Enrolled but Excluded: Barriers to Social Security Access for Contract Workers in India

INTRODUCTION

The blue-collar workforce in India faces numerous challenges, including job insecurity, unfair working conditions, and lack of stable employment. While formal employment is often viewed as a safeguard against these issues, the reality is more complex. A significant portion of India's blue-collar workers are outsourced to third-party contractors, blurring the lines between formal and informal employment.

The share of contractual workers in India is on a rise. According to the Quarterly Employment Survey, the second quarter of 2022 recorded over 18.5% of contractual workers as compared to the 8.5% in the earlier quarter. The survey captures non-farm sectors such as manufacturing, construction, trade, transport, education, health, accommodation & restaurants, information technology (IT)/business process outsourcing (BPO), and financial services. This indicates an Indian business’ preference of hiring contractual workers, as also highlighted in the Economic Survey 2015-16, which finds that one of the main reasons behind rise in contract labour is that the “workers are considered employees of the contractor exempting them from certain labour laws”. 

This arrangement often results in contract workers receiving less favorable terms of employment compared to permanent employees, particularly in accessing national social security and medical insurance schemes. One such scheme is the Employees' State Insurance (ESI), a contributory program designed to provide health coverage and social security benefits to workers. Both the employer and the employee make monthly contributions to the scheme where the former is responsible for the 4.75% of the payable wages and latter provides 1.75% of the wages. Additionally, workers earning Rs. 137/- or lesser per day are exempted from making contributions to this fund.  Unlike many other labour laws, the responsibility of enrolling contractual workers in ESI remains under the employer rather than the contractor.

ESI’s importance has grown in the last decade as more and more firms are registered under this scheme. This figure has increased from 5.8 lakhs in 2012 to 15.4 lakhs in 2022, which represents an increase of 200% in a decade. Along with that, the number of employees registered under ESI has increased from 1.63 crore in 2012 to 2.78 crore in 2022, which represents a raise of nearly 70% in the last decade. The latest data released by the ESIC are 17.28 lakh new workers enrolled under ESI solely in the month of October of 2023. Judging solely from its enrollment numbers and income, ESI can easily pass off as a successful scheme. However, much of its criticism lies in the benefit distribution with workers often not reaping quality medical services and overall low rate of disbursement of funds.

In this article, we analyse the use of ESI by workers in a private establishment in Haryana and gain an understanding of what this scheme translates into for these beneficiaries. We find that many loopholes in the inherent informal nature of hiring and management of blue-collar workers in India allow organisations to easily bypass employer duties stripping the workers of their entitled benefits. Even worse, there is not much emphasis on what fully entails the employer’s responsibility besides processing enrollments in the scheme. This leads to workers relying on their family savings rather than ESI funds due to lack of knowledge on the scheme and distrust in the ESI dispensary.

LITERATURE REVIEW

The limitations of ESI and the gap between the figures of enrolment and withdrawals has been a point of investigation for several studies in the past. 

A robust study conducted by Verma et. al (2012)  evaluates the utilisation of the scheme at an ESI dispensary in Shiavaji Colony, Rohtak. Through a linear regression, they find that utilisation of public health services largely depends on their accessibility and availability. Non availability of medicines and hospital staff formed for a total of 58.1% of the reason why the beneficiaries were dissatisfied. 41.5% of the respondents reported lack of knowledge regarding the scheme and therefore were not using it. Though this study was conducted a decade ago, our analysis confirms that not much has changed behind the dissatisfaction and non-utilisation of ESI by beneficiaries even today. 

A study by Sasikala and Krishnamurthy (2017) delves into more structural reasons behind the failure of the scheme. The most common reasons uncovered in their surveys with fifty insured factory workers were cumbersome formalities in availing benefits, prolonged waiting periods, rude behaviour of medical staff and unsuitable timing of the dispensary.

Prasad and Ghosh (2020) provide a detailed analysis of the numbers around coverage and benefits under ESIC as reported on their website. Findings show that ESI may not be providing the best quality of health services to its beneficiaries with low hospitalization rates and extremely low length of stay. They also note a rise in registrations in the scheme over the years without any increase in the supply of health services. The authors identify large reserves with ESIC owing to this gap. As per the figures from ESIC’s annual reports, 63.6% of their total income remained with the department as unused funds in the financial year of 2018. This raises the question behind the entitlement of these unused funds which include the contributions of the workers themselves.

Ahuja (2020) dives into how India’s employment-based welfare policies have historically marginalised the informal sector despite the high percentage of people employed within it. It has, in fact, largely defined the boundaries of formal and informal employment. Contract labour opened the pathway for workers offering blue collar services to be employed within formal institutions and potentially access these employment-based welfare. In theory, ESI aims to do so. The scheme is meant to serve as a safety net for the most vulnerable workers of our country and is therefore a right of every contracted worker despite their nature of work. Ironically, this segment of workers (i.e. those hired through third party contractors) see a higher pattern of evading labour laws and being withheld of employment benefits.

While previous studies have predominantly examined workers in manufacturing industries such as mining, production, and automobiles—sectors known for their hazardous working conditions—our study focuses on the education sector and provides data on workers under a relatively less precarious environment. This shift in focus allows one to explore whether safe working conditions translate into better access to healthcare rights for blue-collar workers. Moreover, our research specifically targets contracted labour, particularly blue-collar workers employed at private formal establishments through third-party contractors. This unique angle enables us to investigate the critical role that third-party contractors play in mediating access to employment-based welfare schemes. This lens has been understudied despite the increase in contractual labour in India.

METHODOLOGY AND DATA COLLECTION

This study uses both primary and secondary sources of research. For primary data, we conducted surveys with 29 workers employed in a private education institution in NCR which collected information on worker profile, their awareness of the scheme, opinions and experiences they have had in accessing it. These interview surveys were conducted in Hindi and testimonies have been used anonymously. Our sample selection followed convenience sampling due to multiple reasons – a) the surveys were conducted by volunteers of Nepathya Foundation, b) owing to past relationship with the NGO, workers felt safe while expressing their opinions honestly during the interviews, c) the NGO has not conducted any interventions for ESI reflecting an undisturbed sample.

Our choice behind this specific institution can be broken down to two main reasons – a) all workers in the housekeeping, dining and security departments earn a monthly wage of between 10,000 and 20,000 rupees making them eligible for ESI and b) all workers are hired through a third-party contractor that specialises in providing such labour. This hiring mechanism for informal workers such as cleaners, servers and security staff became the primary point of investigation in this study. Secondary sources of research include studies and interviews that reflect contractor-labour relationships since we did not conduct any interviews with contractors and employers.

RESULTS

Our sample included a total of 29 workers with 12 females and 17 males. On average, a worker was in their mid -twenties and had a family of four, including two children. 82% of the sample had another family member who was earning, so they were not the sole breadwinner in the family. All the workers in our sample were employed in blue collar jobs that require a certain degree of manual labour. These include – security personnel, housekeeping and kitchen staff members. 

All workers except one were enrolled in the scheme. The one worker who was not enrolled in the scheme had gained employment at the establishment only a month prior to the time when the survey was being conducted. We found that his paperwork was still in the process, and he would soon be enrolled in the scheme too. This corresponds to the high numbers of ESI enrolments that the ministry continues to release data on every quarter. 

While we try to understand how useful ESI has been for workers in this establishment, we find that literacy levels do not have any linear or predictable impact on perceiving the scheme as useful. Workers labelled the scheme as useful only if they have been able to avail it successfully in the past. This helps us eliminate any bias that education may bring, confirming that education is not the differentiating factor between blue collar contracted workers and regular employees for utilising ESI.

An interesting find was that locals were more familiar with the scheme as compared to those workers who migrated to Haryana for work from other states. 94% of the locals reported awareness regarding the scheme whereas only 54% of migrant workers were aware about ESI. This can be due to several reasons. Firstly, locals are familiar with the area and can easily explore the ESI allocated hospital for the locality. Many local workers report knowing about the details of the scheme through word of mouth. This indicates that they are more likely to befriend each other and hence gain knowledge about the scheme through each other which might pose a challenge for migrants.

This brings us to our argument that contract workers are not sufficiently oriented about their rights to social benefits by the authorised agents. For many regular employees, it is easy to access this information since they are directly managed by the employer that is also responsible for the ESI enrolment. However, contract employees find it more difficult to approach either their contractor or their principal employer for information regarding social benefits. This leaves the workers in state of confusion and helplessness as also voiced by workers during our surveys.  

Only 17% of the sample reported receiving benefits from ESI and these were mainly in the form of free medicines. Additionally, one female reported receiving a consultancy during her pregnancy. The biggest reason behind this low rate, according to our interviews, was the lack of knowledge regarding the scheme.  Many workers were informed of the reimbursement for medicines which they later availed. However, they are not fully aware of the different kinds of benefits that ESI provides them with. The situation gets more complicated as workers are not aware of the differences between the different health schemes such as Ayushman Bharat. Some workers also reported unawareness about the procedure of availing ESI. Recently enrolled workers have been denied services due to issues with the ESI card provided to them. Information received from the employer upon being enrolled is reportedly different from what the staff at the ESI dispensary tells them. 

“The dispensary said that I need to bring in a card but I do not know much about it. I don’t even know whom I can ask about this and why it is taking so long to issue the card.” ~ reports A, a security guard who has been enrolled in the scheme since he joined the establishment nine months ago.

Unfortunately, both the third-party contractor and the principal employer are far away from such facets as they exit the process of ESI after turning in their required share of paperwork and funds. A report published under the ICEM Contract and Agency Labour project, discovered that contractors often deduct the social security from the workers and the employers but keeps the money for themselves. This is perpetuated due to missing channels of communication between the employers, contractors and workers. 

Legally, ESI funds allocated to the worker can be withdrawn by the worker when they join another institution. However, since this process is managed by the contractor in case of contracted workers, they are isolated from this process. Contract workers are also excluded from trade and labour unions, which does not allow them to voice their concerns and advocate for their rights in such circumstances. 

This is an issue not only regarding labour welfare in India but also public health and financial security. Not being able to access ESI facilities properly, either compromises the health outcomes of the community or burdens them with financial stress. 

To gauge the latter, we asked respondents, what kind of finances do they use in case of health emergencies. 27.5% of the workers said that they borrowed from family and friends and 17.2% of the workers said they resort to borrowing from either banks or the establishment itself. It is important to note that both these forms have some interest rates being charged on them. For this reason, all workers steer clear from moneylenders. P, a kitchen staff working at the establishment for just the  past three months mentioned in his interview - “I have borrowed from moneylenders before coming to this institute. It is unmanageable. I was paying an interest of 10,000 rupees every month on a one lakh principal amount”.  

CONCLUSION

In line with past literature, the reasons behind not using ESI funds lies in the sheer time and effort it takes to process a treatment through it. However, for contract workers, there is a larger barrier of accessing information about ESI in the first place. This backdrop requires government intervention about a clearer division of responsibilities between the contractor and employer regarding social schemes. Some ways of ensuring that workers do not face such issues include – a) increasing the role of either the contractor or the employer in the scheme by mandating workshops and worker trainings to be conducted to help alleviate any issues and b) establishing communication and feedback channels between employer and the worker to ensure that the contractor is unable to take advantage of the ESI funds intended for the workers’ use. 

We believe these steps will decrease the dependency on informal channels such as word of mouth to spread information regarding the scheme which is inefficient as it outcasts certain groups and could potentially lead to misinformation. Unused funds with the Employee State Insurance Corporation from the past years can be injected into the scheme to strengthen the weaknesses that many studies such as ours have brought forward to the policymakers of this nation.