Table of Contents

Introduction......................................................................................................................................1

Definition.....................................................................................................................................1

Why Do We Need Social Security...............................................................................................2

OBJECTIVES OF SOCIAL SECURITY....................................................................................2

Social Security legislations in Organized sector.............................................................................3

Social Security in unorganized sector..............................................................................................7

Other Provisions for Employees Medical Care, Safety, Occupational Health and Welfare
Funds:-.......................................................................................................................................11

Trends and issues:-........................................................................................................................13

Examples of Companies Following Social Security:-...................................................................16

Social Security Benefits in CASP (NGO):-...............................................................................16

Social Security Benefits in TATA Motors:-..............................................................................18

Social Security benefits in NATCO PHARMA LTD.-..............................................................20

Bibliography:-................................................................................................................................21

1
Introduction:-
Definition:-

There is no commonly accepted definition of the term "SOCIAL SECURITY". According to the
I.L.O. Social Security means, the result achieved by a comprehensive and successful series of
measures for protecting the public (or a large sector of it) from the economic distress that, in the
absence of such measures, would be caused by the stoppage of earnings in sickness,
unemployment or old age and after death; for making available to that same public, medical care
as needed; and for subsiding families bringing up young children. (ILO, Geneva, 1958) again
ILO redefines Social Security as a protection given by society to its members through a series of
public measures from economic and social distress that otherwise would be caused by stoppage
of or substantial reduction of earnings resulting from sickness, maternity, employment, injury,
unemployment, invalidity, old age and death; the provision of medical care and the provision of
subsidies for families with children (ILO Geneva 1984, p.3).

Why Do We Need Social Security:-

Social Security protects not just the subscriber but also his/her entire family by giving benefit
packages in financial security and health care. Social Security schemes are designed to guarantee
at least long-term sustenance to families when the earning member retires, dies or suffers a
disability. Thus the main strength of the Social Security system is that it acts as a facilitator - it
helps people to plan their own future through insurance and assistance. The success of Social
Security schemes however requires the active support and involvement of employees and
employers.
As a worker/employee, you are a source of Social Security protection for yourself and your
family. As an employer you are responsible for providing adequate social security coverage to all
your workers.

2
OBJECTIVES OF SOCIAL SECURITY:-

The meaning of the Social Security as discussed above clearly indicates the objectives of Social
Security in the developing countries. These objectives are to ensure:
 Support in the event of unemployment or non employment for young orphans, destitute
women, incurably sick, old persons when there is none to take care of them.
 Showing or providing work to those who can work which includes job security and
income guarantee.
 Standardization of income for maintenance of life at an optimum level.
 Protection against fall in income due to any contingency.

3
Social Security legislations in Organized sector:-
The principal social security laws enacted in India are the following:
1) The Employees’ State Insurance Act, 1948
2) The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 (Separate
provident fund legislations exist for workers employed in Coal mines and tea
plantations in the state of Assam and for seamen).
3) The Workmen’s Compensation Act, 1923
4) The Maternity Benefit Act, 1961
5) The Payment of Gratuity Act, 1972

These laws can be broadly divided into two categories, namely, the contributory and the non-
contributory.
Contributory laws:-These laws in which financing of the social security programmes is done by
contributions paid by workers and employers and in some cases supplemented by
contributions/grants from the Government. The important contributory schemes include the
Employees State Insurance Act, 1948 and the Provident Fund, Pension and Deposit Linked
Insurance Schemes framed under the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1948.
Non-Contributory laws:- The three major non-contributory laws are the Workmen’s
Compensation Act, 1923, the Maternity Benefit Act, 1961 and the Payment of Gratuity Act,
1972.

1) The Employees’ State Insurance Act, 1948:- The ESI Act provides for health care and cash
benefit payments in the case of sickness, maternity and employment injury. The Act is
applicable to non-seasonal factories using power and employing ten or more persons and
non-power using factories and certain other establishments employing twenty or more
persons.
The ESI Scheme is administered by a statutory body called the Employees’ State Insurance
Corporation (ESIC) which has members representing Employers, Employees, Central and State

4
Governments, Medical profession and the Parliament. The Union Minister for Labour is the
Chairman. The ESI scheme is operational in 642 centers in 22 state/ union territories and the
wage ceiling for coverage is Rs. 6,400 per month.
The ESI Scheme is mainly financed by contributions from the employers and employees. The
rates of the employers’ and the employees’ contribution are 4.75% and 1.75% respectively. The
State Governments’ share of the expenditure on the provision of medical care is to the extent of

12.5% (1/8th within the per capita ceiling) and the remaining 7/8th is funded by the central
government. The Scheme provides full medical facilities, from primary health care to super
specialty treatment in respect of the insured persons

2) The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952:-

The objective of the act is to provide Provident Funds, Pension and Insurance for employees.
Presently the following three Schemes are in operation under the Act through the Employees'
Provident Fund Organization:
a) Employees’ Provident Funds Scheme, 1952
b) Employees’ Deposit Linked Insurance Scheme, 1976
c) Employees' Pension Scheme, 1995

a) Employees’ Provident Funds Scheme, 1952:- the Act is applicable to 180 specified
industries/classes of establishments as is specified in Schedule I of the Act or any activity
notified by the Central Government in the Official Gazette and employing 20 or more
st
persons. As on 31 March 2003 there were 3,44,508 establishments and factories
covered under the Act with a membership of 394.98 lakh under EPF Scheme both in the
Exempted and Un exempted Sectors. With effect from 01.06.2001, an employee on
joining the employment in a covered establishment and getting wages upto Rs.6500/- is
required to become a member.
The benefit under the scheme is to partially withdraw by way of advances, which is
allowed to members for specified purposes.

5
 b) Employees’ Deposit Linked Insurance Scheme, 1976:- This scheme is applicable to all
factories/establishments with effect from August 1, 1976. All the employees who are
members of the Employees’ Provident Fund are required to become members of this
Scheme. Employers are required to pay contributions to the Insurance Fund at the rate of
0.5 per cent of pay i.e. basic wages, dearness allowance including cash value of food
concession and retaining allowance, if any.

c) Employees' Pension Scheme, 1995:- Employees' Pension Scheme, 95 provides the

following benefits, Superannuation on attaining the age of 58 years, Retirement benefit
Permanent total disablement, Death during service, Death after
retirement/superannuation/permanent total disablement, Children pension and Orphan
pension are some of the benefits provided by the scheme.
Members on attaining the age of 58 years and having rendered minimum ten years’
contributory service are eligible for the scheme.
The Scheme is financed by transferring 8.33% of the Provident Fund contribution from
employers' share and by contribution @ 1.16% of basic wages by the Central
Government.
The employee would obtain the pension after retirement and sometimes the spouse,
children after the death of the employee.

3) The Workmen’s Compensation Act, 1923:- The Act provides for payment of compensation
to workmen and their dependants incase of injury and accident (including certain
occupational disease) arising out of and in the course of employment and resulting in
disablement or death. The Act applies to railway servants and persons employed in any such
capacity as is specified in Schedule II of the Act. Schedule II includes persons employed in
factories, mines, plantations, mechanically propelled vehicles, construction works and certain
other hazardous occupations. Minimum rates of compensation for permanent total
disablement and death have been fixed at Rs.90,000 and Rs.80,000 respectively. Maximum
amount for death and permanent total disablement can go up to Rs.4.56 lakh and Rs.5.48
lakh respectively depending on age and wages of workmen.

6
4) Maternity Benefit Act, 1961:- The Maternity Benefit Act, 1961 regulates employment of
women in certain establishments for a certain period before and after childbirth and provides
for maternity and other benefits. The Act is applicable to mines, factories, circus industry,
plantations, shops and establishments employing ten or more persons, except employees
covered under the Employees’ State Insurance Act, 1948. It can be extended to other
establishments by the State Governments. There is no wage limit for coverage under the Act.

5) Payment of Gratuity Act, 1972:- The Payment of Gratuity Act, 1972 applies to factories
and other establishments employing ten or more persons. On completion of five years
service, the employees are entitled to payment of gratuity @15 days wages for every
completed year of service or part thereof in excess of six months subject to a maximum of
Rs.3.50 lakh. The current maximum limit is applicable from 24.9.1997. The wage ceiling for
coverage under the Act has since been removed w.e.f. 24.05.1994.

7
Social Security in unorganized sector:-

Need For Social Security In Unorganized Sector:- The unorganized nature of the workforce,
dispersed nature of operational processes and lack of institutional back up reduces their
bargaining power and their ability to take full benefits from the Acts and legislations enacted for
their benefits. Further, low skill levels of this workforce provide little scope for them to move
vertically in the occupational ladder to improve their financial situation.
The growth of informal, unprotected work with shrinking formal employment compels the
workers to bear an increasing direct burden of financing social needs, with adverse effects on
their quality of life. That burden may also undermine the capacity of enterprises to compete with
global economy.

The existing social security arrangements in the unorganized sector can be broadly classified into
four groups as follows:
i) Centrally funded social assistance programs;
ii) Social insurance schemes
iii) Social assistance through welfare funds of Central and State Governments
iv) Public initiatives.

Centrally Funded Social Assistance Programs

The centrally funded social assisted programs include schemes for both rural and urban areas
under the National Social Assistance Program (NSAP), which has three components viz.,
1. National Old Age Pension Scheme (NOAPS) - The destitute old age persons having little
or no regular means of subsistence from his/her own source of income or through
financial support from the family members or other sources is eligible to get old age
pension @Rs.75 per month.
2. National Family Benefit Scheme (NFBS) - The NFBS provides a lump sum family
benefit of Rs. 10000 to the bereaved household in case of death of the primary bread
winner irrespective of the cause of death. This scheme is applicable to all the eligible
persons in the age group of 18-64.

8
 3. National Maternity Benefit Scheme (NMBS) - Under the NMBS, cash assistance of
Rs.500 is provided to the women of household below poverty line and 19 years of age
and above, up to the first two live births.

Other schemes implemented by the government to ensure creation of adequate employment

opportunities to provide social security to the people in the unorganized sector are:

Employment Assurance Scheme (EAS)

It envisages creating additional wage employment opportunities at the time of acute shortage of
wage employment through manual work undertaken for creation of infrastructure by the rural
poor living below the poverty line. It is a centrally sponsored scheme run on cost sharing basis
between the centre and states in the ratio of 75:25.

Swaran Jayanti Gram Swarojgar Yojana (SGSY)

SGSY primarily improve the family income of the rural poor. It covers all aspects of self
employment and beneficiaries assisted through credit-cum-subsidy program

Jawahar Gram Smridhi Yojana (JGSY)

JGSY ensure employment of rural infrastructure and generate wage employment for unemployed
rural poor.

Social insurance schemes

The Social Insurance Schemes available to the unorganized sector are operated through the LIC
such as Social Security Group Insurance Scheme- All persons in the age group of 18 to 60 years
belonging to the 24 approved occupation groups i.e. Beedi Workers, Brick-Kiln Workers,
Carpenters, Cobblers, Fishermen, Hamals, and Handicraft Artisans etc. The premium under the
Social Security Group Insurance Scheme is Rs.10 per thousand sum assured, of which 50% is
paid out of Social Security Fund and rest 50% is paid by the beneficiaries or the nodal agency.
Some insurance schemes are:

Janshree Bima Yojana

Janashree Bima Yojana providing insurance cover of Rs.20,000 in case of natural death;
Rs.50,000 in case of death or total permanent disability due to an accident and Rs.25,000 in case

9
of partial disability. The premium for these benefits is Rs.200/- per beneficiary of which 50% of
the premium i.e.,Rs.100 is contributed from the “Social Security Fund” and 50% contributed by
the beneficiary/state government/nodal agency. It is available to persons in the age group of 18 to
60years and living below or marginally above the poverty line.

Krishi Shramik Samajik Suraksha Yojana-2001

Ministry of Labour in consultation with Ministry of Finance launched a Krishi Shramik Samajik
Suraksha Yojana – 2001 through the Life Insurance Corporation of India w.e.f. 1.7.2001. The
scheme envisage to cover 20,000 agricultural laborers from each of the selected 50
blocks/districts, taking at least one from each state over a period of three years during the first
phase and the age limit is 18-50 years. The beneficiary will contribute Rs.365/- per annum and
government will provide Rs.730/- per annum per beneficiary. The benefits available under the
Scheme include life-cum-accident insurance, money-back and the superannuation benefits. In
case of natural death or permanent partial disability before the age of 60, beneficiary will get
Rs.20,000/- and Rs.25,000/- respectively and Rs.50,000 in case of accidental death and
permanent total disability

National Policy for Older Persons

This issue is to be addressed through thrift and self-help, where people prepare for old age by
open a single Individual Retirement Account (IRA) with the pension system at as early a point in
his life as possible by saving accumulating through their decades in the labor force to a minimum
of Rs.100 per contribution and Rs.500 in total accretions per year and at 60’s they would derive
benefit.. The role that the Government can play in this enterprise is to create the necessary
institutional infrastructure to enable and encourage each citizen to undertake this task.

Social assistance through welfare funds of Central and State Governments

The Central Government through the Ministry of Labour also operates at present Five Welfare
Funds for workers and Source of funding of these Funds is collection through access on mica
export, export of iron ore, internal consumption of iron ore, manganese ore and chrome ore as
well as limestone and dolomite. Some of the welfare funds are

10
Group Insurance Scheme for Beedi Workers
According to this scheme provides Rs.3,000/- in case of natural death, Rs.25,000/- due to
accidental death or total permanent disability and Rs.12,500 in case of partial permanent
disability. The premium of Rs.18 per worker per annum is equally shared by the Beedi Worker
Welfare Fund (BWWF) and ‘Social Security Fund’ of the Central Government.

Integrated Housing Scheme for beedi and mine workers

An Integrated Housing Scheme for Beedi/Iron ore/Manganese ore/Chrome ore workers,
Limestone and Dolomite mine workers is in operation wherein subsidy of Rs.20,000 per worker
or 50% of the actual cost of construction whichever is less is provided.

Welfare Fund for Building and Other Construction Workers

There is Building and Other Construction Workers Act, 1996 enacted by the Central Govt. The
Act has provision of levying access and to implement the Scheme through the welfare fund for
the benefit and welfare of building and other construction workers and in the long run
government will also take care of their social security needs and is also examining the
possibility of having a National Policy on Home Based Workers.

Thrust Areas
An important thrust area identified by the Ministry of Labour, Government of India, is the social
security of workers in the fish processing industry. A welfare fund is been allocated to them and
this would be used for providing various kinds of social security and welfare amenities to such
workers.

Experience of the States

In addition to the Central Government, a number of State Governments have also set up welfare
funds for various categories of workers in their states so that they would be benefited.

Public Initiatives
In addition to Governmental efforts, several public institutions and agencies are also providing
various kinds of social security benefits to selected groups of workers. Two of the outstanding
examples are those of Self-Employed Women’s Association (SEWA)started in 1975 with a
demand from members for a maternal protection scheme followed by health care and child care

11
and the Mathadi Workers Boards in Maharashtra is regulated by Mathadi Tripartite Boards set up
since 1969. There are about 50,000 registered employers and 1,50,000 workers registered under
30 different Boards in the State. Each Board is headed by a Chairman appointed by the
Government of Maharashtra and there are equal number of representatives from the unions and
the employers associations. The Mathadi Workers Boards, besides settling disputes between
unions and employers, are actively involved in imparting social security benefits to their
members by setting up of hospitals and dispensaries

Other Provisions for Employees Medical Care, Safety, Occupational Health and Welfare
Funds:-
Medical care:- ESI provides for health care and cash benefits to employees covered by it I case
of sickness, maternity and employment injury. Where as Workmen’s Compensation Act 1923
(WCA) provides for compensation in cases of accidents arising out of or in course of
employment but does not provide for medical care. The Factories Act, 1948 (FA) is a basic
legislation on health and safety at workplace and provides clauses on various measures the
employer should undertake to ensure the safety and health of the workers.

Pattern of helath care provision in public and private sector:- In public sector particularly
banks, steel, coal and petroleum industries the medical benefits are virtually unlimited for a full
time permanent employee. Reimbursement of expenses for major ailments is atleast 75% of the
expenses incurred, if not 100%. But in private sector except for TATA Iron and Steel company,
medical, benefits for non-executive employees is usually limited to a maximum of a few
thousands. According to a survey, the maximum a private company would spend on an employee
and his/her family in a year for health care would be less than a months basic salary.

Legislations for to provide medical care and health benefits for contractual, regular and causal
employees are

 Interstate Migrant Workmen( Regulation Of Employment And Conditions Of Service)

Act, 1979
 Beedi And Cigar Workers (Conditions Of Employment And Service) Act, 1966

12
  Beedi Worker Welfare Fund Act, 1976
 Building And Other Construction Workers (Regulation Of Employment And Conditions
Of Service) Act, 1996.

Occupational health:- three important legislations in the area of occupational safety and health
are

 The Factories Act, 1948 – regulates health, safety, welfare and working conditions of
workers in factories and is enforced by state government through inspectors.
 The Mines Act, 1972 – provides measures for the health, safety and welfare of workers in
the coal, metalliferous and oil mines.
 The Dock Workers (Safety, Health & Welfare) Act, 1986 – contains provisions for
health, safety and welfare of workers working in ports /docks.

Welfare funds:- Statutory Welfare Funds have been set up I coal, mica, iron ore, chrome ore,
manganese and dolomite mines and in the beedi and cine industries to supplement the fforts of
employers and government. Large companies in the public and private sectors in coal and iron
ore mines such as Coal India Ltd and Tata Colliers provide a variety of welfare facilities like
water supply, medical, education, housing, canteen, etc,. to their employees.

13
Trends and issues:-

Job security to income security:

Indian legislation provides job and income guarantee to permanent workmen covered by the
industrial disputes act. The 1957 conference of the Indian labour conference resolved that for
automation to be introduced without tears, technological progress should not result in
retrenchment.

A recent report of south Asian multi disciplinary team of the ILO suggested that if work force
adjustments become necessary, income guarantee measures should be introduced before the
current job protection is done away with

Thus, collective bargaining has over the years been responsible for maintain job guarantee and
where workforce reductions become inevitable, voluntary separations are induced with lump sum
payment which provide semblance of guarantee against income loss resulting out of job loss.

Zero to full cover:

Collective bargaining has helped the workers in the organized sector to improve the statutory
welfare benefits particularly in regards to health care, housing and dependence care in times of
untimely death.

In recent years, there has been some progress towards creation and improvement of retirement
benefits. While for the workers in the unorganized sector, there is hardly any medical or health
insurance covered, in organized it is comparatively better.

Welfare to money fare:

One notices a trend towards converting most of the employee benefits into cash and seeking
payments in cash. Employers find it expedient to conceive such demands from trade unions
because of the numerous problems they face in administering a variety of welfare benefits.

There are few large companies which had problem in running the canteen. They tend to close the
canteen facilities except where it is statutory and offer canteen allowances to individual
employees instead of canteen subsidies.

14
There are many such examples, gradually conversion of many such benefits into cash have
become dysfunctional in as much as the purpose for which the benefits were originally conceived
began to be defeated.

Ceilings raised and/ or removed:

There is no wage limit under the payment of gratuity act 1972. During 1990’s the ceiling on
gratuity has been raised from 1 lakh to 3.5 lakhs. Slab system of dearness allowance and removal
of house rent allowance have been some other developments in 1990’s due to legislative
amendments and collective agreements. There is a proposal to remove the salary limits eligibility
and quantum of bonus under the bonus act.

Portable benefits:

Earlier pension schemes were designed to reward people for long and loyal service not any long
run. Now people want to take away there cash balance pension money with them when they shift
jobs so that they do not loose pension contributions whether they are in late 20’s or late 50’s.
employees who call it a day mid day through their career and still expect to receive a substantial
benefits in a cash balance plan more than they would under most traditional defined benefit
pension plans.

As pensions become portable, employers are introducing age weighted profit sharing plans. It is
not pensions alone. Provident fund and health benefits too can be portable.

Administration

There have been several reviews of ESI and provident funds scheme in recent year with the use
of IT more information is also available while the objectives of the scheme and the benefits
under them are laudable, there is going concern about the high cost of administration, poor
quality of service made manifest by poor quality drugs, discourteous behavior, delays, in
settlement inefficiencies, and even allegations about rampant corruption in dispensing benefits.

15
Financing:

Social security and employee welfare funds should be established when the firms and the
national economy are doing well. Unfortunately, this was not done in adequate measure.

In this context of structural changes in the economy, with increasing incidents of unemployment
among the educated and with the swelling of ranks of the unemployed are making reverse
graduation into the unorganized sector, the problem providing income security to the workers
affected by restructuring at enterprise and economy levels is acquiring serious proportions.

Integration:

Though the social security schemes and benefits for the workforce in the organized sector differ
in their scope, there is a significant over lap in their coverage of clients. This provides the
rational for integrating various social security schemes and extends the coverage to even larger
sections of the work force.

Several committees on commissions, the Indian labour conference, and even the committees of
parliament are debating in the case for integration and the tangible benefits that accrue from it
from mid 1950’s.

16
Examples of Companies Following Social Security:-

Social Security Benefits in CASP (NGO):-

The voluntary organization in a participating process towards implementation of social security

measures has mostly risen during and after the post world war scenario. The non-Governmental
organization focusing towards any developmental activities have sustainability factor in mind for
its beneficiaries. The activities designed by and large cover the overall development may it be in
an institutionalized or de-institutionalized form. They also promote to cover the larger
perspective of education, health, income generation, community development and social
responsibility, which provide a security net directed towards sustainable development. In Indian
context most NGOs follow the Gandhian concept of development whereby every village
becomes a self-sustained village and every family plays an integral role in the development of
the village.

CASP is a child focused, humanitarian organization without any religious or political affiliations.
It has been working for the development of children, their families and communities (below
poverty line) for the past 25 years. Currently CASP is sponsoring nearly 75000 children in nine
states of India

Community Aid & Sponsorship Programme (CASP) has been playing a key role to provide
inbuilt support system to its clients for promoting social security. The organization thus deals
and addresses the overall need of a child, family and its community. The programmes that have
been undertaken start with educational and health needs of the child, covering infra-structural
and income generation requirements of the family and with environment responsible for
progressive development in the community. The activities include health insurance, accidental
insurance, and formation of credit and industrial cooperatives, women income generation groups,
children's banks, scholarships and community based service oriented functional groups.

17
Our major thrust

CASP has a philosophy of achieving its objectives through people's participation and different
stakeholders who are involved while implementing various programmes. Keeping in view the
social security aspect CASP as an organization firmly believes that security should be culture
specific and woven with the emotional bonds. Merely providing economic security will not lead
to the development in totality. Hence strengthening institutions like family and community is
very significant towards sustainability of the safety net. It is essential to integrate these
institutions with the outside resources so as to make a stronger society.

CASP has been moving with the time and providing inputs to its beneficiaries to become
sustainable to various developmental interventions. Training and networking are our core
components.

CASP has enabled families and groups towards formation of cooperatives. These infrastructures
have become institutions today with an objective of creating safety net for the people e.g. In one
of the slum areas 107 cooperative housing societies have been formed which takes care of all the
housing and environmental issues of that particular slums. The population covered in this area is
approx. hundred thousand people. Similarly the credit co-operatives of women groups take care
of the financial aspects and needs of the neighborhood communities. CASP being a child-
focused organization has also trained children and has inculcated the habits of saving and
working in a team. The schools have started a bank where these children save and use amount for
their school needs and supplies. The children have also formed their own cooperative wherein
they purchase material in bulk and supply at a very reasonable rate. These are some of the
program interventions, which have become an integral part of slum development.

With a view of development, social security should have holistic features combining social
structures, institutional resources, family bonds, community organizations and resources so as to
create an environment of strong relationships, which provide safety nets at all levels.

18
Social Security Benefits in TATA Motors:-

Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering
eligible employees. The plan provides for a lump sum payment to vested employees at
retirement, death while in employment or on termination of employment of an amount equivalent
to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon
completion of five years of service. The Company makes annual contributions to gratuity fund
established as trust. The Company accounts for the liability for gratuity benefits payable in future
based on an independent actuarial valuation.

Superannuation

The Company has two superannuation plans, a defined benefit plan and a defined contribution
plan. An eligible employee on April 1, 1996 could elect to be a member of either plan.

Employees who are members of the defined benefit superannuation plan are entitled to benefits
depending on the years of service and salary drawn. The monthly pension benefits after
retirement range from 0.75% to 2% of the annual basic salary for each year of service. The
Company accounts for the liability for superannuation benefits payable in future under the plan
based on an independent actuarial valuation.

With effect from April 1, 2003, this plan was amended and benefits earned by covered
employees have been protected as at March 31, 2003. Employees covered by this plan are
prospectively entitled to benefits computed on a basis that ensures that the annual cost of
providing the pension benefits would not exceed 15% of salary.

The Company maintains a separate irrevocable trust for employees covered and entitled to
benefits. The Company contributes up to 15% of the eligible employees’ salary to the trust every
year. The Company recognizes such contributions as an expense when incurred. The Company
has no further obligation beyond this contribution.

Bhavishya Kalyan Yojana (BKY)

Bhavishya Kalyan Yojana is an unfunded defined benefit plan. The benefits of the plan accrue to
an eligible employee at the time of death or permanent disablement, while in service, either as a
result of an injury or as certified by the Company’s Medical Board. The monthly payment to

19
dependents of the deceased / disabled employee under the plan equals 50% of the salary drawn at
the time of death or accident or a specified amount, whichever is higher. The Company accounts
for the liability for BKY benefits payable in future based on an independent actuarial valuation.

Post-retirement Medicare Scheme

Under this scheme, employees get medical benefits subject to certain limits of amount, periods
after retirement and types of benefits, depending on their grade and location at the time of
retirement. Employees separated from the Company as part of Early Separation Scheme, on
medical grounds or due to permanent disablement are also covered under the scheme. The
liability for post-retirement medical scheme is based on an independent actuarial valuation.

Provident fund

The eligible employees of the Company are entitled to receive benefits under the provident fund,
a defined contribution plan, in which both employees and the Company make monthly
contributions at a specified percentage of the covered employees’ salary (currently 12% of
employees’ salary). The contributions as specified under the law are paid to the provident fund
and pension fund set up as irrevocable trust by the Company or to respective Regional Provident
Fund Commissioner and the Central Provident Fund under the State Pension scheme. The
Company is generally liable for annual contributions and any shortfall in the fund assets based
on the government specified minimum rates of return or pension and recognizes such
contributions and shortfall, if any, as an expense in the year incurred.

Compensated absences

The Company provides for the encashment of leave or leave with pay subject to certain rules.
The employees are entitled to accumulate leave subject to certain limits, for future encashment.
The liability is provided based on the number of days of un-utilized leave at each balance sheet
date on the basis of an independent actuarial valuation.

20
Social Security benefits in NATCO PHARMA LTD.-

Provident fund:-
The Company contributes to the provident fund maintained by the Regional Provident Fund
Commissioner, in accordance with Employees provident fund and Miscellaneous Provision Act,
1952. The provident fund plan is a defined contribution plan and contribution paid or payable is
recognized as an expense in the period in which the employee renders services. There are no
other obligations of the Company other than the contributions made to the fund.

Gratuity:-

Gratuity is a post employment defined benefit plan. An independent actuary, using the projected
unit credit method calculates the defined benefit obligation annually. Actuarial gains or losses
arising from experience adjustments and changes in actuarial assumptions are credited or
charged to the profit and loss account in the period in which such gains or losses arises.

Employee state insurance:-

The Company contributes to the Employees State Insurance Fund maintained by the state
authorities, in accordance with Employees State Insurance Act, 1948. The plan is a defined
contribution plan and contribution paid or payable is recognised as an expense in the period in
which the employee renders services. There are no other obligations of the Company other than
the contributions made to the funds.

Leave encashment:-

As per the Company's policy, eligible leaves can be accumulated by the employees and carried
forward to future periods either to be utilized during the service, or en-cashed. Encashment can
be made during service or on resignation, or retirement of the employee. The value of benefits is
determined based on an independent actuarial valuation using the projected unit credit method as
at the year end. Actuarial gains and losses are recognized immediately in the profit and loss
account.

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Bibliography:-

Books:

 Industrial relations by venkata ratnam

Web sites:

www.ilo.org/wcmsp5/groups/public/---.../wcms_067588.pdf

www.planningcommission.nic.in/aboutus/committee/.../ wg_soclscty.pdf

www.tatamotors.employeebeneifts.co

www.natcopharma.socialsecuritybenefits.co

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