1

CHANAKYA NATIONAL LAW UNIVERSITY

PROJECT

LABOUR LAW-II

TOPIC: UNORGANISED SECTOR AND GOVERNMENT SOCIAL SECURITY

SUBMITTED TO

Dr. S.C Roy

Faculty of LABOUR LAW-II

SUBMITTED BY

Ritukumar

4th Semester

1158
 2

AIM:Unorganised sector and government social security.

ISSUES

Inspite of the fact that not much has been done in providing social security cover to the rural
poor and the unorganized labour force, the country has made some beginning in that
direction. Both the central and state governments have formulated certain specific schemes to
support unorganized workers which fail in meeting with the real needs and requirements of
the unorganized sector labour force.As per the Unorganized Sectors’ Social Security Act
(2008) nothing is mentioned about what constitutes appropriate and adequate social security
for the vast mass of unorganized workers and their dependents, what eligibility criteria, if
any, ought to be prescribed, what will be the scale of benefits that the workers and their
families are entitled to receive and under what conditions, what will be the funding
arrangements that must be put in positions to meet the cost of social security and so on.The
law which deals with the issue of unemployment, its regulation, wages, and conditions of
work is not merely incomplete but dysfunctional if it proceeds to deal with social security on
a standalone basis.

RESEARCH PROBLEM

The researcher would focus on the organizational problems leading to mismanagement, ill
organization and lack of accountability which render the schemes of unorganised sector
ineffective. It would also include suggestions to problems for better implementation of social
security schemes by the government for coconut workers.

HYPOTHESIS

Two things are being considered:-

1. The security needs of the unorganized sector such as Food, Nutrition, Health,
Housing, Employment, Income, Life and accident, and old age remains a dream in
India.
2. The requirements of minimum wages are not being fulfilled in case of coconut
workers.

RESEARCH METHODOLOGY

The researcher will use Non-doctrinal research methodology which includes primary and

secondary sources of research in the draft and the project as a whole.

 3

ACKNOWLEGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Dr.
S.C Roy for his exemplary guidance, monitoring and constant encouragement throughout the
course of this project. The blessing, help and guidance given by him time to time shall carry
me a long way in the journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my seniors, the library staff
and my friends for their valuable information and guidance, which helped me in completing
this task through various stages.

I would also thank my Institution and my faculty members without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

Ritukumari
 4

CONTENTS
1. INTRODUCTION
2. UNORGANISED SECTOR IN INDIA
3. IMPORTANCE AND CAUSES OF UNORGANISED SECTOR IN INDIA
4. SOCIAL SECURITY AND BENEFITS
5. CASE ANALYSIS
6. CONCLUSION
BIBLIOGRAPHY
 5

INTRODUCTION
The Indian Economy is characterized by the existence of a vast majority of informal or
unorganized labour employment. As per the Economic Survey 2007-08, 93% of India’s
workforce include the self employed and employed in unorganized sector. The Ministry of
Labour, Government of India, has categorized the unorganized labour force under four
groups in terms of Occupation, nature of employment, specially distressed categories and
service categories.

1. In terms of Occupation:
Small and marginal farmers, landless agricultural labourers, share croppers,
fishermen, those engaged in animal husbandry, beedi rolling, labeling and packing,
building and construction workers, leather workers, weavers, artisans, salt workers,
workers in brick kilns and stone quarries, workers in saw mills, oil mills etc. come
under this category.

2. In terms of Nature of Employment:

Attached agricultural labourers, bonded labourers, migrant workers, contract and
casual labourers come under this.

3. In terms of Specially distressed categories:

Toddy tappers, Scavengers, Carriers of head loads, Drivers of animal driven vehicles,
Loaders and unloaders come under this category.

4. In terms of Service categories:

Midwives, Domestic workers, Fishermen and women, Barbers, Vegetable and fruit
vendors, News paper vendors etc. belong to this category.1

In addition to these four categories, there exists a large section of unorganized labour force
such as cobblers, Hamals, Handicraft artisans, Handloom weavers, Lady tailors, Physically
handicapped self employed persons, Rikshaw pullers, Auto drivers, Sericulture workers,
Carpenters, Tannery workers, Power loom workers and Urban poor.

Though the availability of statistical information on intensity and accuracy vary significantly,
the extent of unorganized workers is significantly high among agricultural workers, building
and other construction workers and among home based workers. According to the Economic
Survey 2007-08 agricultural5 workers constitute the largest segment of workers in the
unorganized sector (ie. 52% of the total workers).2

1
http://www.ijrbsm.org/pdf/v2-i12/6.pdf on 11th nov
2
ibid
 6

As per the National Sample Survey Organization (NSSO), 30 million workers in India are
constantly on the move (migrant labour) and 25.94 million women workforce has been added
in the labour market from the year 2000 onwards. All the more every day 13000 Indians turn
60 years and they are expected to live another average of 17years. Unfortunately only 10% of
the Indians save for old age. The tragedy is that the existing social security legislations cover
only 8% of the total work force of 459 million in India.

The latest report of the NSSO uploaded by the close of May 2011 about the casual workers in
India between 2004-05 and 2009-10 compared to that of the period between 1999 – 2000 and
2004-05 very clearly shows that there is significant increase in the number of casual workers
and decline in the number of regular workers.

This report shows a substantial shift between 1999-00 and 2009-10 in the structure of the
labour force which can be broadly divided in to self employed, regular, and casual workers.
(casual workers are employees who do not enjoy the same benefits and security as tenured
employees. All daily wage employees and some categories of contract employees are casual
labourers.)

All these NSSO reports are clear evidences to prove that the labour market of India has been
undergoing tremendous transformations, including growth of informal sector activities,
deterioration in the quality of employment (in terms of job security, terms and conditions at
work), Weakening of worker organizations and collective bargaining institutions, marked
decline in social security etc. To a greater extent, these transformation could be related to the
ongoing globalization process and the resultant efforts on the part of employers to minimize
the cost of production to the lowest levels. It is also evident that most of these outcomes are
highly correlated and mutually reinforcing. A closer analysis suggests that the growing
informalisation of labour market has been central to most of these transformations, which
inter alia highlights the utility of understanding the growth of unorganized sector in India and
its implications.3

Many thought that India’s growth could do no wrong, and took the administrative versions
and interpretations for granted. Now it comes to a point that none of these can be taken for
granted. Growth is slow, inflation is structural and structure of employment is not enough to
cater to the growing labour force.

UNORGANISED SECTOR IN INDIA

3
http://www.ijsrp.org/research-paper-0613/ijsrp-p1825.pdf on 11th nov
 7

Unorganised or informal sector constitutes a pivotal part of the Indian economy. More than
90 per cent of workforce and about 50 per cent of the national product are accounted for by
the informal economy. A high proportion of socially and economically underprivileged
sections of society are concentrated in the informal economic activities. The high levels of
growth of the Indian economy during the past two decades are accompanied by increasing
informalisation. There are indications of growing interlinages between informal and formal
economic activities. There has been new dynamism of the informal economy in terms of
output, employment and earnings. Faster and inclusive growth needs special attention to
informal economy. Sustaining high levels of growth are also intertwined with improving
domestic demand of those engaged in informal economy, and addressing the needs of the
sector in terms of credit, skills, technology, marketing and infrastructure. 4

The term „unorganised worker‟ has been defined under the Unorganised Workers‟ Social
Security Act, 2008, as a home based worker, self-employed worker or a wage worker in the
unorganised sector and includes a worker in the organised sector who is not covered by any
of the Acts mentioned i.e. The Employee‟s Compensation Act, 1923 , The Industrial
Disputes Act, 1947 , The Employees‟ State Insurance Act, 1948 , The Employees Provident
Funds and Miscellaneous Provision Act, 1952 , The Maternity Benefit Act, 1961 and The
Payment of Gratuity Act, 1972 . The survey carried out by the National Sample Survey
Organisation in the year 2009- 10, the total employment in both organized and unorganised
sector in the country was of the order of 46.5 crore. 5 Out of this, about 2.8 crore were in the
organised sector and the balance 43.7 crore in the unorganised sector. Out of 43.7 crore
workers in the unorganised sector, 24.6 crore workers were employed in agriculture sector,
4.4 crore in construction, and remaining were in manufacturing activities, trade and transport,
communication & services. A large number of unorganized workers are home based and are
engaged in occupations such as beedi rolling, agarbatti making, papad making, tailoring, and
embroidery work. The unorganised workers suffer from cycles of excessive seasonality of
employment, lack of a formal employer- employee relationship and absence of social security
protection.

Several legislations such as the Employee‟s Compensation Act, 1923; the Minimum Wages
Act, 1948; the Maternity Benefit Dr.MunaKalyani “Unorganised Workers: A Core Strength
of Indian Labour Force:; the Contract Labour (Abolition and Prohibition) Act, 1970; Building

4
ibid
5
ibid
 8

and Other Construction Workers (Regulation of Employment & Conditions of Service) Act,
1996; and the Building and Other Construction Workers Welfare (Cess) Act, 1996 etc. are
directly or indirectly applicable to the workers in the unorganised sector also. The Ministry of
Labour is also operating Welfare Funds for some specific categories of workers in the
unorganised sector like beedi workers, cine workers and certain non-coal mine workers. The
funds are used to provide various kinds of welfare activities to the workers in the field of
health care, housing, education assistance for children, water supply etc. The Government has
launched Group Insurance Scheme, AamAdadmiBimaYojana for landless rural households
which also include workers in the unorganised sector. (Ministry of Finance, Government of
India has approved the merger of Social Security Schemes viz., AamAdmiBimaYojana
(AABY) and JanashreeBimaYojana (JBY).The merged scheme is renamed
“AamAdmiBimaYojana” and has come into effect from 01.01.2013.)93 per cent of the labour
force is employed in the "unorganised sector", i.e. sectors which don't provide with the social
security and other benefits of employment in the "organised sector." The unemployment rate
went up between 1993-94 to 2004. On the basis of current daily status (unemployed on an
average in the reference week), during the reference period, unemployment rate for males
increased from 5.6 per cent to 9.0 per cent in rural areas, and from 6.7 per cent to 8.1 per cent
in urban areas. Unemployment rate for females increased from 5.6 per cent in 1993-94 to 9.3
per cent in 2004 in rural areas. The gender differential in the worker population ratio (WPR)
was distinct: 55 per cent for males and 33 per cent for females in the rural areas, and 55 per
cent for males and 17 per cent for females in the urban areas. The rate of growth of
employment declined sharply from 2.04% per year in the period 1983-94 to only 0.98% per
year in the period 19994 to 2000. This is while the labour force increases roughly by 2.5%
every year. Urban unemployment rates (current daily status) were higher than rural
unemployment rates for both males and females in 1993-94. However, in 2004, rural
unemployment rates for males was higher than that of urban males. Again, it is important to
look at quality of employment in urban areas. Unemployment rates varied sharply across
States. States, where wages are higher than in neighbouring ones because of strong bargains
or social security provisions, such as high minimum wage, had high incidence of
unemployment, in general.6

The major characteristics of the unorganized workers:

6
Supra 1
 9

 The unorganized labour is overwhelming in terms of its number range and

therefore they are omnipresent throughout India.

 As the unorganized sector suffers from cycles of excessive seasonality of

employment, majority of the unorganized workers does not have stable durable
avenues of employment. Even those who appear to be visibly employed are not
gainfully and substantially employed, indicating the existence of disguised
unemployment.
 The workplace is scattered and fragmented.
 There is no formal employer – employee relationship
 In rural areas, the unorganized labour force is highly stratified on caste and
community considerations. In urban areas while such considerations are much
less, it cannot be said that it is altogether absent as the bulk of the unorganized
workers in urban areas are basically migrant workers from rural areas.
 Workers in the unorganized sector are usually subject to indebtedness and
bondage as their meager income cannot meet with their livelihood needs.
 The unorganized workers are subject to exploitation significantly by the rest of
the society. They receive poor working conditions especially wages much
below that in the formal sector, even for closely comparable jobs, ie, where
labour productivity are no different. The work status is of inferior quality of
work and inferior terms of employment, both remuneration and employment.
 Primitive production technologies and feudal production relations are rampant
in the unorganized sector, and they do not permit or encourage the workmen to
imbibe and assimilate higher technologies and better production relations.
Large scale ignorance and illiteracy and limited exposure to the outside world
are also responsible for such poor absorption.
 The unorganized workers do not receive sufficient attention from the trade
unions.

IMPORTANCE AND CAUSES OF

UNORGANISED LABOUR
 10

The activities in the informal sector account for a substantial share of total employment in the
developing countries - ranging from the third to two-thirds or more, particularly in urban
areas.20 National level data on employment and income generated in the informal economy
is generally not available. India is one of the few exceptions where it has recently estimated
the informal sector by National Sample Survey Organisation. Globalisation measured in
terms of trade and capital flows between countries and technological changes believe to have
played an important role. A faster growth of employment in the unorganised or informal
sector is often referred to as an evidence of the employer’s unwillingness to expand
employment in large sized factories in which the protective labour laws are applicable. They
instead farm out work to smaller units. Hence, there is no doubt that employment has growth
faster in the informal segment and its share has sharply increased over the years. 7 Further, the
intensified competitions among firms have resulted in driving down the labour-cost. These
costs are lower in informal economy, due to non compliance with labour regulations such as
minimum wage, social security contributions and other welfare provisions. Apart from that,
improvement in technologies are also have contributed to such informalisation as we do not
posses required skills and training for the employment in the organised sector. Afurther
distinction is often made within the informal sector between those who operated from their
residence, and other micro enterprises. Not all those operating from their residence or whom
are truly independent enterprises, taking risks and making decisions; many, especially
women, are paid for their work by the employer, sub contractor, agent or middlemen and
hence consider as “home workers” or “disguised wage workers”. The tendency to engage
workers outside the factory premises on a sub contracting basis is widely seen in the process
of informalisation and interpreted as a means by which employers disown responsibilities for
their welfare envisaged in the labour standards. 8 Another factor that has developed the
unorganised sector is nom-availability of modern sector jobs even to those women and men
who live in urban places and have some education and skill. The employment opportunities
in the modern sectors are rare due to technological development in these sectors. These
sectors are capital intensive rather than labour intensive. Thus, a large number of unemployed
men and women are attracted by the unorganised sector as entry is easy there and it provides
income, though insufficient, to the family. The meagre income that they get is precious for
their own and for their survival.23 5.5 PROBLEMS OF UNORGANISED WORKERS

7
http://labour.gov.in/sites/default/files/SwasthyaBimaYojana.pdf
8
ibid
 11

Unlike organised sector, this sector have not tasted the benefits or derived the advantages that
can be gained from organisation. Many of them are victims of invisibility. The difficulty
 12

SOCIAL SECURITY AND BENEFITS

It is rightly true that when independent India’s constitution was drafted, social security was
specially included in List III to Schedule VII of the constitution and it was made as the
concurrent responsibility of the central and state governments. A number of directive
principles of state policy relating to aspects of social security were incorporated in the Indian
constitution. The initiatives in the form of Acts such as the Workmen’s Compensation Act
(1923), the Industrial Disputes Act (1947), the Employees State Insurance Act (1948), the
Minimum Wages Act (1948), the Coal Mines Provident Funds and Miscellaneous Provisions
Act (1948), The Employees Provident Fund and Miscellaneous Provisions Act (1952), the
Maternity Benefit Act (1961), the Seamen’s Provident Fund Act (1966), the Contract Labour
Act (1970),9

the Payment of Gratuity Act (1972), the Building and Construction Workers Act (1996) etc.
reveal the attention given to the organized workers to attain different kinds of social security
and welfare benefits. Though it has been argued that the above Acts are directly and
indirectly applicable to the workers in the unorganized sector also, their contribution is very
negligible to the unorganized workers.

Inspite of the fact that not much has been done in providing social security cover to the rural
poor and the unorganized labour force, the country has made some beginning in that
direction. Both the central and state governments have formulated certain specific schemes to
support unorganized workers which fails in meeting with the real needs and requirements of
the unorganized sector labour force.10

This becomes clear even when the highly proclaimed National Rural Employment Guarantee
Act -2005 (NREGA), though it is a breakthrough, doesn’t have common wage in different
states and limits itself only to hundred day’s work for those registered worker under the Act.
What about the rest of the days in an year? As per this Act, the work guarantee applies in
rural areas only, what about the urban poor?11
9
http://labour.gov.in/sites/default/files/SwasthyaBimaYojana.pdf
10
ibid
11
Supra 3
 13

And looking at the recent Unorganized Sectors’ Social Security Act (2008) , one really
wonders if there is any provision for an unorganized worker in this Act other than some
guidelines about the available social security schemes in the country. How can it be called an
Act unless it has the legal binding and provisions of rights to work and entitlements under it?
Here as per the Act nothing is mentioned about what constitutes appropriate and adequate
social security for the vast mass of unorganized workers and their dependents, what eligibility
criteria, if any, ought to be prescribed, what will be the scale of benefits that the workers and
their families are entitled to receive and under what conditions, what will be the funding
arrangements that must be put in positions to meet the cost of social security and so on.
Aren’t the unorganized workers of this country entitled to receive, in this 60th year of our
Republic, minimum standards of social security and labour rights, on the scale and spread
adumbrated in the relevant ILO convention drawn up more than 50 years ago? Therefore, this
law which does not deal with the issue of unemployment, its regulation, wages, and
conditions of work and so on is not merely incomplete but dysfunctional if it proceeds to deal
with social security on a stand alone basis. The Act, actually, suffers from a serious lack of
legislative policy and intent. Ultimately this Act is an eye wash which has neither the
capacity to address nor the inbuilt provision to provide solutions to the needs of the
unorganized sector. Even the provisions and procedure of the Minimum Wages Act (1948) is
so vague and futile that different states of India have fixed abysmally meagre wages and that
too with so much of variations from state to state.

In fact a comprehensive Act, catering to the security needs of the unorganized sector such as
Food, Nutrition, Health, Housing, Employment, Income, Life and accident, and old age
remains a dream in India. Still the cries of the unorganized sector goes unattended with the
governments laying red carpets for the corporates and so called investors at the expense and
sacrifice of the working class.

CASE ANALYSIS
 14

The Supreme Court in number of cases has pointed out that the right to livelihood is inherent
in the right to life. Particularly, in the case of Rural Litigation and Entitlement Kendra,
Dehradun v. Uttar 216 Pradesh,71 the court has held that the right to livelihood is inherent in
right to life under Article 21. In peoples’ Union for Democratic Rights v. Union of India,72 it
was held that taking of labour or service of any person for payment less than the prescribed
minimum wages is violation of the fundamental right to such labourer while excising the
scope and ambit of Article 23 of the Constitution of India. The court further held that begar is
a form of forced labour, in whatever form it may manifest itself because it is violative of
human dignity and contrary to basic human rights. In Sanjit Roy V. State of Rajasthan, 73 it
was held that payment of wages lower than the minimum wages to the persons employed on
famine relief work is violation of Article 23 of the Constitution of India. Whenever, any
labour or service is taken by the state from any person who is affected by drought and
scarcity condition, the state cannot pay him less wages than the minimum wages on the
ground that it is given to them to meet famine situation. Further, the court held that state
cannot take advantage of their helplessness. In Deena V. Union of India, 74 the Supreme
Court held that labour taken from prisoners without paying proper remuneration was forced
labour and violation of Article 23 of the Constitution. The prisoners are entitled to payment
of reasonable wages for the work taken from them. And the court is under duty to enforce
their claim.

Similarly the Supreme Court in BandhuaMuktiMorcha v. Union of India,75 held that when
an action is initiated in the court through public interest litigation alleging the existence of
bonded labour, it may give the Government opportunity to examine whether bonded labour
system exists and as well as to take appropriate steps to eradicate that system. This is the
constitutional obligation of the state to ensure that there is no violation of the fundamental
right of any person, particularly when he belongs to the weaker sections of the community
and is unable to wage a battle against a strong and powerful opponent who is exploiting him.
The court also held that both the Central Government and State Governments are, therefore
bound to ensure observance of social welfare and labour laws enacted by parliament for the
purpose of securing to the workmen a life of basic human dignity in compliance with the
Directive Principles of State policy. Further, Justice P.N. Bhagwati observed the conditions
of bonded labourers as follows: “bonded labourers as the “non-beings” are living a life worse
than that of animals are atleast free from to roam about as they want and they can plunder or
grab food whenever they are hungry. The freedom of bonded labourers are snatched by their
 15

employers and they are consigned to an existence where they have to live in hovels or under
the open sky and be satisfied with whatever little unwholesome food they can manage to get,
inadequate to fill their hungry stomachs. Not having any choice, they are driven by poverty
and hunger into a cite of bondage, a dark bottomless pit from which in a cruel exploitative
society, they cannot hope to be rescued.” Thus, the Supreme Court has stretched its hands to
reflect its socio-economic approach in tackling legal and constitutional issues relating to all
the aspects of bonded labour regarding its identification, release and rehabilitation. In
NeerajaChaudhary V. State of Madya Pradesh, the court observed that any failure of action
on the part of the State Government in Implementing the provisions of the Minimum wages
Act was violative of Article 21 as also 23 of the Constitution.12

12
http://www.ijrbsm.org/pdf/v2-i12/6.pdf ON 11th november
 16

CONCLUSION
In spite of the fact that not much has been done in providing social security cover to the rural
poor and the unorganized labour force, the country has made some beginning in that
direction. Both the central and state governments have formulated certain specific schemes to
support unorganized workers which fail in meeting with the real needs and requirements of
the unorganized sector labour force. This becomes clear even when the highly proclaimed
National Rural Employment Guarantee Act - 2005 (NREGA), though it is a breakthrough,
doesn‟t have common wage in different states and limits itself only to hundred day‟s work
for those registered worker under the Act. What about the rest of the days in a year? As per
this Act, the work guarantee applies in rural areas only, what about the urban poor? And
looking at the recent Unorganized Sectors‟ Social Security Act (2008), one really wonders if
there is any provision for an unorganized worker in this Act other than some guidelines about
the available social security schemes in the country. How can it be called an Act unless it has
the legal binding and provisions of rights to work and entitlements under it? Here as per the
Act nothing is mentioned about what constitutes appropriate and adequate social security for
the vast mass of unorganized workers and their dependents, what eligibility criteria, if any,
ought to be prescribed, what will be the scale of benefits that the workers and their families
are entitled to receive and under what conditions, what will be the funding arrangements that
must be put in positions to meet the costof social security and so on. Aren‟t the unorganized
workers of this country entitled to receive, in this 60th year of our Republic, minimum
standards of social security and labour rights, on the scale and spread adumbrated in the
relevant ILO convention drawn up more than 50 years ago? Therefore, this law which does
not deal with the issue of unemployment, its regulation, wages, and conditions of work and so
on is not merely incomplete but dysfunctional if it proceeds to deal with social security on a
standalone basis. The Act, actually, suffers from a serious lack of legislative policy and
intent. Ultimately this Act is an eye wash which has neither the capacity to address nor the
inbuilt provision to provide solutions to the needs of the unorganized sector. Even the
provisions and procedure of the Minimum Wages Act (1948) is so vague and futile that
different states of India have fixed abysmally meagre wages and that too with so much of
variations from state to state. In fact a comprehensive Act, catering to the security needs of
the unorganized sector such as Food, Nutrition, Health, Housing, Employment, Income, Life
and accident, and old age remains a dream in India. Still the cries of the unorganized sector
 17

goes unattended with the governments laying red carpets for the corporate and so called
investors at the expense and sacrifice of the working class.

BIBLIOGRAPHY

1. Labour laws by S. N. Mishra

2. Industrial Relations and Labour Laws by SC Srivastava

3. Labour laws by H. L. Kumar

WEBSITES

1. National Wage Boards for Working Journalists and Other Newspaper Employees” online: <
http://labour.gov.in/content/KNWageBoard/aboutus. htm>

2. Thomas Kochan et al. “Employment Relations in the Growing Asian Economies” online

3. http://www.amrc.org.hk/content/collective-bargaining-india-recent-trends

4. . R. Sivarethinamohan, Industrial Relations and Labour Welfare: Text and Cases, Available at
https://books.google.co.in/books?id=OBuLapJUAcC&printsec=frontcover