labour-codes, Critical Analysis Of Social Security For Unorganised Sector

Labour Laws in Unorganized Sector


Manpower is essential for the development of the economy of a country. The countries are continuously working for the development of the workforce so as to enhance their economy. In almost all the countries, there are unorganized workforce. In India, the unorganized workers are more. Our country is striving its every nerve to reduce this sector by extending various social benefits to the unorganized workers. Our country is the overhaul process of labour laws according to the changes in the changing economic scenario.[1]

An unorganized worker plays a pivotal role in society, so they need special attention. Most of them are socially and economically deprived sections of the society engaged in informal economic activities. The government realized the pivotal role performed by unorganized sector in the economy. Therefore, many legislations and schemes have been initiated by the government for the benefit of unorganized workers.[2]


According to the Unorganized Workers and Social Security Act, 2008 “Unorganized Sector means an enterprise which is engaged in the production or sale of the food or in providing services of any kind owned by individuals or self-employed workers and where the number of workers is less than 10 in number.”[3]

According to Unorganized Workers and Social Security Act, 2008 – Unorganized worker means

  • A home-based worker.
  • Self-employed worker.
  • Nature of employment, contract, casual and bonded labour wage worker in the unorganized sector. [4]


The unorganized worker has been classified into 4 categories –

  1. By 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.
  2. By nature of employment – bonded labourers, migrant workers, contract and casual labourers etc.
  3. Service category- domestic workers, fishermen, barbers, vegetable and fruit vendors etc.
  4. Special category – toddy tappers, scavengers, carriers of head loads, drivers of animal driven vehicles, loaders and un-loaders etc.[5]


In India, the unorganized sector labors are unprotected. The unorganized workers are often exploited. The unorganized sector is one of the largest sectors in terms of employment of the workforce. It is a dangerous situation where a large section of the population does not receive the benefits of liberalization and consequently the social inequality is widened.[6]

According to the Economic Survey of 2018 -19, released on July 4, 2019, ‘almost 93% of the total workforce is informal.’  But according to the Niti Aayog’s Strategy for New India, released in November, 2018 ‘by some estimates, India’s informal sector employs approximately 85% of all workers.’

The latest Periodic Force Survey (PLFS) of 2017 – 2018 released in May 2019 says that even among the regular wage/ salaried workers in the non-agricultural sector (of the informal sector), 71.1% had no written job contract, 54.2% were not eligible for paid leave and 49.6% were not eligible for any social security benefit.[7]


  1. Low wages – wages are the only factor for which a person works, in spite of their being a statute that provides for the minimum wage that is to be paid to the workers, the workers do not receive the minimum wage.
  2. Health problems – the working conditions in the unorganized sector is the leading cause of the adverse effect on the health conditions of the workers.  The health problems are mostly related to inhalation of the tobacco dust and body ache, unguarded machinery, various toxic chemicals, dust lime, dust blaze, the raw material for synthetic generation leads to death of many unorganized workers. [8]
  3. Extended hours of work –the workers in unorganized sectors are made to work for long hours beyond the labour and regulatory norms in India. As the labourers are illiterate, employers exploit them by forcing them to work for long hours.
  4. Seasonal employment – the unorganized workers are employed only for a particular season and remain unemployed during the remaining year.
  5. Harassment at workplace – In spite of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 female labours in the unorganized sector face sexual harassment at workplace. They suffer a wide range of physical and psychological ailments due to eve-teasing and sexual harassment

Apart from these problems faced, some major concerns are –

  • The unorganized sector remains outside the purview of the formal and banking insurance industries
  • Considering the fact that the half of our country’s GDP comes from the unorganized sector, it is shocking that less than 1% of the unorganized sector receive the benefits of the provident fund.
  • They do not have any back up with respect to sudden inevitable happenings like accident.
  • There is a lack of proper legal documentation and agreement between the employer and employee.


In the era of liberalization, globalization, and privatization the country has seen drastic changes in the business environment and nature of employment. These changes created many issues in social security measures.

In this regard, the issue of social security to the growing sector of unorganized workers draws more attention in emerging India. The government enacted much social security legislation for the welfare of unorganized workers also formulated many schemes. Unorganized Workers Social Security Act 2008 is one of the significant activities which are exclusively for the protection of unorganized workers.[9]

The Unorganized workers social security Act, 2008 gave powers to Central and State Governments to formulate suitable welfare schemes, from time to time for unorganized workers. The Act required that every unorganized worker must take registration from the District Administration, shall not be less than 14 years of age. The Act also provided for the constitution of the National Social Security Board and State Social Security Board for unorganized workers by the respective Central and State Governments respectively.[10]


  • The Act was passed before 2008, and since then the implementation of the program is at snail’s pace.
  • No funds were allocate for the program.
  • It is just a compilation of the existing BPL schemes and no special schemes have been rolled out.
  • The Act does not talk about the Minimum wages to paid or even how to revise it.
  • The grievance redressal mechanism is either missing or too inefficient.
  • The Act does not mention about what is appropriate and adequate social security for the unorganized workers and their dependants. 


The code on social security was introduced in the Lok Sabha in 2019 which aimed to simplify, amalgamate and rationalize the central labour legislations, out of which one was the Unorganized Worker’s Social Security Act, 2008. The bill introduced various new aspects for the welfare of those working in the organized as well as unorganized sectors.

  • Code provided for the Central Government to formulate from time-to-time suitable welfare schemes for the unorganized sector.
  • The code corporatized the pension, insurance and the retirement saving bodies including the EPFO and ESIC, which means the EPFO will become more structured national body under the responsibility of the central government appointed chairman. 
  • This code provides benefits such as the life insurance, health insurance, disability insurance, old age protection etc. to gig workers.
  • The code has made it mandatory for the employer for the payment of the maternity benefit at the rate of the average daily wage for the period of her actual absence.


  • The code merely clubs together the existing legislations and schemes.
  • There is no uniform definition of ‘Social Security’.[11]
  • There is no central fund, the corpus is split into numerous small funds creating multiplicity of authorities and confusion.
  • The code is not clear on how corporatization of existing functional structures hand over to the government appoint chairman is a better alternative.[12]
  • The code does not define ‘Organized and Unorganized Sectors’ clearly.
  • The Social Security Boards, are merely advisory in nature and are not empower to perform many functions except monitoring and review.[13]
  • The Act also provides for the constitution of “Workers Facilitation Centers” by the State Governments to disseminate information social security schemes, assist unorganized workers for the registration and facilitate the enrollment of the registered unorganized workers for social security schemes, but the Act is silent about at which level these workers facilitation centers are to be created.[14]


  • The code appears to confine the scope of “employee” and “worker” to those in organized sector. So, it suggest that this ambiguity must be remove and the workers must be treat uniformly.
  • Although the Centre and State Governments are empower to frame schemes for the benefit of the workers in the unorganized sector, it is suggest that these provisions should strengthen by introducing floor level social security rights for all workers and mandating the governments to enforce them.
  • It suggest that the code should expressly provide for the benefits across states, in order to provide social security coverage to all interstate migrant workers.
  • As many workers may be unable to contribute to schemes frame under the code, hence it is suggest that adequate support should be provide to workers in order to guarantee certain floor level social security rights.
  • The legal documentation and agreement between the employer and employee must be made mandatory.
  • Proper recognition of positions shall be mention in the contract or agreements between the subjects of the undertaking.


Thus, we see that the unorganized sector labours that constitute about 85% of the employment and contribute. To half of the country’s GDP. Yet, the workers face a lot of issues due to the lack of good laws. Or due to the inefficiency of the existing laws. Under the unorganized Workers Social Security Act, 2008, government brought a lot of schemes but to no avail. Subsequently the government brought the Social Security Code, 2019 which provides for some benefits but the problems still exist. They are still lacking in providing social and economic justice to the unorganized sector labours in comparison to the unorganized sector labours. Thus, there is a need for a more clear, stricter laws and better schemes to bring the informal sector labours on par with the formal sector labours.


[1] Mr. M. Govindarajan, [hereinafter Govindarajan] Social Security Law- Unorganized Labour, (02/15/21 7:35pm),

[2] Richa Goel, [hereinafter Goel] Protection of the Rights of Unorganized Sector, (02/15/21 7:44pm),

[3]Unorganized Workers and Social Security Act, 2008, § 2(l)

[4] Unorganized Workers and Social Security Act, 2008, § 2(m)

[5] Ministry of Labour and Employment, (02/15/16 3:36pm) 

[6] Govindarajan, supra note 1 at pg. 1

[7] Govindarajan supra note 1 at pg. 1

[8] Goel, supranote 2 at pg. 1

[9] Goel, supra note 2 at pg. 1

[10] Govindarajan supra note 1 at pg. 1 

[11]Labour Pains: Draft Social Security Code has little to offer, (02/16/21 5:39pm)


[13] Goel, supra note 2 at pg. 1

[14] Goel, supra note 2 at pg. 1

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