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Labour Laws: A Guardian for Unorganised Sector


The unorganized sector is that part of the workforce that has not been able to organize itself in pursuit of a common objective because of certain constraints such as the causality of employment, unawareness, superior power of the single or combined employer, etc. The Ministry of Labor and Employment is one of the oldest and most significant ministries of the Government of India. The Ministry has a major responsibility to protect the interests of workers in general as well as of those who are the poor, deprived and disadvantaged segments of society in particular by ensuring that a healthy working environment is created for higher production and productivity and that vocation training and employment services are developed and coordinated. In accordance with the liberalization process, the Government's emphasis is centered on supporting employment and ensuring workplace social security both in the organized and unorganized sectors. These targets are to be achieved through the implementation and enforcement of several labor laws that regulate employment terms and conditions of employees. State Governments also have jurisdiction to legislate because labor is a subject in the concurrent list under the Indian Constitution.

Who are the Unorganised Workers?

Various commissions have described unorganized labours in different ways but the important and relevant ones have been discussed in this article.

According to the Central Statistical Organisation, “all unincorporated enterprises and household industries (other than organized ones) which are not regulated by law and which do not maintain annual accounts or balance sheet constitute the unorganised sector”. The Directorate General of Employment and Training (DGET) defines “the organized sector as comprising all establishments in the private sector, which employ 10 or more persons”.

By implication of this definition, unorganised sector is comprised of enterprises with less than 10 employees. These are not a) organized systematically, b) made formal through mandatory registration or license, c) covered by legislation to protect minimum labour standards in employment and (development) unionized.

In the report of National Commission on Labour in 1969 the term ‘unorganised labour’ has been defined “as those workers who have not been able to organise themselves to pursuit of their common interests due to certain constraints like casual nature of employment, ignorance and illiteracy, small and scattered size of establishments, etc”.

Ministry of Labour has categorised the unorganised labour force under four groups in terms of occupation, nature of employment, specially distressed categories and service categories.

In terms of occupation, “it included small and marginal farmers, landless agricultural labourers, share croppers, fishermen and those engaged in animal husbandry, beedi rolling, labeling and packing, building and construction workers, leather workers, weavers, artisans, salt workers, workers in brick kilns and stone quarries, workers in saw mills, oil mills etc.,”.

In terms of nature of employment, “they are attached agricultural labourers, bonded labourers, migrant workers, contract and casual labourers”.

“Toddy tappers, scavengers, carriers of head loads, drivers of animal driven vehicles, loaders and unloaders”, belong to the specially distressed category while “midwives, domestic workers, fishermen and women, barbers, vegetable and fruit vendors, newspaper vendors etc. come under the service category".

In addition to the above categories, there exists a large section of urorganised labour force such as cobblers, handicraft artisans, handloom weavers, lady tailors, physically handicapped self-employed persons, rickshaw pullers/ auto drivers, sericulture workers, carpenters, leather and tannery workers, power loom workers and urban poor.

Laws Protecting Unorganised Workers

Labour laws, which protect the interest of the unorganized workers, can be classified into three groups. The first set of laws applies to the unorganized sector in general. The second group of laws applies to certain unorganized workers' groups and their scope is limited to their type of job or size of employment. The third set of laws refers primarily to organized employees in the field, i.e. to enterprises, institutions, or businesses with ten or more staff, although such laws can extend (in certain cases) to other sectors of the workforce in the unorganized sector by relieving the requirement for jobs.

Laws which apply to all sections of the Unorganised Sector Labour

Equal Remuneration Act, 1976

The legislation extends to women workers, which calls for equal pay for men and women workers and the prohibition of prejudice on the grounds of gender. The Act stipulates that the employer needs to offer equal wages for the same or equivalent jobs for both men and women. The same job or job of similar nature implies work in which, when carried out in a specific work setting, the expertise, commitment and obligation needed are equivalent. The Act also anticipates disparity in the recruitment of women and men.

The Bonded Labour System (Abolition) Act, 1976

The Act refers to bonded labor which calls for the elimination of bonded labor to discourage the physical and economic growth of the poorer classes of the community. Article 23(1) in Part III relating to Fundamental Rights, states "Traffic in human beings and begar and other forms of forced labor are prohibited and any contravention of the provision shall be an offence, punishable by law". The Bonded Labour System (Abolition) Act, (1976) dealing with bonded and forced labour was legislated by the Indian Parliament in 1976 because of the above provision.

Law which Applies to some Sections of the Unorganised Sector Labour

The Minimum Wages Act, 1948

The Act applies to employees engaged in scheduled work and establishes minimum wage rates in certain employment. This refers to all producers, non-agricultural employees, and rural and industrial employees. However, by incorporating plans, the government may expand the reach of this Act. The legislation includes units that only have one person.

Under the Act, the competent government shall set the minimum pay levels for workers in a specific job and update the prices at intervals which it deems reasonable for such periods not to exceed five years. Further, a government shall set the average working time that shall constitute an ordinary day of work within one or two of the periods stated; give a day of rest for a total of seven days to be compensated for, in lieu to, and compensation for, the job on a day of rest, to all employees or some defined class of employees; In compliance with the Laws, Sunday is typically a weekly rest day. The normal working day is for an adult 9 hours, and a child 4 1⁄2 hours. Overtime in agriculture is paid 11⁄2 times the wage and doubles the rate in other scheduled occupational cases.

The Act supports unorganized employees who operate in arranged employment. Yet almost 60% of employees are self-employed or home-based in the unorganized sector. They are also beyond the control of the Minimum Wages Act of 1948, despite becoming the largest in the sector.

The Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act, 1993

The Act refers to manual scavengers and forbids the usage and building of dry latrines as well as for the continuity of manual scavengers and stipulates that water seal latrines have to be constructed and preserved. Under the Act, no person may engage in or use human excreta manually or construct or maintain a dry latrine for any person to be engaged in or used for any other person.

Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979

The Act applies to any institution that employs five or more inter-state migrant workers and to any contractor that employs five or more inter-state migrant workers. Organizations with less than five migrant workers are not covered by this Act. "Worker" for this Act means a person employed in or in connection with any establishment to do any work of a qualified, semi-skilled or unqualified person who is a manual, oversight, technical or clerical employee in respect of a hiring or rewards, but who does not employ a person primarily in a managerial or administrative capacity. The Act provides that the contractor is responsible for regular payment; ensures equal pay for equal labor regardless of sex; ensures appropriate conditions of work; provides and maintains the residence for such workers during their period of employment; provides workers free of charge medical facilities; provides protective clothing; reporting to the specified authorities of both the states and the next-of-kin of the workman shall be made if the worker was fatally accidental or suffer a grave bodily injury.

Motor Transport Workers Act, 1961

The Act shall extend to all motor vehicle companies which hire five or more motor transport employees. However, it can broaden the scope of this Act to a corporation of less than five workers in motor transport. The Act pays for canteens, stores, clothing, raincoats, and other related programs to defend from rain or cold, laundry stations, emergency facilities, and primary assistance. The Act frequently lays down operating hours for adult staff and young people. Adolescents are forbidden from 10 P.M to 6 A.M. This contains guidelines on regular rest periods (at least 1⁄2 hour), transfer over, division of service, etc.

Laws Extendable to the Unorganised Sector

Beedi and Cigar Workers (Conditions of Employment) Act, 1966

The Act extends to workers employed in Beedi and Cigar businesses. It guarantees well-being and regulates their working conditions. This applies to wages and home workers, but not to self-employed people in private homes. The Legislation requires the clearance of industrial grounds without any pollution, secrecy, or other disturbance created by effluvia. It aims to keep clean, including whitewashing, color washing, varnishing or painting. The industrial premises need to maintain proper lighting, ventilation, and temperature to prevent injury to people's health. The Act provides for at least four and a quarter cubic meters of space for every person in the workroom to prevent overcrowding. It provides considerable supplies of healthy drinking water, sufficient urinal accommodation, appropriate washing facilities, nurseries, appropriate first aid facilities, and canteens. It also includes provisions on annual leave wages.

Payment of Wages Act, 1936

The Act extends to organizations including 10 or more construction employees and other contract workers. It aims at regulating the work and service conditions of building workers and other construction workers and provides for their health and welfare measures. Within this Act, organizations with less than 10 workers are not covered.

The Act sets hours for the normal day including one or more specified intervals; provides a day to rest for each 7 days, payment of work for the rest day at a rate not lower than the overtime, wages at twice the rate for overtime work. The Act forbids a worker who is sordid or who is visually disabled from doing such a job. The appropriate government has the authority to establish regulations for building workers' safety and health. The particular feature of the Act is that, if the construction cost exceeds ten lakh, it covers all private residential buildings. In actual practice, only qualified workers and which work continuously in this industry benefit from the provisions of this act. The protections offered under the Act cannot be given to unqualified employees who do not operate under a system.

Maternity Benefits Act, 1961

The Law applies to working women and seeks to regulate women's employment in certain facilities during certain periods before and after childbirth, and provides for maternity benefits and certain other benefits. It refers to every factory, mill, mine or plantation belonging to government. This Act will not extend to organizations of less than 10 employees. Nevertheless, the State may expand its scope to every other institution or class of institutions. Any plant or other institution to which employees' state insurance act 1948 (34 of 1948) operates is covered by this Act. The Act forbids the recruitment or employment of women during six weeks immediately following the day of her delivery or miscarriage. For certain periods, women employees are entitled to maternity benefits at specified rates. The clause is often rendered to compensate the nominee's parental compensation in case of death, medical insurance benefits, and a miscarriage leave for six weeks directly after the day of the miscarriage, delivery, early birth, nursing breaks, etc.

Contract Labour (Regulation and Abolition) Act, 1970

This Act covers any establishment in which 20 or more employees are or were employed as a contractual worker on any day of the previous 12 months and each contractor which employs or has employed 20 or more workers on any day of the previous 12 months. However, the appropriate government may apply the provisions of this Act to any establishment or entrepreneur employing less than twenty workers after giving not less than two months' notice and by notifying it in the Official Gazette. Under the Act, in any process, operation, or other work of any establishment, the government responsible may ban the employment of contract workers, having regard to the working conditions and benefits provided for contract work of the establishment and to other relevant elements such as the nature or necessity of the work, whether it is perennial, this means it has sufficient time whether regular employees are usually employed by this / another establishment (s) and whether a large number of full-time workers are sufficient. The Act is designed for unorganized sector. However, it has a very limited scope. The limitations of the law are that if the contractor employs less than 20 workers, the contractor will gain. This provision creates ability for employers and contractors of all kinds to manipulate the workers. The security offered by this Act is therefore far from adequate.


About 8% of workers in India earn benefits under various labour laws. The remaining ninety-two percent work in the unorganized sector and either are not covered or these legislations are not implemented for them, resulting in uncertain employment and low income. Labour laws which were put into place to protect workers and social security acts designed for labour are becoming irrelevant for the unorganised sector, partly because workers being unorganised are unable to get them enforced and partly because these laws are designed for an economy where there is a recognizable employer-employee relationship. In the Indian economy today the direct relationship between employers and employees has more or less disappeared. Unlike in the west, self-employment has always been an important part of the economy, and today over 50 per cent workers in India are self-employed. Even when they work for an employer, the link is often transitory with casual workers and multiple and changing employers, such as agriculture or construction workers.

The set of first labour laws, including the Factories Act, the Mines Act, etc, were passed to protect workers in the period between 1928 and 1960 mainly with industrial workers in view, working in specific work places and with a clear employer-employee relationship. The 1960s and 1970s saw a number of legislative attempts such as the Interstate Migrant Act and the Bonded Labour Act to bring into the fold of protection the non-industrial workers. These widened the definition of the workplace to include places such as homes which may not be under the direct supervision of an employer; they also brought in others in the employment chain such as contractors.

Unorganised Sectors in India are contributing immensely towards economic growth; however the same is not recognised due to lack of statistical information and lack of proper mechanisms to collect the same. Equally a huge number of people are depended on workers working in unorganised sectors, but the same is also not recognised. There are no available statistics reflecting the types of unorganised sectors and the workers. It is difficult indeed!

Labour legislations and other welfare legislations in India are all focused towards organised sectors, seldom is provided for unorganised sectors. The Constitutional provisions do not guarantee rights only for people working in organised sectors and hence, it leaves a room for the legal fraternity to suggest solutions for filling up the legal dearth.


  • Equal Remuneration Act, 1976.

  • The Bonded Labour System (Abolition) Act, 1976.

  • The Minimum Wages Act, 1948.

  • The Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act, 1993.

  • Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979.

  • Motor Transport Workers Act, 1961.

  • Beedi and Cigar Workers (Conditions of Employment) Act, 1966.

  • Payment of Wages Act, 1936.

  • Maternity Benefits Act, 1961.

  • Contract Labour (Regulation and Abolition) Act, 1970.



2nd Year ( 4TH Semester)

BA.LLB. (Hons.)

Dr. Ram Manohar Lohiya National Law University, Lucknow.

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