20 crore paid or payable to workers = ₹1 crore.
  3. The contribution must not exceed the cap, so ₹10 crore is cut down to ₹1 crore.
  4. Section 114(4) requires the commencement date to be notified, so the duty applies from that date.

Answer: The contribution is limited to ₹1 crore, because of the 5% cap on payments to gig and platform workers.

Example 2

A State Government receives ₹40 lakh from composition of offences under the Code relating to the State. Where is it credited and who may it benefit?

Show the solution
  1. Composition of offences relating to the State Government is a source named in Section 141(5)(i).
  2. It is credited to the State Social Security Fund established by the State Government.
  3. Section 141(5) says the fund is for the welfare of unorganised workers.
  4. It is administered and spent in the manner the State Government prescribes.

Answer: The ₹40 lakh goes to the State fund under Section 141(5) and is spent for the welfare of unorganised workers as the State prescribes.

Exam tips

  • Write the section number with each point: 141(1), 141(2), 141(5), 114(4).
  • In a numerical, show the 1% to 2% band and then apply the 5% cap.
  • Draw the line between Central and State funds in one sentence.
  • For compensation questions, apply facts to the test of injury or death arising out of and in the course of employment.
  • Close with a compliance point such as the notification of rate, category and commencement date.

Practice questions from Social Security Legislations

Employee Compensation and Social Security Fund in other exams

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

Employee Compensation and Social Security Fund: frequently asked questions

What is the Social Security Fund under Section 141?

It is a fund the Central Government establishes for the social security and welfare of unorganised, gig and platform workers. It has separate accounts for each source of money.

How much must aggregators contribute?

The rate is notified by the Central Government at not less than 1% and not more than 2% of annual turnover. The contribution cannot exceed 5% of the amount paid or payable to gig and platform workers.

Can a scheme for gig workers be funded from CSR?

Yes. Section 114(3)(e) allows a scheme to be funded from a corporate social responsibility fund within the meaning of the Companies Act, 2013.

Do States have their own fund?

Yes. Section 141(5) requires each State Government to establish a fund for unorganised workers, credited with State composition amounts and other prescribed sources.