UNORGANIZED SECTOR and SOCIAL SECURITY
CONTEXT
1. Social security includes those measures that aim to guarantee a minimum
subsistence level as well as protecting the income of people in situations where it
is imperilled owing to various contingencies. This is significant because it
provides for healthcare and protection against loss of income.
2. Social security is important in view of Article 39, 41, and 43 of the Constitution of
India. But the problem is 90% of the workforce in India is a part of the
unorganized sector, which means the existing laws that cover organized sector
does not extend to them.
WHAT IS THE UNORGANIZED SECTOR
1. ILO
a) The concept of an informal or unorganized sector began to receive worldwide
attention in the early 1970’s when the ILO initiated serious efforts to identify
and study the area through its World Employment Program Missions in Africa.
b) Since then, the informal sector has been the subject of several studies and
seminars covering various aspects like its size, employment potential,
relationship with formal sector, etc.
c) In 1987, the Director General of the ILO submitted a report to the ILO called
“Dilemma of the Informal Sector”. In it, he referred to the role of this sector in
promoting employment, the absence of adequate laws for providing protection,
and the scope for application of international labour standards in this area.
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2. 1 National Commission on Labour
a) The 1st NCL under the chairmanship of Justice Gajendragadkar defined the
unorganized sector as that part of the workforce who have not been able to
organize in pursuit of a common objective because of constraints such as
ignorance and illiteracy, casual nature of their employment, small size of
establishments with low capital investment per person employed, scattered
nature of establishments, and superior strength of the employer operating singly
or in combination.
b) The 1st NCL also highlighted some illustrative categories of unorganized labour.
Some of these are: casual labour, labour employed in small scale industry,
workers in tanneries, contract labour including construction workers, sweepers
and scavengers, and other unprotected labour under labour laws.
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3. After identifying unorganized labour, the 2nd NCL then:
a) Identified its characteristics:
(i) Low scale of organization;
(ii) Operation of labour relations on a casual basis, or on the basis of kinship or
personal relations;
(iii) Small own account- (household) or family-owned enterprises or micro
enterprises;
(iv) Ownership of fixed and other assets by self.
(v) Risking of finance by self;
(vi) Involvement of family labourers;
(vii) Production expenditure included in household expenditures and use of
capital goods;
(viii) Easy entry and exit of labour;
(ix) Free mobility within the sector;
(x) Use of indigenous resources and technology;
(xi) Unregulated or unprotected nature of employment;
(xii) Absence of fixed working hours;
(xiii) Lack of security of employment and other social security benefits;
(xiv) Use of labour intensive technology;
(xv) Lack of support from the government;
(xvi) Workers living in slums and squatter areas;
(xvii) Lack of housing and access to urban services;
(xviii) High percentage of migrant labour.
b) Said aside from the above, workers who depend directly or indirectly on natural
resources that are open or common property-based are also included in the
unorganized sector, provided that: (i) it does not include any such person who is
subject to the three armed forces Acts or prison services; AND (ii) that they are
not employed as permanent workers in factories as defined in section 2(m) of the
Factories Act of 1948, plantations as defined in Section 2(f) of the Plantations
Labour Act, 1951, mines as defined in Section 2(j) of Mines Act, 1952, shops
and commercial establishments, as defined by the different state Acts, other
casual and contract workers in defense establishments, factories, plantations,
mines and shops and commercial establishments who for some reason do not
enjoy the benefits of social security laws.
c) Identified specific groups of employments in the unorganized sector:
(i) Home based worker
A. Article 1 of Convention 177 of ILO defines the term. ‘Home work’ refers
to the work carried out by a person who is to be referred to as a home
worker in his home or in other premises of his choice other than the
workplace of an employer, for remuneration, which results in a product
of service as specified by the employer.
B. The Convention says it does not matter who provides the equipment,
materials or other inputs used. It also does not regard a person as a home
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based worker if he occasionally performs his work as an employee at
home rather than at his usual workplace.
(ii) Scavengers
A. The Commission found that there is a very large number of people
engaged in manual scavenging in different parts of the country. It said
allocation of labour on the basis of caste is one of the fundamental tenets
of the case system due to which Dalits have been assigned these tasks as
they are regarded as polluting for other communities.
B. Emphasizing more on the caste element, the Commission found that
scavenging is a hereditary occupation with the workers hardly being paid.
(iii) Rag picker
A. These people are popular in industrial towns and metro cities. They have
an impact on the urban economy.
B. Industries want their waste recycled. These people help with that thoug
the environment they work in is highly unhygienic. Mostly women and
children do it.
(iv) Domestic workers
A. An estimate made by the College of Social Work Bombay suggests that
80% of domestic workers are women
B. Most people employed in domestic work are migrants.
(v) Plantation workers
A. Plantation labour Act only applies to plantations that measure 5 hectares
or more, and in which 15 or more persons are employed on any day
during the preceding 12 months.
B. But it does not apply to those employed in a factory or those who earn
more than 750 as monthly wages. Therefore, no worker is really covered
under the Act.
(vi) Public, private, small mines and quarries
4. On the basis of the 2nd NCL Report, the government drafted the Unorganized
Worker Social Security Bill 2003 but nothing happened. In 2006, it set up another
committee to review the social security system available to labour in the informal
sector. Considering this report, the government came up another Bill called the
Unorganized Worker Social Security Bill, 2007. This was passed in 2008 and is
now an Act.
UNORGANIZED WORKER SOCIAL SECURITY ACT, 2008
1. Purpose: To provide social security and welfare to unorganized workers.
2. Section 2 Definitions
(a) "employer" means a person or an association of persons, who has engaged or
employed an unorganised worker either directly or otherwise for remuneration;
(b) "home-based worker" means a person engaged in the production of goods or
services for an employer in his or her home or other premises of his or her choice
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other than the workplace of the employer, for remuneration, irrespective of whether or
not the employer provides the equipment, materials or other inputs;
(f) "organised sector" means an enterprise which is not an unorganised sector;
(k) "self-employed worker" means any person who is not employed by an employer,
but engages himself or herself in any occupation in the unorganised sector subject to a
monthly earning of an amount as may be notified by the Central Government or the
State Government from time to time or holds cultivable land subject to such ceiling as
may be notified by the State Government;
(l) "unorganised sector" means an enterprise owned by individuals or self-employed
workers and engaged 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;
(m) "unorganised worker" means 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 in Schedule II to this Act;
(n) "wage worker" means a person employed for remuneration in the unorganised
sector, directly by an employer or through any contractor, irrespective of place of
work, whether exclusively for one employer or for one or more employers, whether in
cash or in kind, whether as a home-based worker, or as a temporary or casual worker,
or as a migrant worker, or workers employed by households including domestic
workers, with a monthly wage of an amount as may be notified by the Central
Government and State Government, as the case may be.
(do Section 3,4,5,6,7,10 from Bare Act)
3. Salient features of the legislation
a) Enabling a framework for social security schemes:
The Act enables the government to formulate welfare schemes for the
unorganized sector workers regarding life and disability cover, health and
maternity benefits, and age allowance. It provides 11 schemes for unorganized
sector workers including old age pension allowance, national family benefit
scheme, etc. Further, any notified scheme may be wholly funded by the central
or state government or both or they could require contribution by the
beneficiaries or their employers.
b) Establishment of national and state security advisory boards:
NSSAB recommends formation of schemes for unorganized sector workers.
c) Provision for registration and smart cards for the unorganized sector
Rehash section 10.
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4. Criticism
a) Heavily watered down version of the Bill suggested by the NCL
b) Ambiguity w.r.t definition clauses
(i) Term social security has not been defined. Emphasis seems to be only on
schemes of welfare. Even Section 3 only says Central Government will
formulate suitable welfare schemes for unorganized workers.
(ii) Term family has not been defined. Can’t let it be defined in the scheme. We
need a proper definition.
(iii) District administration not defined.
(iv) Establishments employing 10-19 workers are excluded from both this Act as
well as the Factories Act. They will suffer.
c) Deficiency in appropriate administrative mechanism for implementation
We have an NSSAB and a SSAB, but no decentralized system. Draft Bill
prepared by the Commission addressed this by grouping employments into
13/14 levels and recommending a board for each. But it was not incorporated
into the Act.
d) Inconsistency in the powers and constitution of the Board
Presently there are 5 reps from each of the ministry of social justice,
empowerment, law and finance. Remaining seats are allotted to the State
governments. This is tentative, meaning nobody will actually appoint them. We
need state sectoral boards. It should be tripartite with various fields coming
together, including trade unions.
e) Absence of universal application for realizing social security of the unorganized
sector
Wage worker is defined with limits on monthly earning and holidays. It excludes
many from the safety net and consequently the benefits.
f) Refusal of justiciable social security to the unorganized workers
No defined social security is given to anyone. Only schemes, which can be
changed at any time by a notification. Also, nothing on the issue of employment,
condition of work, etc.
g) Absence of dispute settlement mechanism
h) Lack of legislative policy or intent
5. Proposal for amendments
a) Determination of minimum social security needs and tentative decision on initial
benefits
b) Determination of specific targeted beneficiaries
c) Setting up an administrative structure
d) Proper estimation of the total financial cost
e) Determination of resources to finance social security
f) Formulation of an ideal decision on benefits: both administration and financial
g) Amend Section 2(1) to the extent it covers only enterprises below 10 workers.
It should be all enterprises that don’t fall under the Factories Act, 1948.
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h) Define social security as any measures by government in collaboration with
the employee, worker or otherwise designed to meet the contingencies during
the worker’s life including pension, unemployment benefits, maternity
benefits, etc.
i) Section 2(m) should be amended to incorporate workers dependant on
traditional livelihood systems.
j) Benefits and protection of healthcare and maternity leave should be need
based and not “minimum”.
k) Establish state sectoral boards.
l) Establish a national security fund under section 4 and allow people to
contribute to it (contributions, grants).
m) New Chapter VII on Dispute Settlement similar to Industrial Disputes Act,
1947 that provides for arbitration.
n) Define family under section 2 to account for the fact that the worker is a
breadwinner and give an extended definition.
6. Extra stuff
a) In 2015 the labour ministry suggested an amendment ot the Act to remove a
limitation that prohibits extending social security benefits to the unorganized
workers in the organized or formal sector, such as the ID Act. But obviously
nothing happened.
b) The NDA government before the election in its latest budget has announced an
ambitious pension scheme for unorganised workers. Under the scheme, all the
unorganized sector workers will be issued social security cards to give them
social security benefits such as health insurance and old age pension. But it is
criticised for having unrealistic goals because the contributions are not linked to
employment and are voluntary in nature, AND the age when the benefits starts
ifs 60. Most people die by then.
c) Ahead of polls, Gujarat Trade Unions have demanded that unorganized workers
be accounted for when looking at social security too.
