The unorganised sector and labour protection in India
The unorganised sector of India, often referred to as the “informal economy,” is considered the crux of the Indian labour market. The National Commission for Enterprises in the Unorganised Sector (NCEUS) opined that nearly 90% of the total workforce of India is engaged in unorganised sector work, giving almost 50% of the GDP.[1] These include agricultural labourers, construction workers, domestic helpers, street vendors, small-scale manufacturing workers, gig workers, and many others who remain away from the protective umbrella of normal labour laws.
The organised sector assures statutory benefits such as minimum wages, provident fund, insurance, and maternity benefits. But workers in the unorganised sector face deplorable working conditions, with no job security, low bargaining power, and practically no social protection. This raises the crucial issue- are these workers really protected by the legal frameworks in force, or is this protection largely a myth?
Historical Development of Labour Protection in India
Labour legislation in India was traditionally oriented toward the organised sector, particularly after the advent of industries during the colonial period. Post-independence laws such as the Factories Act, 1948; Minimum Wages Act, 1948; Industrial Disputes Act, 1947; and Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 were enacted. But entering into force for establishments with a particular threshold of workforce size, thereby leaving out the majority of the unorganised workers. For years, the absence of a comprehensive implementation had left informal workers dependent on short-term welfare schemes and state interventions.
Constitutional Mandate
The Indian Constitution provides a powerful foundation for labour welfare and social security, consisting of DPSPs and Fundamental Rights. Article 38 makes social justice a cardinal principle to guide the State, while Article 39 prescribes that the State ensure citizens get the right to an adequate livelihood, are not denied equal pay for equal work, and are not exploited. Article 41 declares the right to work, to education, and to public assistance in certain cases, and Article 43 prescribes a living wage to workers and humane working conditions.
Besides these, Fundamental Rights, enforceable by courts, protect structure-wise equality of subjects, such as Article 14 guarantees equality before law, Article 21 guarantees the right to life with dignity, and Article 23 prohibits forced labour. Thus, these constitute the constitutional framework for the protection of the unorganised sector workers.
These rights have been strengthened by the judiciary through progressive interpretation. The Supreme Court in People’s Union for Democratic Rights v. Union of India [2] found that non-payment of minimum wages constituted forced labour under Article 23. Then again, the Court in Bandhua Mukti Morcha v. Union of India[3] emphasized the State’s duty to locate and rehabilitate bonded labourers, linking the dignity of labour with Article 21. In Daily Rated Casual Labour v. Union of India[4], the Court upheld equal pay for equal work of casual workers. These rulings show that statutory safeguards are still very often fragmented. Therefore, constitutional enactments reinforced by judicial activism continue to be fundamental safeguards for workers belonging to the unorganised sector.
The Unorganised Workers’ Social Security Act, 2008 (UWSSA)
The Unorganised Workers’ Social Security Act, 2008 (UWSSA)[5] was an attempt at recognising the plight of unorganised workers by stipulating the constitution of the National Social Security Board to recommend schemes on life and disability cover, health and maternity benefits, and old-age protection. However, the stated goal of the Act has come under sharp criticism for being more declaratory than enforceable and for lacking universal and enforceable entitlements, lacking robust funding mechanisms, leaving implementation largely to pre-existing schemes that are poorly implemented, and leaving no guarantees for minimum wage or job security of these workers. Symbolically at least, this Act recognised the unorganised labour force; however, it failed to provide a real and workable welfare system.
Code on Social Security, 2020
The Code on Social Security, 2020, represents a significant step in consolidating and rationalising India’s fragmented labour laws by extending coverage to unorganised workers, including gig workers. It envisages comprehensive schemes providing health, maternity, life, disability, and old-age benefits, while introducing a centralised framework for the Aadhaar-based registration of unorganised workers through the e-SHRAM portal. This move reflects an important policy shift towards recognising the vulnerabilities of informal labour in a rapidly changing economy. However, the Code’s transformative potential is undermined by serious implementation hurdles such as a lack of awareness among workers, bureaucratic complexities in registration, and the voluntary nature of employer contributions, which collectively dilute its capacity to ensure genuine and universal social security coverage.
Minimum Wages Act,1948
In the early period, the Minimum Wages Act, 1948[6], brought wage protection to informal workers in some forms, though its implementation was weak because of inadequate enforcement mechanisms. To correct this drawback, the Code on Wages of 2019 set out the universal right to minimum wages and timely payments in all sectors, including the unorganised sector workforce. Yet, in practice, compliance in this sector remains limited as workers often lack bargaining power, are poorly organised, and labour inspections remain insufficient, rendering statutory wage protection largely ineffective.
The judiciary has played an important role in enforcing these rights. In People’s Union for Democratic Rights v. Union of India[7], the Supreme Court held that non-payment of minimum wages amounted to forced labour under Article 23. In a related case, National Campaign Committee for Central Legislation on Construction Labour v. Union of India[8], the Court directed the effective implementation of welfare legislation for construction workers. Such decisions exemplify judicial activism in protecting informal workers; however, gaps in enforcement still remain.
Contemporary Issues
Unorganised sector workers continue to suffer numerous injustices against their economic security and dignity. Daily-wage systems, seasonal employment, and no formal contracts, together with instability, characterize conditions of vulnerability, where no stability in employment and enforceable rights exist. Social security benefits such as insurance, pensions, and maternity benefits, though under several schemes, are the right of informal workers, rarely reach them due to weak institutional delivery. Further, the environment being scattered does not allow for collective organisation, leaving workers without any bargaining mechanism. Welfare implementation is also hindered because of a lack of awareness, bureaucratic red tape, and corruption. Now, with the emergence of the gig economy, wherein millions depend on digital platforms, the insufficient traditional labor laws have become much sharper in view, raising very urgent practical concerns about the future protection.
Reality Check – Myth vs. Reality
Implementing the laws, policies, and welfare schemes that are put in place to protect unorganised workers has always been an inconsistent and erroneous practice. Legal protection most often exists as a mere theoretical promise. Gone are the times when most informal workers faced discrimination through secure wages, workplace safety, and effective social security benefits. Labour codes-an example being the Code on Social Security, 2020-reflect the legislative intention of trying to provide coverage and organise its workforce within an organised domain. However, without an enforcement mechanism and budgetary allocations, coupled with a ground-level awareness among workers of these rights, such laws would be ornamental at best.
Recommendations
The protection of workers in the unorganized sector should be multidimensional. Enhancing the labor inspection mechanisms with stringent provisions would ensure that an employer complies with the stipulated statutory provisions. The State must develop and maintain an all-encompassing Social Security System managed through a central contributory-cum-subsidised fund that all informal workers can access. These workers must be provided adequate awareness programs through NGOs and community groups or through digital platforms on their rights and entitlements. The creation of mechanisms that will enhance unionization and allied groups (cooperatives) would boost the bargaining capacities tremendously. In light of the rapid growth of the gig economy, the platforms should be given employer status, with consequent obligations towards workers’ welfare. On another note, the State should now move away from fragmented scheme-based temporary measures and opt for a universal rights-based approach towards labour protection.
Suggestions
- Strengthen Labour Inspections: Enhance inspection mechanisms by incorporating deterrent provisions to ensure employer compliance with statutory requirements.
- Universal Social Security System: Set up a comprehensive, centralised contributory-cum-subsidised social security fund available to all informal workers.
- Awareness Programs: Organise large-scale awareness initiatives through NGOs, community groups, as well as digital platforms, educating workers about their rights and entitlements.
- Encouraging Collective Organisation: Encourage collective organisation and the formation of worker cooperatives to provide stronger bargaining power and collective action.
- Gig Worker Protection: Define and hold platforms as employers with attendant responsibilities for the benefit of gig and platform workers.
- Shift to Rights-Based Approach: Disengage from the fragmented scheme-based intervention towards universal rights-based labour protection.
