Social Security and the Unorganized Sector in India:

An Analysis of India’s Labour Law Framework

Abstract:
With population ballooning across the globe, a spike in the demand-supply of goods and
services has led to an increased labour employment across sectors. In this regard, it is to be
noted that the unorganized sector/informal sector employment continues to account for a
considerable size of employment in India. Traditional labour legislations until 1970s have
primarily focused on the welfare and social security measures for the organized workers.
Therefore, it was recognized by the International Labour Organization (ILO) that socially and
economically deprived sections of the society were engaged in informal economic activities
and hence measures to provide social security to labourers working in the said sector was
necessary. Following the lead, India enacted its first legislation dedicated to the social
security of the unorganized sector workers called the Unorganised Workers Social Security
Act, 2008. The Act provides for social security measures covering life, disability, health,
maternity benefits and old age protection. However, the Act was critiqued for not defining the
ambit of ‘Social Security’. Similarly, recommendations of the Second National Labour
Commission, the Report of the Parliamentary Standing Committee for Labour and the Report
along with draft laws prepared by the National Commission for Enterprises in the
Unorganized Sector (NCEUS) had been ignored. In order to collate and combine the large
number of labour legislations existent in the country, the Government of India had introduced
the Code on Social Security on 11th December 2019. The said legislation incorporates the
social security measures for the unorganized sector under Chapter IX. This paper shall
therefore seek to analyse the social security measures comprehensively existent for the
unorganized sector while simultaneously laying emphasis on the new code introduced.

Keywords: Labour Law, Social Security, Unorganized Sector, Informal Sector, India
Introduction:
A large section of India’s population earn their livelihood by working for an income. While
some may work as self-employed, the others work as contract workers or home-based
workers. It is a settled principle of human rights that labourers and workers across the globe
must have human working conditions and timely payment of wages. However, with the
advent of ‘Socialism’ across the globe in the mid 1900’s, certain other additional benefits
such as fixation of minimum wages and guaranteed income were proposed to be added to
such human rights as ‘social security’ measures. Thus, States across the world legislated upon
labour laws which covered different aspects of a worker's needs. In India for instance, only
about 8% of workers actually get the benefits available under such Acts. The rest 92%, work
in the unorganized sector, and either are not eligible for coverage, or these Acts are just not
implemented for them.1 Such workers, who inspite of contributing over 60% of the country’s
GDP (Gross Domestic Product)2, are left behind with no coverage of social security leading
them to spend out of their miniscule incomes for any contingency such as dependant’s
education, illness, old age related expenditure, etc.

Significance of the Unorganized Labour:

The term 'unorganised' is often used interchangeably with the term 'informal', or employment
in the informal sector. The term ‘informal’ generally denotes the no-requirementThe
International Labour Organisation (ILO) in the 1970’s made serious efforts to identify and
study the area of informal sector through its National Commission on Labour Programme
missions in Africa, Kenya and SriLanka3. Ever since, the informal sector began to be studied
and multiple seminars covering various aspects of such employment types began to be held
globally. A report titled ‘Dilemma of the Informal Sector’ submitted by the Director General
of the ILO in 1987 highlighted the issues faced by the sector. The report referred to the role
of this sector in promoting employment, the absence of adequate laws for providing
protection to workers in this sector, and the scope for application of international labour
standards in the said sector.4
1
Report on the Conditions of Work and Promotion of Livelihood in the Unorganized Sector 1 (Feb. 19, 2020,
11:55 PM), https://www.prsindia.org/uploads/media/Unorganised
%20Sector/bill150_20071123150_Condition_of_workers_sep_2007.pdf.
2
Plight of 40 crore unorganized workforce in focus on May Day (Feb. 19, 2020, 11:46 PM),
https://www.livemint.com/Politics/mUQvxV40fRcbDyoFk5jsdL/Plight-of-40-cr-unorganized-workforce-in-
focus-on-May-Day.html.
3
R.S.Tiwari, Informal Sector Workers: Problems and Prospects, (New Delhi: Anmol Publishers) 2005 Edition,
p.5
4
Dipankar Debnath, Way Forward for Empowering of Unorganized Workers in India: A Review of the
Unorganised Workers Social Security Act, 2008, 5 Indian J.L. & Just. 237 (2014).
In India, the 1st National Commission on Labour, under the Chairmanship of Justice
Gajendragadkar, defined the unorganised sector as workforce 'who have not been able to
organise in pursuit of a common objective because of constraints such as (a) casual nature of
employment, (b) ignorance and illiteracy, (c) small size of establishments with low capital
investment per person employed, (d) scattered nature of establishments and (e) superior
strength of the employer operating singly or in combination.’5 It is to be noted that the
Commission had also made an important distinction between organized and unorganized
sectors and opined the following: "Unorganised workers consist of those working in the
unorganised enterprises or households, excluding regular workers with social security
benefits, and the workers in the formal sector without any employment/ social security
benefits provided by the employers".

The Constitutional Mandate:

A strong influence on the Labour Law regime in the Country can be observed to have
stemmed from the Constitution of India. The Constitution through both the Fundamental
Rights and Directive Principles of State Policy (DPSP) provide for protection of interest of
the workers. For instance right to form unions, freedom of speech and expression, right
against forced labor, and right against child labor are fundamental in nature and justiciable,
the rest such as right to livelihood, equal pay for equal work, right to appropriate conditions
of work, and maternity relief for the working population in the country are DPSPs enshrined
under the Constitution and are not justiciable per se. In promoting social justice, the
Constitution of India distinguishes between rights and goals 6. The fundamental rights
guaranteed in Part Ill of the Constitution are enforceable rights, whereas the directive
principles in Part IV are unenforceable goals or aspirations. The Constitution of India
envisages that constitutionally guaranteed labour rights are to be realized through appropriate
legislative enactment. Most of the legislations in this regard have expressly been made
protecting the organized sector. The National Commission for Enterprises in the Unorganised
Sector (NCEUS) in its report stated that legislative enactment realizing constitutional
guarantees are inadequate so far as informal workers were concerned 7. Hence, informal
workers in India remain excluded from constitutional guarantees. A careful perusal of the
fundamental rights and the directive principles with respect to work and workers would

5
https://casi.sas.upenn.edu/sites/default/files/iit/National%20Commission%20on%20Labour%20Report.pdf
6
Shylashri Shankar, Scaling Justice - India's Supreme Court, Anti-Terror Laws and Social Rights ,Oxford
University Press. 2009, at xiii.
7
Supra note 1.
clarify that most of the guarantees are aimed at promoting a well-rounded dignified human
life for workers. Therefore, it opined that a great responsibility rests upon the legislators to
enact laws that seek to provide social security to all workers including the unorganized if the
true vision of the makers of our Constitution is to be achieved.

The Unorganized Workers' Social Security Act, 2008:

Prior the enactment of Unorganized Workers' Social Security Act, 2008, the then existing
labour legislation provided for meagre benefits for the unorganized sector which includes the
Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act
1979 that provides for employment of inter-State migrant workmen and provides for their
conditions of service; the Contract Labour (Regulation & Abolition) Act 1970 which sought
to protect and regulate the contract labours; Beedi Workers Welfare Fund Act 1976 to
promote the welfare of persons engaged in beedi establishments; Building and other
Construction Workers (Regulation of Employment and conditions of service) Act 1996 to
regulate the employment and condition of service of buildings and other construction workers
and to provide for their safety, health and welfare measures and for other matters connected
therewith or incidental thereto. Therefore, the need to legislate exclusively upon the Social
Security for the unorganized sector was realized on the 30 th of December, 2008 through the
enactment of the Unorganized Workers' Social Security Act, 2008. This Act builds on the
earlier experience of social security for the unorganized sector, especially the many existing
welfare boards and on other existing laws and schemes. It can be considered an enabling
legislation and provides for the following:

1. It defines workers in three categories i.e. self-employed worker, unorganized worker

and wage worker.
2. It identifies each worker and gives him/her a unique social security number and a
social security card.
3. It offers a variety of social security benefits to such workers. They include health
insurance, maternity benefit and pensions.
4. It binds the government to provide a minimum amount of benefits and funds.
5. It encourages the unorganized workers to organize round such social structures and
benefits, creating a platform for voice.

Yet another striking feature of this legislation is that it provides legislative backing to all the
social security schemes announced by the government. These include the Aaam Admi Bima
Yojana (Insurance scheme for the common man), National Old Age Pension Scheme and
Janani Suraksha Yojana (maternity benefit for the women). Such schemes now form a part of
the Schedule of the Act. Similarly, a provision has been made for issuing smart card, carrying
a unique identification number, to each of the beneficiary families. The Act facilitates both
public and private health facilities which shall be utilized for providing medical services and
there would be cashless transactions to ensure that there is no harassment of the beneficiaries.
Each family would be entitled to a health care worth Rs. 30,000/year and the central
government’s share in the said scheme is 75% while the states would contribute 25%.

However, several criticisms have been made against the implementation of the said
legislation and the same shall be discussed in the current article. It is to be noted that the main
focus of the bill was to take steps to ensure the social security and welfare of the members of
the unorganised sector (which includes the domestic worker). It sought to set up a Central
level board which would make recommendations regarding social security schemes such as
health, maternity benefits and retirement benefits. 8 Similarly, it set up a National Social
Security Board and State Social Security Board, with tripartite representation i.e. between the
unorganised worker, employers and the government. 9 However, their roles have been
restricted to advisory and monitory roles only with little power to make any real impact 10.
Further, the Act does not provide for any penal sanction or even stipulations about working
conditions.11 The Act mandates certain contributions to be made by the beneficiaries which
tends to make the entire object futile as their daily/monthly wage will be affect by such
deductions.

It is to be further noted that the Hon’ble Supreme Court in the case of Shramjeevi Mahila
Samiti v. State of NCT of Delhi 12 has highlighted the non-implementation of certain
provisions of the Act. The Court in this case directed the respective governments to setup
National and State Boards as contemplated under the Act. As part of this litigation, the Court
specifically had looked into the issue of registration, directing the initiation of the registration
process and issuance of identity cards. Thereafter, the Hon’ble Supreme Court in August,

8
Section 5, The Unorganized Workers' Social Security Act, 2008.
9
Section 5(2), The Unorganized Workers' Social Security Act, 2008.
10
Utkarsh Agrawal and Shailja Agarwal, Social Security For Domestic Workers In India (Feb. 22, 2020, 12:39
PM) http://docs.manupatra.in/newsline/articles/Upload/33C4D30A-4721-4464-9DF2-5DFA4A769B80.pdf.
11
South Asia Citizens Web, A Critique of India's Unorganised Workers' Social Security Act, 2008 (Feb. 23,
2020, 7:15 PM), http://www.sacw.net/article658.html.
12
WPCRL No. 879/2007 (High Court of Delhi).
2017 directed the Delhi government to initiate a pilot scheme to ensure that the domestic
workers in Delhi are registered under the Unorganised Workers Social Security Act, 2008.13

The Code on Social Security, 2019:

The Code on Social Security (“the Code”) which was introduced in the Lok Sabha on 11 th
December, 2019 seeks to compile and collate all major labour welfare and social security
measures into a single Code.14 One of the major changes brought about by the Code with
respect to informal sector workers is their recognition as employees and the recognition of the
household as a workplace. The Code proposes the setup of an apex body, the National
Council, which shall act as the supervisory and monitoring body for the social security
schemes that are to be framed by the Central and State Governments. Boards at the State
level are to be responsible for registration of workers and placement agencies and collection
of contributions. A Central Board shall provide technological support and co-ordinate the
functioning of the State Boards.

Obligations imposed by the Code on the households include payment of employer’s and
worker’s contributions, filing of return-cum-challan, and maintenance of registers of records.
Further, rights of inspection of employer’s premises under the Act include inspection of
households. Penalties have been prescribed for non-compliance with obligations, including
creation of cognizable offences.15 Similarly, under the erstwhile Act, a scheme for the benefit
of unorganised workers may be funded wholly by the Central / state government, or funded
partly by the Central Government and partly by the state government, or funded partly by the
Central / state government and partly through contributions from beneficiaries / employers. In
addition to these, the Code now allows such schemes to be funded by the corporate social
responsibility fund within the meaning of the Companies Act, 2013. Thus, two key highlights
can be ascertained from new Code:

a) The broadened ambit of the term ‘employee’ which shall now encompass unorganized
workers.
b) A new framework with structural changes for funding of schemes by the Central and
State governments.

13
Supreme Court Directs Delhi Govt. To Register Domestic Workers Under the Unorganised Workers Social
Security Act (Feb. 23, 2020, 4:33 PM) https://www.livelaw.in/sc-directs-delhi-govt-register-domestic-workers-
unorganised-workers-social-security-act/.
14
The Code on Social Security, 2019 (Feb. 23, 2020 5:25 PM) https://prsindia.org/billtrack/code-social-security-
2019.
15
Supra note 10 at 46.
Although, the new definition has been widened, it is opined that the said definition will call
for litigation before the Courts since greater liabilities are attached to the word ‘employee’.
Similarly, a target-based approach should be adopted by both the State as well as Central
government in order to achieve greater implementation and attain the true object of the Act.