IMPACT OF LEGISLATIONS AND PROPOSED BILLS ON SOCIAL

SECURITY FOR UNORGANISED SECTOR

Submitted By :

Swikar Sankrit Shubham Sakhuja

Reg. No : 15040142120 Reg. No : 15040142135

BBA. LLB. (Hons.) 2015-20 Section - B

Course Teacher : Prof. Gyanashree Dutta

Alliance School of Law

Alliance University, Bangalore

Date of Submission : 09/04/2019

Abstract

Impact of legislations and proposed bills on social security for unorganised sector.
Swikar Sankrit and Shubham Sakhuja, Alliance School of Law, Alliance University.

This research paper deals with the need of social security for unorganised sector and the impact of
legislations and proposed bills on social security for unorganised sector. Social security for
unorganised sector in India is very necessary as the workers in the unorganised sector comprises
about 95 percent of the total workers in India. The workers in the unorganised sector faces various
contingencies and problems like workplace hazards and uncertainty of employment. The objective
of this study is to identify the origin of social security schemes in India and to examine the need of
social security for workers in the unorganised sector, and to suggest the measures to cover the
maximum workforce of unorganised sector under the proposed bills. The doctrinal methodology has
been used in this paper to achieve the objectives. This paper uses secondary data to collect
information from the reports of ‘The National Commission on Labour’, ‘National Commission for
Enterprises in the Unorganised Sector’and from various labour law legislations and articles. This
paper includes the study of the different legislations enacted by the Government of India to study
the social security measures applicable to the workers in the unorganised sector. This paper further
examines the ‘Draft Labour Code on Social Security, 2018’ and also discusses some suggestions to
enhance the quality of working conditions for workers of the unorganised sector.
 Table of Contents

S. No. Contents Page No.

1 Introduction 1

1.1 - Introduction 1

1.2 - Literature Review 2

1.3 - Research Problem 2

1.4 - Research Questions 2

1.5 - Existing Legal Situation 3

1.6 - Scope and Objective of Research 3

1.7 - Research Methodology 3

1.8 - Hypothesis 3

2 Social Security and Unorganised Sector 3

3 Need for Social Security in Unorganised Sector in India 5

4 Legislations and Bills on Social Security for Unorganised Sector 6

5 Impact of Legislations and Bills on the Unorganised Sector 9

6 Conclusion 12

7 Bibliography 13
1. Introduction

1.1 Introduction

India is one of the biggest country when it comes to population. In 2005, report of National
Commission for Enterprises in the Unorganised Sector (NCEUS) reckons that out of 458 million
workers employed in India, almost 435 million (95 percent of total workers) worked in the
unorganised sector, contributing about 50.6 percent to the India’s gross domestic product (GDP).

India is a developing country with very few social security benefits for workers in the unorganised
sector. Social security is the basic need for everyone without reference to the sector they are
employed in and regardless of the nature of their employment. It is the basic need that should be
extended by the state and the society to its citizens and members to protect them against the various
eventualities of life and to enable them to overcome various contingencies so that they could lead a
dignified and secured life.

One of the major problem with the unorganised sector is that it is not well defined and identified
anywhere in the Indian legislations. Assuming that the sector falling outside the purview of the
organised sector is unorganised sector is not much to define and identify the unorganised sector. The
term ‘Unorganised Sector’ in India has been defined by the ‘National Commission for Enterprises in
the Unorganised Sector’, in their ‘Report on Conditions of Work and Promotion of Livelihoods in
the Unorganised Sector’ as "... consisting of all unincorporated private enterprises owned by
individuals or households engaged in the sale or production of goods and services operated on a
proprietary or partnership basis and with less than ten total workers.”1 This definition by the
National Commission for Enterprises in the Unorganised Sector (NCEUS) seems vague as it cannot
be based on the number of employees in enterprises as it covers agricultural workers, craftsmen,
home-based workers, self- employed workers, workers in weavers’ cooperatives, as well as the
workers in small scale industries where the workers can't be counted on fingers. Now the question
arises as to when there is not even a static and viable definition for the term ‘Unorganised Sector’,
how will the authorities identify the workers and extend the social security benefits to those that
come under the unorganised sector.


1 Report On Conditions Of Work And Promotion Of Livelihoods In The Unorganised Sector. Academic Foundation.
1 January 2008. p. 1774. ISBN 978-81-7188-678-4. Retrieved on 31st March 2019.
1
Though there are good number of social security legislations in India to meet the purpose of the
Constitution and to provide the protection to the workers in the unorganised sector, the scope and
coverage of these legislations is very narrow because of the absence of the feasible definition of the
unorganised sector. The labour ministry proposed a comprehensive code on social security system
in 2018 to provide retirement, health, old age, disability, unemployment and maternity benefits to
50 crore workers in the country, which would possibly cover the entire unorganised sector. Now, it
has to be seen that how effective the implementation of the code would be and whether it would
cover the entire unorganised sector or not!

1.2 Literature Review

- The Unorganised Workers' Social Security Act, 2008, this Act defines the meaning of the
‘Unorganised Sector’ and ‘Unorganised Workers’ and provides for the social security and welfare
of the workers in the unorganised sector.

- Dr. S.C. Srivastava, Social Security and Labour Laws, this book covers the constitutional
framework of social security provisions in labour laws.

1.3 Research Problem

This research paper deals with the problems that is prevalent in the unorganised sector and how the
workers in the unorganised sectors are negated of the social security benefits.

1.4 Research Questions

- What was the result of the previous social security legislations in its implementation on
unorganised sector?

- Is government doing anything on its part to extend the social security benefits to workers in the
unorganised sector?

2
1.5 Existing Legal Situation

The Central government has drafted a Labour Code on Social Security, 2018 which combines the
multiple social security schemes in a precise and rationale manner. It is foreseen that this Labour
Code would cover the fifty crore workers in the country.

1.6 Scope and Objective of Research

The objective of this paper is to identify the origin of social security schemes in India and to
examine the need of social security for workers in the unorganised sector. This paper also evaluates
the impact of the social security legislations on workers in the unorganised sector.

1.7 Research Methodology

The research methodology employed during this project is doctrinal. This paper uses secondary data
to collect information and involves locating and interpreting relevant primary and secondary
sources of law and synthesising those sources to form a rule or rules of law. As part of this process,
an evaluation and critique of competing or inconsistent sources was required. Most of the
information has been taken from labour law legislations and labour law reports and various articles.

1.8 Hypothesis

The implementation of the previous social security legislations was not carried effectively and it left
out the workers in the unorganised sector from the coverage of social security schemes.

2. Social Security and Unorganised Sector

Unorganised sector, more often known as informal sector is not registered with the government and
suffers from a low productivity malady, when compared to the organised sector or formal sector,
reason being the lower real wages and the poor working conditions of the workers in the
unorganised sector.

3
Unorganised sector faces problems like excessive seasonal and irregular employment, majority of
casual and contractual employment, lack of social security measures, non coverage of welfare
legislations and no protection from trade unions . Workers in unorganised sectors are also negated
of the minimum wages, basic social standards and their rights. Unorganised sector workers are so
disbanded that the applicability of the legislation in this sector is very inadequate and inefficacious.

Though there is not even a single definition that could ever cover the whole of the unorganised
sector, but still there is one definition laid under the “The Unorganised Workers' Social Security
Act, 2008” on the basis of the report submitted by the ‘National Commission for Enterprises in the
Unorganised Sector’. The Act defines the ‘Unorganised Sector’ as ‘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’2 . The same Act also defines the unorganised workers as ‘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.’3

Social security is the basic requirement for everyone whether it be the formal sector or informal
sector, but is of greater importance for those who are employed in the informal sector because they
suffer from severe seasonal employment and casual - contractual employment.

Social Security could be defined as a system of payments made by the government to people who
are ill, poor, or who have no job4. Social security has also been postulated in the Article 22 of the
Universal Declaration of Human Rights, which declares :

Everyone, as a member of society, has the right to social security and is entitled to realization,
through national effort and international co-operation and in accordance with the organization and
resources of each State, of the economic, social and cultural rights indispensable for his dignity and
the free development of his personality.

2 Section 2(l), The Unorganised Workers' Social Security Act, 2008

3 Section 2(m), The Unorganised Workers' Social Security Act, 2008
4 Cambridge Dictionary
4
The Constitution of India make numerous special references for social security of the weaker
section of the society. Entry No 24 in the List III of the Schedule VIII provides for the welfare of
labour, provident funds, old age pension, maternity benefit and liability for workmen’s
compensation. Apart from this, Article 41 of the Directive Principles of State Policy mentions the
role of the State in facilitating social security to those who are unemployed, aged, sick, disabled and
those who belongs to the unprivileged class of people. Further, Article 42 of the Constitution
provides that the State shall make provision for securing just and humane conditions of work and
for maternity relief.

Social security may also be understood as the action plans of a government that are aimed at
promoting the welfare of its people through the welfare measures that guarantees basic resources for
food and accommodation, and to protect them from the various undesirable contingencies like
sickness and unemployment.

3. Need for Social Security in Unorganised Sector in India

In India, unorganised sector constitutes about ninety-five percent5 of the total workforce, which
hints that the majority of the Gross Domestic Product is accounted by the unorganised sector.
Unorganised sector contributes more than fifty percent to the India’s Gross Domestic Product and
this shows the importance of the unorganised sector workers for the economy. As unorganised
sector workers contribute more than fifty percent to India’s Gross Domestic Product, it becomes
very important to take care of them because if their social status is not taken care of, their mental
and physical health would deteriorate and their productivity would fall, which would further lead to
slow economy and decline in GDP growth.

The need of social security in unorganised sector can be seen as a two fold requirement. First, to
ascertain the social status of the workers in the unorganised sector, and second, with respect to the
contribution of the unorganised sector workers to the economy.

5 National Commission for Enterprises in the Unorganised Sector, Report on Conditions of Work
and Promotion of Livelihoods in the Unorganised Sector, National Commission for Enterprises in
the Unorganised Sector (2005)
5
According to the Article 41 of the Directive Principles of State Policy, it is the duty of the State to
facilitate social security to all who are unemployed, aged, sick, disabled and those who belongs to
the unprivileged class of people. India also ratified the ILO Convention on Social Security in 1964
which established minimum standards of social security. Sticking to the Directive Principles of
State Policy and ILO Convention, government has already enacted various social security
legislations like Employees’ State Insurance Act, 1948, Workmen’s Compensation Act, 1923,
Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, Maternity Benefit Act, 1961,
Payment of Gratuity Act, 1972, etc., but the problem arose as it was smoothly applicable to the
organised sector and failed to cover the unorganised sector.

4. Legislations and Bills on Social Security for Unorganised Sector

There are various social security legislations and bills on social security for unorganised sector but
hardly any of them ever clearly defined the unorganised sector and the unorganised sector workers.
The Unorganised Workers' Social Security Act, 2008 was the first legislation which was enacted by
the Ministry of Labour and Employment exclusively to ensure the welfare of workers in the
unorganised sectors

Following are the social security legislations that were enacted over the time:

Workmen’s Compensation Act, 1923

The Workmen’s Compensation Act, 1923 was one of the very first social security legislation in
India. This Act was enacted with the aim to make the employer liable to pay the compensation to
his employees or their dependants (when employee dies) in case of injury or death that may arise
out of and in course of employment.

This Act ensured that the workers would be compensated in case of partial or total disablement, or
death6 and hence would help to save the social status of the workers.

6Gary Dessler & Biju Varkkey, Human Resource Management (2009), Indian Adaptation, 11th
edition, Pearson Education.
6
The Royal Commission on Labour in India (Whitley Commission)

Whitley Commission, or also known as The Royal Commission on Labour was formed in 1929 and
was chaired by John Henry Whitley. This commission was set up to inquire to examine the living,
working and socio-economic conditions of the workers in the industry at that time. This was the
first ever commission that discussed about the social condition of the workers.

Social Security (Minimum Standards) Convention, 1952 (ILO Convention on Social Security)

ILO Convention on Social Security or Social Security (Minimum Standards) Convention, 1952 was
the first ever international convention which talked about the social security. It protects the workers
against the contingencies that covers any morbid condition regardless of its cause and also includes
pregnancy. This convention was adopted on June 28, 1952 and came into force on April 27, 1955.
India ratified this convention in 1964.

Employees’ State Insurance Act, 1948


Employees’ State Insurance Act, 1948 was enacted with the purpose of introducing a central health
insurance scheme for industrial workers. This is one of the compulsory State Insurance that provide
benefits to the industrial workers in case of sickness, maternity, and employment injury.

Minimum Wages Act, 1948

Minimum Wages Act, 1948 sets the minimum wages that must be paid to the workers in accordance
with this Act. This Act gives both the Central and State government the power in respect to fixation
of wages.

In 1920, KGR Chaudhary started the initiative for fixation of minimum wages and passed a
resolution to setup the board for determining the minimum wages in each industry. This was the
very first step which led to the enactment of the Minimum Wages Act.

In 1928, International Labour Conference planned a system to fix minimum wages for different
trades. Then on the recommendation of the International Labour Conference, Standing Labour
7
Committee was appointed in 1943 to look into the social conditions of the labours. This led to the
first bill on minimum wages in International Labour Conference in 1945.

In 1946, a bill on minimum wages on the recommendation of Standing Labour Committee was
introduced in the Central Legislative Assembly. In 1947, the representative of government,
employers and workers attended a conference and defined the minimum wages and discussed the
other aspects of the minimum wages and eventually Minimum Wages Act was passed in 1948.

The Employees' Provident Fund and Miscellaneous Provisions Act 1952

This Act resulted from the Directive Principles of State Policy which provides that State shall make
provisions for securing the right to work, education in case of old age, unemployment and total
disablement and other needs. This Act administers a contributory Pension, Insurance and Provident
Fund Scheme for the employees, which could be used by them in case of emergency.

Maternity Benefit Act, 1961

The purpose of this Act is to protect the job of women employees at the time of maternity and
secures them the right to full paid leave from work so that they could take good care of their new
born child.

Payment of Gratuity Act, 1972

Payment of Gratuity Act, 1972 regulates the payment of gratuity to the employees. Gratuity is the
monetary benefit which has to be paid to the employee by the employer for the continuous service
of five years or more. It is compulsory and given to the employee when he resigns, retires or is
terminated from the organization.

The Unorganised Workers' Social Security Act, 2008

Acknowledging the requirement of ensuring social security to the workers in the unorganised sector,
the Government had enacted the Unorganised Workers’ Social Security Act, 2008. This Act

8
provided for the formation of National Social Security Board to advocate for social security
schemes.

This Act defines the meaning of Unorganised Sector, Unorganised Worker, Self-Employed and
Wage Worker. It provides for the formulation of the Central Government schemes fro unorganised
workers for life and disability cover, health and maternity benefits, old age benefit and any other
benefits as the government may deem fit.

Draft Labour Code on Social Security, 2018

The Labour Code on Social Security, 2018 is one of the latest initiative of Central Government
which would cover the ninety percent of the existing workers in the unorganised sector who are not
covered under any social security scheme. The Labour Code would be a compendium of the
multiple social security statutes in a simplified, concise and rationalised manner which would
enable the authority to implement and enforce stringently.

This Draft Code came into the existence because of the Report of the Second National Commission
on Labour (2002) and various other studies and reports on social security policies. This new Draft
Labour Code aims at covering around fifty crore workers employed in the unorganised sector under
the ambit of social security schemes.

5. Impact of Legislations and Bills on the Unorganised Sector

There have been various social security legislations for workers in India, but none of them have
ever been wide, simplified and rationalised enough to interpret the definition of unorganised sector,
unorganised worker, etc. which led to the failure of the implementation of these legislations in the
unorganised sectors and failed to extend the social security schemes to the workers in the
unorganised sector.

The negation of the right and benefits of the workers in the unorganised sector forced the
government to enact the ‘The Unorganised Workers' Social Security Act, 2008’. This Act was
passed with the inclusion of all the required definitions and elements and was believed that this
would address the problems of the workers in the organised sector. The results of the
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implementation of this Act were expect to be positive and was assumed that this Act will help to
cover all the unorganised workers under the ambit of this new legislation. This Act defined all the
elements and had every necessary provisions but unfortunately nothing fruited as a result as
expected.

Although the failure of the legislations to cover the social security for workers in the unorganised
sector raised the serious questions and the serious need for the implementation of the social security
schemes for the unorganised sector. Even then judicial response on the right to social security has
never been too vast and that is the reason why judiciary never has a role on providing the social
security benefits to the workers in the unorganised sector.

In the case of Life Insurance Corporation of India v. Consumer Education and Research Centre7,
the Honourable Court observed that the Constitution of India provides for the social security to
everyone under Article 41 and Article 47 and it obtrudes a positive duty on the state to provide
social security benefits and to raise the living standards to improve the working conditions and
lifestyle of the people of the State.

People’s Union for Democratic Rights and Others vs. Union of India8, also known as Ashiad Case
is one of the major and landmark judgement of the Supreme Court of India which made a
distinctive contribution to the labour law and also showed the possessive attitude of the judges
towards the labours and for the protection of their interests. This case also highlighted that it is the
time that court must come forward for the poor, hard working and striving workers of the country.

The case of Calcutta Electricity Supply Corporation v Subhas Chandra Bose9 describes the scope of
constitutional provisions along with the Universal Declaration of Human Rights (Articles 22-28)
and International Covenant on Economic Social and Cultural Rights.

7 1995 AIR 1811, 1995 SCC (5) 482

8 1982 AIR 1473, 1983 SCR (1) 456
9 (1992) 1 SCC 441
10
In the case of Bandhua Mukti Morcha v. Union of India10, the Court held that the Central State
Governments are responsible to ensure observance of social welfare and labour laws enacted by
parliament for the purpose of securing the basic dignity in accordance with the Directive Principle
of State Policy to the workmen.

The Supreme Court of India in the case of National Campaign Committee for Central Legislation
on Construction Labour v. Union of India and Ors11 , ordered for the implementation of the Building
and Other Construction Workers (Regulation and Employment) Act 1996, as well as the Building
and Other Construction Workers’ Welfare Cess Act 1996, noting that, the provisions of the Act has
not been implemented despite the 12 years lapse since the Acts came into force.

After the failure of all the legislations and judicial response to extend the social security benefits to
the amassed workers in the unorganised sector, the Central government had to prepare the ‘Draft
Labour Code on Social Security, 2018’. The government prepared this Draft Labour with the aim to
cover the fifty crore workers, which means to cover the whole unorganised sector.

10 AIR 1984 SC 802

11 2018 (3) BomCR 347
11
6. Conclusion

India has a variety of social security legislations. These legislations provides to secure the social
security to the workers and to ensure the better working conditions of the labours. All these
previous legislations covered the workers of the unorganised sector but failed to cover the workers
employed in the unorganised sector. There was a very soft judicial response on the implementation
of these social security issues and did not help much to cover the unorganised sector under the
ambit of these legislations. There have been formation of various Labour Commissions to examine
the need of social security schemes for workers in the unorganised sector. Central Government has
drafted a Labour Code to comprehensively cover the fifty crore workers.

12
7. Bibliography

The above project has been made with the help of the following sources :

Legislations
1. Workmen’s Compensation Act, 1923
2. ILO Convention on Social Security
3. Employees’ State Insurance Act, 1948
4. Employees’ Provident Fund Act, 1952
5. Maternity Benefit Act, 1961
6. Payment of Gratuity Act, 1972
7. The Unorganised Workers' Social Security Act, 2008
8. Draft Labour Code on Social Security, 2018

Reports
1. Report of the Royal commission on labour in India (Whitley Commission)
2. Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector (2005)
1 January 2008. p. 1774. ISBN 978-81-7188-678-4. Retrieved on 31st March 2019.

Books
1. Prof K Madhavan Pillai, Labour and Industrial Laws, 1 (2000)
2. Dr. S.C. Srivastava, Social Security and Labour Laws

Case Laws
1. Life Insurance Corporation of India v. Consumer Education and Research Centre, 1995 AIR
1811, 1995 SCC (5) 482
2. People’s Union for Democratic Rights and Others vs. Union of India, 1982 AIR 1473, 1983
SCR (1) 456
3. Calcutta Electricity Supply Corporation v Subhas Chandra Bose, (1992) 1 SCC 441
4. Bandhua Mukti Morcha v. Union of India, AIR 1984 SC 802
5. National Campaign Committee for Central Legislation on Construction Labour v. Union of
India and Ors, 2018 (3) BomCR 347

13
Online Articles/Journals
1. Renana Jhabvala, ‘Social Security for Unorganised Sector’, Economic and Political Weekly,
Vol. 33, No. 22 (May 30 - Jun. 5, 1998), pp. L7-L11 - <https://www.jstor.org/stable/4406828?
read-now=1&seq=1#page_scan_tab_contents >
2. Social Security Coverage Scheme for Workers in Unorganised Sector, Business World (Delhi,
17 November 2016) <https://www.business-standard.com/article/government-press-release/
social-security-coverage-scheme-for-workers-in-unorganised-sector-116111601429_1.html>
3. Govt Plans New Social Security Scheme to Cover Workers in Unorganised Sector, News 18
(New Delhi, 8 January 2018) <https://www.news18.com/news/india/govt-plans-new-social-
security-scheme-to-cover-workers-in-unorganised-sector-1625321.html>
4. Social security for unorganized sector workers and related issue, BW Online Bureau, BW
People, Business World, Anshul Prakash, Partner and Utkarsh Kumar, Associate from Khaitan
& Co. (14 June, 2018) <http://bwpeople.businessworld.in/article/Social-security-for-
unorganized-sector-workers-and-related-issue/14-06-2018-151986/>
5. Unorganised labour force in India, Vikaspedia <http://vikaspedia.in/social-welfare/unorganised-
sector-1/categories-of-unorganised-labour-force>
6. The Unorganised workforce of India, Staff Reporter, Geography and You (10 August 2018)
<https://www.geographyandyou.com/economy/development/the-unorganised-workforce-of-
india/>
7. Government to bring Bill for social security to unorganised workers, PTI, Economic Times
(New Delhi, 12 February, 2015) <https://economictimes.indiatimes.com/news/economy/policy/
government-to-bring-bill-for-social-security-to-unorganised-workers/articleshow/
46215389.cms>

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