Need of Social Security in Unorganized sector

Note: the inputs of this article are taken from the Yojana magazine

Social Security is a prerequisite for a just and equitable society.

International norms

  • The right to social security is a human right and according to the ‘Universal Declaration of Human Rights’ enacted by the United Nations, access to social security is a basic right.
  • The ‘Social Security (Minimum Standards) Convention 102 adopted by the International Labour Organization (ILO) in 1952 also prescribes minimum standards for benefits in the important areas of social security comprising of nine provisions.

India and international norms

  • India is a founding member of the ILO and has ratified several ILO as well as UN human rights instruments.
  • Many of these are reinforced by the recently adopted Sustainable Development Goals.
  • The country has well-established social security systems providing varying degrees of coverage in several of the nine branches of ILO Social Security (Minimum Standards) Convention, No. 102 (1952), which principally aim to cover formal workers in the organised sector.
  • These measures also extend some coverage to informal workers in the organised sector, and in some establishments which are part of the unorganised sector.
  • However, the major part of the unorganised sector which constitutes a pivotal part of the Indian economy covering about 84 per cent of workforce is left uncovered by a comprehensive social security system.

What is unorganized sector?

  • Defined broadly, unorganised sector workers are those who do not have contracted employment with a formal sector employer and are engaged as home-based, self-employed or wage workers.
  • The high levels of growth of the Indian economy during the past two decades is accompanied by increasing informalisation.
  • There is a growing inter-linkage between informal and formal economic activities.
  • There has been new dynamism of the informal economy in terms of output, employment and earnings.
  • Faster and inclusive growth needs special attention to informal economy.
  • Sustaining high levels of growth are also intertwined with improving domestic demand of those engaged in informal economy, and addressing the needs of the sector in terms of credit, skills, technology, marketing and infrastructure.


Unorganised Sector in India

  • As per the estimates of the NSSO 68th Round about 84 per cent of workers are in the ‘unorganised’ or ‘informal’ sector and more than 90 per cent in informal employment (taking formal and informal sectors together).
  • About 72 per cent of the employees in the agriculture and non-agriculture sectors were not eligible for any social security benefit – the proportion was 93 per cent for casual labourers and 56 per cent for regular wage/salaried employees.
  • The workforce in the unorganised sector comprising about 472.9 million of the total workforce do not get adequate labour protection in terms of job security, wages, working conditions, social security and welfare due to various factors such as: casual and seasonal employment; scattered work place; poor working conditions; lack of employer-employment relationship; irregular and often long working hours; limited access to credit; lack of legal protection, social security and government support.

Social security for organized sector

  • The workers in the organized sector which constitute about 7 per cent of the total workforce are covered under various legislations providing social security to these workers.
  • The major legislations providing social security to these workers are: The Employees’ State Insurance Act, 1948 and the Employees Provident Fund & Miscellaneous Provisions Act, 1952 etc.
  • These two legislations provide for medical and health insurance and provident fund and pension to the workers respectively.

Social Security for Unorganised Sector

As the National Commission for Enterprises in the Unorganised Sector (NCEUS) argues, the unorganised sector workforce does not enjoy three types of social protection :

  1. Employment security (no protection against arbitrary dismissal)
  2. Work security (no protection against accident and health risks at the workplace)
  3. Social security (health benefits, pensions, and maternity benefits)

In the spirit of extending social security to the unorganised sector and keeping in mind long term demographic trends which indicate a rapidly ageing population and a non-declining unorganised sector workforce, the Government of India passed the landmark Unorganised Workers‘ Social Security Act (UWSSA) in 2008.

  • The purpose of the Act was to provide India‘s large unorganised sector workforce with a minimum level of social protection that would enable them to endure income and health related shocks, stay out of poverty, and ultimately allow them to lead dignified lives.
  • Although the Act has been hailed as a rights-based document, implementing mechanisms and associated funding have hardly been provided for.
  • The Act merely provides for constitution of national and state level social security boards that are basically advisory in character.

At present the social security framework of the country has been operating at two levels.

  1. There are the universal programmes and schemes for basic social/human development, such as the literacy mission, programmes for provision of schooling, healthcare services, drinking water and sanitation, and technical training, etc.
  2. There are the social/human development schemes that are intended to provide socio-economic security to the vulnerable citizens, irrespective of their working status to meet their promotional and protective needs such as ICDS, PDS, NSAP, MGNREGA, etc.
  • The existing social security/welfare arrangement in India for meeting contingencies and eventualities (e.g. health, accidents, death and old age) with a legislative backing exist only for the workers in the formal sector.
  • Lack of social protection reduces productivity. Not only does lack of health reduce productivity of the workers due to illness, it also is an important cause of households incurring debt due to out-of-pocket expenses on illness.

Therefore, inclusive growth cannot have much meaning without some minimum safety net for the workers in the unorganised sector.

Moreover, the current Social Security Administration in the country faces challenges of

(a) multiplicity of policies, schemes and agencies

(b) poor coverage and outreach

(c) inadequate benefits

(d) fragmentation

(e)poor quality of implementation (and selection)

(f) high costs and

(g) exclusion of large sections particularly unorganised sector workers.

Keeping the above in mind, the Ministry of Labour and Employment in line with the recommendations of the 2nd National Commission on Labour, has formulated a Code on Social Security and Welfare by amalgamating all existing Labour Laws related to Social Security.

The Code proposes a three tier Social Security Administration Structure with tripartite representation-

(a) National Social Security Council headed by the Prime Minister

(b) Central Board of Social Security at Union level and

(c) State Board(s) of Social Security at State/UT level for implementation of the Social Security framework.

Local bodies (panchayats/ urban local bodies) assigned the functions of registrations and facilitation which may be called fourth layer too.

There would be a Unique Aadhaar Based Registration system for all workers (Compulsory registration) and a Portable Social Security Account i.e. Vishwakkarma Karmik Suraksha Khata (VIKAS) would be opened for all workers on registration which shall be linked to the Aadhaar number of the worker and shall take care of the contribution transfer and benefit entitlement in case the worker migrates from one state to the other.

This new social security paradigm would not only be a goodwill gesture or appeasement to the citizen but a right for all workers of the country.



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