National Journal of Labour and Industrial Law

Volume 2, Issue 2
www.stmjournals.com

A Social Inclusion Perspective of the Unorganized Sector

in India
Chetan Upadhyay*
Student, Amity Law School, Amity University, Lucknow, Uttar Pradesh, India

Abstract
The majority of the workforce in India is unorganised in nature. While the organised sector
workers are protected by labour laws and avail benefit of formal employment contracts and
social security measures, it is the workers of the unorganised sector who are unable to enjoy
such security and benefits. Unorganised workforce in India make a significant contribution to
the growth of the nation, while being denied basic benefits like job security, social security
measures, proper working environment, reasonable pay, pension schemes, health benefits, etc.
This paper tries to differentiate between organised and unorganised sectors, categorises the
unorganised sector into various sub-groups or sectors and highlights their issues. The concept
of social inclusion and social security is explained. Constitutional provisions as given in the
Directive Principles of State Policy which support labour welfare are mentioned. This paper
further discusses collective bargaining as an approach towards resolving issues of
unorganised labour and explores the various efforts and schemes of the Government to
organise the unorganised sector.

Keywords: Organised Sector, Unorganised Sector, Social Inclusion, Social Security,

Collective Bargaining, workforce, labour laws, employment, pension schemes, benefits

*Author for Correspondence E-mail: chetanupadhyayasjc@gmail.com

INTRODUCTION raw materials (Pettinger, 2017) (Pettinger,

This paper focuses mostly on the unorganised
sector workforce which accounts for a huge
portion of the poor and unrepresented
population of the country. The organised
sector of India is well developed and advanced
with many work benefits and schemes. The
unorganised sector on the other hand shows
stark difference from the organised sector,
where, even reasonable pay and healthy work
environment is sometimes an unresolved issue.
The Indian Economy is characterised by a vast
majority of informal or unorganised labour
employment (Kumar & Viji, 2016) (Kumar &
Viji, 2016) [1].
To understand the plight of the unorganised sector
in India, we first have to understand the concept
of sectors and the main difference between
organised and unorganised sectors. An Economy
may be broadly divided into four sectors:
Primary Sector
The primary sector is sometimes known as the
extraction sector – because it involves taking
2017) [2].
Secondary Sector
The secondary sector takes raw materials and
combines them to produce a higher value-added
finished product. For example, raw sheep wool
can be spun to form better-quality wool. This
wool can then be threaded and knitted to
produce a jumper that can be worn (Pettinger,
2017) (Pettinger, 2017) [2].
Tertiary Sector
The tertiary or service sector is concerned with
the intangible aspect of offering services to
consumers and business. It involves retail of
the manufactured goods. It also provides ser-
vices, such as insurance and banking
(Pettinger, 2017) (Pettinger, 2017) [2].
Quaternary Sector
The quaternary sector is said to the intellectual
aspect of the economy. It includes education,
training, the development of technology, and
research and development (Pettinger, 2017)

NJLIL (2019) 1–8 © Law Journals 2019. All Rights Reserved Page 1
A Social Inclusion Perspective of the Unorganised Sector in India
(Pettinger, 2017) [2]. Above divisions of sectors is
based on economy. On the basis of employment,
sectors can be divided into two parts:
Organised Sector
Section 2(f) of the Unorganized Workers
Social Security Act, 2008 (Ministry of Law
and Justice, 2008) (Ministry of Law and
Justice, 2008), defines organised sector as “an
enterprise which is not an unorganised sector.”
It is pertinent to note that organised sector may
also have unorganised workers working there.
A few labour laws which govern the organised
sector are as follows:
• Shops and Commercial Establishment Act
(State-wise)
• Factories Act, 1948
• Industrial Employment Standing Order
Act, 1946
• Contract Labour (Regulation & Abolition)
Act,1970
• Building and other construction workers
(Regulation of employment and conditions
of service) Act, 1996
• Payment of Wages Act, 1936
• Minimum Wages Act, 1948
• Payment of Bonus Act, 1965
• Payment of Gratuity Act, 1972
• Workmen’s Compensation Act, 1923
The organised sector already enjoys social
security benefits under the numerous above-
mentioned acts.
Unorganised Sector
The term unorganised sector was defined in a
report by the National Commission for en-
terprises in the Unorganised Sector
(National Commission for Enterprises in the
Unorganized Sector, August, 2007) (National
Commission for Enterprises in the
Unorganized Sector, August, 2007) [3] as:
“The unorganised sector consists of all unin-
corporated private enterprises owned by indi-
viduals or households engaged in the sale and
production of goods and services operated on
a proprietary or partnership basis and with
less than ten total workers”.
According to Section (2) (l) of The Unorgan-
ised Worker’s Social Security Act, 2008
(Ministry of Law and Justice, 2008) (Ministry
NJLIL (2019) 1–8 © Law Journals 2019. All Rights Reserved
Chetan Upadhyay
of Law and Justice, 2008), [4] an unorganised
sector is defined as “an enterprise owned by
individuals or self-employed workers and en-
gaged in the production or sale of goods or
providing service of any kind whatsoever, and
where the enterprise employs workers, the
number of such workers is less than ten.” It
may be understood as the sector which is out-
side the purview of the Government.
UN Economic and Social Council (ECOSOL)
(United Nations, 1993) (United Nations, 1993)
[5] denotes the term ‘informal sector’ as:
a. All private unincorporated enterprises
(informal enterprises) or households en-
gaged in the production and sale of goods
or services, and
b. Enterprises with employment size below a
pre-determined threshold.
It is a common observation that the availability
of cheap labour increases as we proceed towards
a rural setup. In this regard, labour can also be
divided on the basis of the development of a
particular area. Such division can be made on the
basis of labour availability and rate of wages at
rural areas, semi-urban areas and at urban
areas. Difference in labour availability and the
paying power of the employer in an area causes
disparity in payment received by a labourer. This
disparity among labour working in rural and
urban areas may lead to exploitation. For
instance, a housemaid in a semi-urban setup may
receive a daily wage of Rs. 20 which loosely
amounts to around Rs.600 a month. For almost
similar household chores in an urban setting, a
housemaid is expected to receive around Rs.
1000 to Rs. 1400 per month which may increase
to almost Rs. 2000 per month in the form of a
salary structure, keeping in mind the occasional
festive gifts and the unexpected day or two leave
from work. In most cities’ housemaids juggle
two or three household jobs and get paid in a
monthly manner. It can be inferred from the
example that in the lesser developed areas or the
semi-urban areas, the housemaid is the one who
is in dire need of money and due to competition
is ready to work at lesser wages. On the other
hand, in urban areas as work availability is more
and the paying power of the employers is more,
the housemaids take advantage of situation. They
not only take a higher payment as a salary, but
also skip days of work and take festive benefits
and holidays.
Page 2
National Journal of Labour and Industrial Law
Volume 2, Issue 2

Table 1: Difference between Organized and Unorganized Sector.

Basis for Organised Sector Unorganised Sector
Comparison
Definition It is defined as “an enterprise It is defined as “an enterprise owned by individuals or self-
which is not an unorganised employed workers and engaged in the production or sale of goods
sector”. or providing service of any kind whatsoever, and where the
enterprise employs workers, the number of such workers is less
than ten”.
Governed by Various acts like The Industrial The Unorganised Worker’s Social Security Act.
Disputes Act, Factories Act,
Bonus Act, PF Act, Minimum
Wages Act etc.
Remuneration Remuneration is usually received Remuneration is usually received in the form of daily wages.
in the form of monthly salary.
Job security There is a job security in There is less job security in unorganised sector and usually no
organised sector and usually a notice is required before terminating services.
notice has to be served before
terminating services.
Working hours Working hours are quite fixed and Working hours are usually not fixed.
clearly mentioned in the job
contract.
Overtime Workers are paid remuneration No provision for overtime.
for overtime.
Salary of As prescribed by the government Usually quite less than the salary prescribed by the government.
workers or the job contract.
Increment in Salary may be incremented once Salary is hardly incremented.
salary in a while in the form of
promotions to reward good
quality of work.
Benefits and Employees get add-on benefits Such benefits are usually not provided in the unorganised sector.
perquisites like medical facilities, pension,
leave travel compensation, etc.

From the discussion on sectors and the
difference between organised and unorganised
sectors, it is quite clear that labour in the
unorganised sector face a lot of issues. This
paper mainly focuses on such issues of the
unorganised sector and offers a social
inclusion perspective of the unorganised
sector. But first, we need to understand what
‘social inclusion’ means. The World Bank
Group (World Bank, n.d. (World Bank) [6]
defines the term social inclusion as:
1 The process of improving the terms for
individuals and groups to take part in
society, and
2 The process of improving the ability,
opportunity, and dignity of those
disadvantaged on the basis of their identity
to take part in society.
Another term about which would be important
to discuss at this point would be social secu-
rity. Social security is the security that the
State furnishes against the risks which an indi-
vidual of small means cannot, today, stand up
to by himself even in private combination with
his fellows (Giri, 1959) (Giri, 1959). [7] The
concept of social security evolved from
Germany in 1883 where blacksmiths, painters,
weavers, etc. were required to contribute at
regular intervals for social welfare, food,
lodging, hospital and funeral expenses of aged
and disabled members of the society (Ranjani,
2018) (Ranjani, 2018) [8]. According to the
National Commission on Labour’s report
(1969) (1969), [9]“Social security envisages
that the members of a community shall be
protected by collective action against social
risks causing undue hardship and privation to
individuals whose private resources can
seldom be adequate to meet them. It covers
through an appropriate organisation, certain
risks to which a person is exposed”. Social
security may also be defined in simple terms as
“right to assistance for those unable to work
due to sickness, disability, maternity, em-
ployment injury, unemployment or old age”
(Ranjani, 2018) (Ranjani, 2018) [8]. The
underlying idea behind social security measures
is that a citizen who has contributed or is likely
to contribute to his country’s welfare should be
given protection against certain hazards (I.L.O.,
1942) (I.L.O., 1942).

NJLIL (2019) 1–8 © Law Journals 2019. All Rights Reserved Page 3
A Social Inclusion Perspective of the Unorganised Sector in India Chetan Upadhyay

In India, we never had a social security system
because we never needed one. India has
always had a joint family system in the
society. All social security needs were taken
care of by the joint family members. With
changing time, family system in India has
started to become nuclear in nature. Hence, the
need for social security measures in India is
increasing but there is no universal social
security system yet in place in India. Various
schemes are launched by the government to
introduce social security in India, but yet we
don’t have a formal, universal social security
scheme. A few such schemes are discussed in
the later part of this paper. These schemes take
us further towards achieving social security for
our workforce.
Issues and Challenges: Informal Workers in
Different Sectors
Unorganised sector can be broadly classified
into various sub-groups or sectors as shown in
Table 2 below. These sub-groups have their
respective issues, which are almost similar,
and challenges which would be faced in the
process of organising them.

Table 2: Informal Workers in Different Sectors.

Group Priority issues Organising challenges
Street, • Right and space to vend. • Not regarded as workers by selves and others.
market • Facilities like- storage, shelter, toilets, water. • Controlled by politicians, “mafia”.
vendors • Protection against police harassment. • Fear of harassment by authorities, police.
• Safety and security. • Competition amongst selves and formal sector.
• Competition– protection against bad effects. • Time spent on organizing means loss of income.
• Access to credit. • No forums for bargaining.
Home-based • Equal income, benefits as factory workers. • Isolated in homes.
workers • Identifying employer. • Time-double burden of work and home care.
• End to exploitation by middlemen. • Fear of losing work.
• Access to regular work. • Restrictions imposed by religion, culture.
• Access to markets (own account). • Children working.
• Access to credit (own account). • Unprotected by labour law or disguised status.
Garment • Living wage. • Women workers are seen as ‘seasonal’,
workers • Right to Organise. ‘supplementary’ wage earners.
• Excessive overtime. • Harassment of trade unions.
• Security of employment. • Often small workshops.
Waste • Access/right to recyclable waste. • Low status and self-esteem.
pickers/ • Integration into municipal systems. • Fear of losing work.
recyclers • Work higher up the recycling chain. • Competition amongst selves.
• Fair prices for recyclables. • Time to meet means loss of income.
• Recognition and improved status. • Child labour.
• Health and safety. • Not protected by labour law.
• Exploitation by middlemen.
Agricultural • Access to resources and equipment. • Scattered locations.
, forestry • Access to credit and markets. • Isolated and far distances.
and fish • Regular work. • Child labour.
workers • Right to land and land use. • Not protected by labour law.
• Right to natural resources. • Seasonal or intermittent work.
Transport • Access to routes and passengers. • Mobility.
workers • Protection against harassment. • Competition between selves and formal sector.
• Health & safety/ accident protection. • Control by politicians, “mafia”.
• Parking and facilities. • Threats by employers.
• Petrol and spares prices and fares. • Fear of harassment by police/ authorities.
• Time for organizing means loss of income.
Women • Safe and affordable childcare. • Fear and lack of confidence.
workers • Income protection during/after childbirth. • Cultural and religious barriers.
• Physical security. • Often in scattered locations.
• Prevention of sexual harassment and • Dominated by men in sector.
protection of women. • Lack of time.
• Equal income for equal value work. • Childcare and home care.
• Access to higher income earning work.
Source: (Bonner, Handling The Day-To-Day Problems Of Informal Workers)(Bonner, Handling The Day-To-Day Problems
Of Informal Workers)

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National Journal of Labour and Industrial Law
Volume 2, Issue 2
As we are now aware of the problems faced by
the unorganized sector, we would now deal
with the ways such problems can be tackled
and resolved. Firstly, we would explore the
Constitutional viewpoint on the status of
unorganized sector workers. After that we
would discuss Collective bargaining as a
remedy for informal workers to resolve their
problems and finally, highlight a few schemes
or ‘yojanas’ launched by the government to
make the life of the unorganized sector a bit
better and their attempt to organize the
unorganized or informal sector.
Constitutional Provisions
The Constitution of India aims to provide
welfare to all its citizens and seeks to ensure
protection of Fundamental Rights keeping in
mind the idea of India as a ‘welfare state’.
Under the Part IV-Directive Principles of
State Policy of the Indian Constitution, the
Articles which promote labour welfare are:
• Article 38- State to secure a social order
for the promotion of welfare of the people.
• Article 39- Certain principles of policy to
be followed by the state.
• Article 41- Right to work, to education
and to public assistance in certain cases.
• Article 42- Provision for just and humane
conditions of work and maternity relief.
• Article 43- Living wage, etc., for workers.
• Article 43 A- Participation of workers in
management of industries.
Collective Bargaining – opportunities and
challenges for informal workers
According to the International Labour Organi-
sation (ILO, n.d.) (ILO), “Collective
bargaining is a key means through which
employers and their organizations and trade
unions can establish fair wages and working
conditions. It also provides the basis for sound
labour relations. Typical issues on the
bargaining agenda include wages, working
time, training, occupational health and safety
and equal treatment. The objective of these
negotiations is to arrive at a collective
agreement that regulates terms and conditions
of employment” [10]. Collective bargaining
basically means action taken together by a
group of people, motivated by their common
goal to enhance their current status. The
opportunities which may be utilised by the
unorganised workers and the challenges which
they may face are discussed below.
NJLIL (2019) 1–8 © Law Journals 2019. All Rights Reserved
Opportunities
Collective bargaining is a key weapon in a
worker’s struggle for rights and justice.
Through acting together informal workers can
bring their demands to the attention of authori-
ties, employers and the public. If informal
workers engage in collective bargaining strate-
gically, backed with good publicity, they can
force concessions from authorities and employ-
ers, build public support and demonstrate the
power and importance of informal workers and
the work that they do (Bonner, Collective
Action For Informal Workers) (Bonner,
Collective Action For Informal Workers) [11].
Challenges
Workers in the unorganised sectors are mostly
seasonal and temporary in nature. Bargaining
power of unorganised workers is also much
lower as compared to the organised sector
workers as in unorganised sector the nature of
work is casual and labour mobility is high. Up
to now, collective bargaining has not been able
to get any visible space in the unorganised
sector. As the workers in the unorganised
sector, particularly women, have not been able
to organise themselves, they are further
discriminated against in the sector (National
Commission on Labour) (National Commis-
sion on Labour) [12]. Most groups of informal
workers do not have negotiating rights or access
to formal dispute resolution mechanisms,
collective bargaining is often the only way they
can make their voices and demands heard. When
they do succeed in negotiating with those in
power, they often need to reinforce the
negotiations, or follow up failed negotiations, by
using collective bargaining.
However, taking action can be risky for
informal workers. Unlike workers in the
formal economy, whose strikes often carry
some protection under labour law, informal
workers do not usually have this protection.
When they act, they are vulnerable to further
harassment and intimidation by police,
authorities and/or employers. Unlike formal
workers, the bargaining power of many groups
of informal workers, or their power to directly
“hurt” an opponent, is not very strong. Many
groups of informal workers cannot even use
strike as a weapon, they have to find alternative
forms of action that will be appropriate to their
situation, but are still effective (Bonner,
Collective Action For Informal Workers)
Page 5
A Social Inclusion Perspective of the Unorganised Sector in India Chetan Upadhyay

(Bonner, Collective Action For Informal
Workers) [13].
Ayushman Bharat Yojana
Ayushman Bharat Yojana is known by many
names such as the Pradhan Mantri Jan Arogya
Yojana (PMJAY) or the National Health
Protection Scheme or sometimes in short as
‘Modi Care’. It is a scheme sponsored by the
central government and launched on 23rd
September 2018.
The scheme is targeted at poor, deprived rural
families and identified occupational category
of urban workers' families (ET Online, 2018)
(ET Online, 2018).[14] AB-NHPS will have a
defined benefit cover of Rs 5 lakh per family
(on a family floater basis) per year for
secondary and tertiary care hospitalisation. It
will offer a benefit cover of Rs 5 lakh per fam-
ily per year. It will subsume the existing
Rashtriya Swasthya Bima Yojana (RSBY),
launched in 2008 by the UPA government (ET
Online, 2018) (ET Online, 2018) [15].
Pradhan Mantri- Shram Yogi Maandhan
Yojana (PM-SYM)
PM-SYM is a pension scheme for those people
whose monthly income is Rs 15,000/ per
month or less and belong to the entry age
group of 18 to 40 years. To avail the benefits
of this scheme, such people should not be
already protected under the New Pension
Scheme (NPS), Employees’ State Insurance
Corporation (ESIC) scheme or Employees’
Provident Fund Organisation (EPFO). Further,
they should not be an income taxpayer (Soi,
2019) (Soi, 2019) [16].
In the presence of Union Labour Minister Mr.
Santosh Kumar Gangwar, Prime Minister Mr.
Narendra Modi launched the Pradhan Mantri-
Shram Yogi Maandhan Yojana scheme an-
nounced by the Centre in its Interim Budget on
1st February 2019. It aims to provide pension
to 42 crore workers in the unorganised sectors.
Over 14.5 lakh workers have registered for the
scheme which would enable them to receive a
minimum pension of ₹3,000 per month after
they attain 60 years (Pandit, 2019) (Pandit,
2019) [17]. The move is likely to benefit
household helps, drivers, plumbers,
electricians, barbers and other workers earning
less than the threshold salary under the scheme
(Sharma, 2019) [18]. The government is
expecting to cross 1 crore enrolments by April-
end this year under PM-SYM (PTI, 2019) [19].

Table 6: Age based individual contribution in PM-SYM Scheme.

Entry Superannuation Member’s monthly Central Government’s monthly Total monthly
Age Age contribution (Rs) contribution (Rs) contribution (Rs)
(1) (2) (3) (4) (5) = (3) +(4)
18 60 55 55 110
19 60 58 58 116
20 60 61 61 122
21 60 64 64 128
22 60 68 68 136
23 60 72 72 144
24 60 76 76 152
25 60 80 80 160
26 60 85 85 170
27 60 90 90 180
28 60 95 95 190
29 60 100 100 200
30 60 105 105 210
31 60 110 110 220
32 60 120 120 240
33 60 130 130 260
34 60 140 140 280
35 60 150 150 300
36 60 160 160 320
37 60 170 170 340
38 60 180 180 360
39 60 190 190 380
40 60 200 200 400
Source: (Soi, 2019)(Soi, 2019)

NJLIL (2019) 1–8 © Law Journals 2019. All Rights Reserved Page 6
National Journal of Labour and Industrial Law
Volume 2, Issue 2
Out of 3.19 crore CSCs in India, 2.99 crore
centres spread across 36 states and union
territories are enrolling informal sector workers
under the pension scheme launched by the
government last month. The scheme came into
effect from February 15, 2019 (PTI, 2019) (PTI,
2019) [20].
The table below gives detailed account of the
contribution to be made by the individual and
the corresponding contribution made by the
government at a given age of the individual.
CONCLUSION
Social Inclusion of the unorganized sector is
an ongoing process. A lot has been done in
this regard, but still there is a lot more to do.
Unorganized workers till date face many
challenges and problems and the greatest one
in my opinion is neglection. We as citizens
need to be more sensitized to such issues and
do our role to try and help the underprivileged.
Creation of more organized jobs is one way to
organize the unorganized sector. For an
unemployed worker, a job is more meaningful
than the job security. The unemployed worker
is ready to do work without job security
(Singh, 2009) (Singh, 2009) [21].
The issues faced by the unorganized sector are
being addressed and brought to the spotlight with
growing times. Various Government schemes as
discussed above play their part in providing
benefits to the workforce. Social security is the
need of the hour in our society. From unending
farmer suicides to death of labour due to harsh
environmental conditions (during summer and
winter) we need a strong social security system
to protect the workforce in the unorganized
sector. Schemes like those discussed above need
to be implemented well and upgraded to keep up
with the developing times.
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Cite this Article
Chetan Upadhyay. A Social Inclusion
Perspective of the Unorganized Sector in
India. National Journal of Labour and
Industrial Law. 2019; 2(2): 1–8p.
Page 8