Challenges Faced By Indian Workers In The Informal Sector

Background

The Informal Sector in India consists of various types of economic activities that are not regulated by the government and operate outside the formal economy. It includes self-employed workers, small-scale businesses, and casual laborers who work in low-paying and insecure jobs without any social protection. The Informal Sector is critical to the Indian economy, employing a sizable section of the Indian workforce, yet, workers in the informal sector, are frequently exploited, lack social security benefits, work in dangerous and hazardous circumstances, experience discrimination, and have limited access to skill development programmes. These issues have a significant influence on the lives of Informal Sector employees, limiting their economic and social progress chances.

The Indian government has enacted a number of laws and programmes to safeguard the rights of employees in the Informal Sector, including the Unorganized Employees’ Social Security Act of 2008 and the Pradhan Mantri Shram Yogi Maan-Dhan Yojana. However, these laws have not been able to address all of the issues confronting workers in the Informal Sector. This blog will dig into the labour regulations pertaining to Informal Sector employees, the major obstacles they confront, and potential solutions to these concerns. By doing so, we aim to highlight the importance of protecting the rights of Informal Sector workers and providing them with access to better job opportunities and a decent standard of living.

A landmark Indian case law that dealt with the issue of workers in the Informal Sector is the Raptakos, Brett, and Co. Ltd. v. Workmen case of 1951.[1] In this case, the Bombay High Court was called upon to decide whether the workers engaged in the production of glucose by the respondent company were workmen under the Industrial Disputes Act, 1947. The respondent company argued that the workers engaged in the production of glucose were not workmen under the Act since they were employed in a seasonal industry and were not entitled to any benefits under the Act. However, the court rejected this argument and held that the workers were indeed workmen and were entitled to the benefits under the Act.

The court observed that the definition of workmen under the Act was broad and included all persons employed in any industry, including seasonal industries. The court further noted that the objective of the Act was to provide social security to workers, and this objective would be defeated if workers in the Informal Sector were excluded from its scope. This case was significant as it recognized the rights of workers in the Informal Sector and affirmed that they were entitled to the benefits and protections under the Industrial Disputes Act, 1947. It also set a precedent for future cases dealing with the issue of workers in the Informal Sector and paved the way for the development of legal protections for this segment of the workforce in India.

Realization of the Right to Social Security of Unorganized Workers in India

Labour Laws Related to Workers in the Informal Sector

Agriculture, construction, household labour, street vending, and other small-scale enterprises are all part of India’s Informal Sector. The Informal Sector in India is governed by various legal provisions and policies, including those related to labor rights, social protections, and economic policies. However, the lack of formal recognition and regulation of the sector has resulted in limited legal protections for workers in the Informal Sector. These workers are not protected by recognized Labour Laws and have no access to social security, health care, or pension plans.

1. The Unorganized Employees’ Social Security Act, 2008: This Act ensures the well-being of unorganized employees by providing health and maternity benefits, life and disability insurance, and old-age protection. The Act also creates a National Social Security Board to supervise and oversee the implementation of unorganized worker social security plans. The Act provides for the registration of unorganized workers, including those in the Informal Sector, with the State Social Security Board. This helps in identifying the beneficiaries of the social security schemes and ensuring that they receive the benefits they are entitled to.
2. The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014: This Act provides for the protection of the livelihood of street vendors and regulates street vending activities. The Act provides for the issuance of certificates of vending, which ensures that street vendors can carry out their activities without harassment from the authorities.
3. The Minimum Wages Act, 1948: The Act applies to all workers, including those in the Informal Sector, who are employed in any industry, trade, business, or manufacture, whether agricultural or non-agricultural. This Act sets minimum wage rates for different categories of workers, including those employed in the Informal Sector.

In Sanjit Roy v. State of Rajasthan (AIR 1983 SC 328),[2] the Supreme Court of India held that Informal Sector workers are entitled to the same constitutional protections as formal sector workers. The case involved a group of casual workers who were not paid the minimum wage prescribed by the government. The workers filed a petition challenging the government’s failure to enforce the minimum wage law. The court ruled that the workers were entitled to fair wages, reasonable working hours, and safe working conditions, regardless of whether they worked in the formal or Informal Sector.

• The Contract Labour (Regulation and Abolition) Act, 1970: This Act regulates the employment of contract labor and provides for the payment of wages, working conditions, and other benefits to contract workers.
• The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996: This Act regulates the employment of construction workers and provides for the payment of wages, safety measures, and welfare provisions.
• The Mahatma Gandhi National Rural Employment Guarantee Act, 2005: This Act provides a legal guarantee for 100 days of wage employment to rural households in India, including Informal Sector workers. The Act prohibits discrimination on the basis of gender, caste, religion, or any other ground in the employment provided under the Act. This ensures that workers in the Informal Sector are not discriminated against and have equal access to employment opportunities.

Key Problems Faced by Workers in the Informal Sector

The exploitation of workers in the Informal Sector is a widespread problem that arises due to the absence of formal labour regulations and the relatively weak bargaining power of workers. Often, Informal Sector employers provide inadequate wages without any accompanying benefits or job security, thereby exposing workers to exploitation. To address this issue, it is imperative that the government introduces rules and regulations to safeguard the rights of employees in the Informal Sector against exploitation. Such regulations should mandate that companies pay a minimum wage, provide job security, and offer additional benefits such as paid leave, overtime pay, and contributions to a provident fund.

Another critical issue that confronts Informal Sector workers is the lack of social security benefits. Social security benefits, including health care, pension plans, and insurance, are essential in providing a safety net for employees during economic shocks, such as illness or job loss. The government can implement social security programs for Informal Sector employees, such as the Pradhan Mantri Shram Yogi Maan-Dhan Yojana, which provides pension benefits to unorganized sector workers. Such programs would provide financial stability to Informal Sector employees while also ensuring access to necessary healthcare services. A very crucial case related to social security issues of workers in the Informal Sector is the Re: The Working Conditions of the Contract Labour engaged in the Building and other Construction Works.[3] In this case, the Supreme Court of India was approached by a group of construction workers who were engaged as contract labourers in various building and construction works. The workers alleged that they were not provided with basic amenities such as drinking water, first aid, and restrooms, and were forced to work in hazardous conditions. The Court, in its judgment, held that workers engaged as contract labourers are entitled to the same working conditions and benefits as workers engaged directly by the employer. The Court also directed the government to ensure that workers engaged as contract labourers are provided with basic amenities and social security benefits such as Provident Fund, Employee State Insurance, and gratuity.

The working conditions prevailing in the Informal Sector are often unsafe and hazardous, subjecting workers to various physical and environmental risks such as dust, noise, and pollution. In order to mitigate such risks, the government can enact laws and regulations that require employers to provide safe and healthy working conditions to Informal Sector workers, and to equip them with proper safety equipment and protection. Additionally, the government can establish a system to monitor and enforce compliance with health and safety standards. Discrimination against Informal Sector workers is also a critical issue, with women, Dalits, and other marginalized groups being overrepresented in the sector, and often subjected to prejudice and exploitation. To address this, the government can enact anti-discrimination legislation that ensures equal compensation for equal labour, and prohibits harassment or discrimination based on gender, caste, or religion.

Section 27 of the Indian Evidence Act: Proviso as an Exception

Improvements in the Sector to Long Help & Support the Workers

1. Formalization of the Informal Sector: The Informal Sector in India is largely unregulated, and workers often lack legal protection and job security. Many employers in the Informal Sector do not comply with formal labour laws, such as minimum wage and social security requirements. Formalization of the Informal Sector would bring more workers under the ambit of formal labour laws and ensure that they have access to legal protection, job security, and social security benefits. The government can provide incentives for employers to formalize their businesses, such as tax breaks, subsidies, and access to credit. By encouraging formalization, the government can create a more transparent and regulated labour market, which benefits both workers and employers. The case of the National Campaign Committee for Central Legislation on Construction Labour v. Union of India,[4] dealt with the issue of the lack of social security benefits for construction workers in the Informal Sector. The Supreme Court held that the workers in the Informal Sector were entitled to social security benefits under the Constitution of India and directed the government to establish a scheme to provide these benefits. The court also directed the government to enforce labour laws to ensure that the workers were not exploited by their employers.
2. Social Security Benefits: One of the most significant issues that Informal Sector workers confront is a lack of access to social security benefits like as health care, pension plans, and insurance. Workers in the Informal Sector are frequently denied access to these benefits, leaving them exposed to financial shocks and health problems. The government can implement social security plans for employees in the Informal Sector, such as the Pradhan Mantri Shram Yogi Maan-Dhan Yojana, which gives pension benefits to unorganized sector workers. These plans can give financial stability and protection to employees in the case of illness, disability, or old age. The government can also collaborate with private insurers to provide affordable insurance products for Informal Sector workers. By providing social security benefits, the government can improve the overall well-being of Informal Sector workers and create a more inclusive and equitable society. The case of National Campaign Committee for Central Legislation on Construction Labour v. Union of India,[5] dealt with the rights of construction workers in the Informal Sector, who are often exploited and denied basic benefits such as minimum wages, social security, and safe working conditions. The Supreme Court directed the government to establish a regulatory framework to protect the rights of construction workers, including the provision of basic amenities such as drinking water, restrooms, and first-aid facilities.
3. Skill Development Programs: One of the most significant difficulties confronting Informal Sector employees is a lack of proper training and skill development opportunities. Many workers in the Informal Sector labour in low-skilled, low-paying positions with few chances for advancement. As a result, the government may implement training and skill development programmes to help Informal Sector employees improve their abilities and find better jobs. These programmes, which might include vocational training, apprenticeships, and on-the-job training, can be tailored to the unique demands of various sectors and businesses. The government can also cooperate with industry partners to give people with hands-on training and job experience, allowing them to obtain practical skills and experience in their desired area. The government can improve the employability, earning potential, and general economic growth of Informal Sector employees by increasing their skills.
4. Improved Working Conditions: Poor working conditions are another big concern for Informal Sector workers. Many of these employee’s labour in hazardous and risky occupations such as construction, waste management, and domestic work. They frequently labour long hours without access to basic safety equipment or protection, putting themselves at risk of accidents, injuries, and health problems. As a result, the government can enact legislation to guarantee that workers in the Informal Sector work in safe and healthy circumstances and have access to appropriate safety equipment and protection. These rules may include workplace safety, health, and hygiene standards, as well as the supply of safety equipment such as helmets, gloves, and masks. To ensure that employers adhere to safety requirements, the government can also develop methods for monitoring and enforcing compliance with these rules. The government can improve the health and well-being of Informal Sector employees while lowering the risk of accidents and injuries by enhancing their working circumstances.
5. Anti-Discrimination Laws: Women, Dalits, and other marginalized minorities face discrimination in India’s informal economy. Women, in particular, suffer several barriers to employment and are frequently paid less than their male colleagues. Similarly, Dalits and other marginalized groups endure prejudice based on their socioeconomic level and heritage. As a result, the government can enact legislation to prohibit discrimination against women, Dalits, and other marginalized groups in the informal sector. These laws may contain rules for equal pay, non-discrimination in employment and promotion, and the development of grievance redressal processes. In the case of Safai Karamchari Andolan v. Union of India,[6] the Supreme Court directed the government to take measures to eliminate manual scavenging, a discriminatory practice that forces people to clean human waste. The court also ordered the government to provide financial and other support to the scavengers and their families to enable them to pursue other livelihoods.

The government can also increase awareness about the significance of diversity and inclusion among companies and workers, and support the promotion of a more varied and inclusive workforce. The government can build a more inclusive and equitable society where everyone has equal access to opportunities and resources by prohibiting prejudice and encouraging equality.

Conclusion

In conclusion, the Informal Sector in India is a significant contributor to the country’s economy, but the workers in this sector are often exposed to various forms of exploitation, including poor wages, lack of job security, and unsafe working conditions. Additionally, they frequently lack access to social security benefits, training and skill development programmes, and face discrimination. The Indian government has taken several steps to address these issues by enacting laws and regulations, such as the Unorganized Employees’ Social Security Act and the Mahatma Gandhi National Rural Employment Guarantee Act. However, there is still a long way to go in safeguarding the rights of Informal Sector workers. Further efforts are needed to ensure that Informal Sector workers receive adequate protection, including better wages, job security, access to social security benefits, and training and skill development opportunities. Additionally, there must be strict enforcement of existing laws and regulations to prevent exploitation and discrimination against workers in the Informal Sector. Overall, it is crucial to recognize the importance of the Informal Sector in India and to work towards creating a fair and just work environment for all workers, regardless of their employment status.

It is worth mentioning the landmark case laws that have played a significant role in protecting the rights of workers in the Informal Sector in India. The case of Mukti Datta v. Union of India,[7] led to the recognition of the right to livelihood as a fundamental right and the importance of providing social security benefits to workers in the Informal Sector. Similarly, in the case of People’s Union for Democratic Rights v. Union of India,[8] the Supreme Court highlighted the need for proper implementation of labor laws and regulations to safeguard the rights of workers in the Informal Sector. These case laws have paved the way for the enactment of laws such as the Unorganized Employees’ Social Security Act and the Mahatma Gandhi National Rural Employment Guarantee Act, which aim to provide better working conditions, social security benefits, and skill development opportunities for workers in the Informal Sector. However, more needs to be done to ensure that Informal Sector workers receive the protection they deserve, and the government must continue to work towards this goal. In Olga Tellis v. Bombay Municipal Corporation,[9] the Supreme Court held that the right to livelihood is a fundamental right guaranteed by the Constitution of India, and that the government has an obligation to ensure that all citizens, including those in the Informal Sector, have access to basic necessities such as food, shelter, and work.

This article is authored by Aseem Shrivastava and Tanisha Gautam, 3rd year students at  Institute of Law, Nirma University, Ahmedabad

References:

1. Unorganized Workers’ Social Security Act, 2008, No. 33, Acts of Parliament, 2008 (India).
2. Pradhan Mantri Shram Yogi Maan-Dhan Yojana, Notification No. F.No. 2-8/2018-SPN-II, Ministry of Labour and Employment, Govt. of India (2019).
3. ILO, Transition from the Informal to the Formal Economy Recommendation, No. 204 (June 21, 2015); see also ILO, Women and Men in the Informal Economy: A Statistical Picture (4th ed. 2018).
4. ILO, Decent Work in the Informal Economy Recommendation, No. 204 (June 21, 2015).
5. Ministry of Labour and Employment, Government of India, “Pradhan Mantri Shram Yogi Maan-Dhan Yojana (PM-SYM)” (last visited Apr. 30, 2023).
6. ILO, SafeWork: Safety and Health at the Heart of the Future of Work: Building on 100 Years of Experience (2019); see also ILO, World Employment and Social Outlook 2021: The Role of Digital Labor Platforms in Transforming the World of Work (2021).
7. ILO, Occupational Safety and Health Recommendation, No. 198 (June 15, 2006).
8. Srivastava, Ravi S., Informal Labour in India: Vulnerability and Exclusion, 11 Econ. & Pol. Wkly. 47 (2011).
9. International Labour Organization, Women and Men in the Informal Economy: A Statistical Picture (2018), available at https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/publication/wcms_626831.pdf .
10. Ministry of Labour and Employment, Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector (2007), available at http://164.100.47.193/lsscommittee/Labour/10_Labour_27.pdf.

[1] Raptakos, Brett and Co. Ltd. v. Workmen, AIR 1951 Bom 13.

[2] Sanjit Roy v. State of Rajasthan, AIR 1983 SC 328.

[3] Re: The Working Conditions of the Contract Labour engaged in the Building and other Construction Works, 1996 SCC (6) 216.

[4] National Campaign Committee for Central Legislation on Construction Labour v. Union of India, (2018) 1 SCC 371.

[5] National Campaign Committee for Central Legislation on Construction Labour v. Union of India, AIR 1996 SC 2715.

[6] Safai Karamchari Andolan v. Union of India, (2014) 11 SCC 224.

[7] Mukti Datta v. Union of India, AIR 1989 SC 933.

[8] People’s Union for Democratic Rights v. Union of India, AIR 1982 SC 1473.

[9] Olga Tellis v. Bombay Municipal Corporation, (1985) 3 SCC 545.