Bills on Unorganised Sector Workers:

Restructuring Labour Market

Legalising Informalisation

– Shankar

CONTRADICTORY STATEMENTS are emanating from the higher echelons power regarding the timing of introduction of the bills on unorganized sector workers in the Parliament. Sonia Gandhi announced that the bill would be introduced in this session, only to be contradicted by the Minster of State for Labour who announced that it would be introduced only in the next session. The official Left that supports the Congress-led UPA government, has not demanded introduction of the bill in this session itself during the coordination meeting of the Left and the UPA. The final blow to the introduction of the bill is dealt by the Finance Minister Chidambaram who has not made any provision for allotment of fund for the purpose of unorganised workers social security fund which will have to become operational once the bill is passed and notified and he has thus effectively put a cap on all speculation on introduction of the bill in this session.

Informalisation, outsourcing, causalisation, contractualisation and feminisation of workforce are the strategies of capital to circumvent hard-earned labour rights and to maximize profits. The Unorganised Sector Workers' Social Security Bill, 2005 (USWSSB) should not be misunderstood as a piece of legislation to reverse this process. Rather, Unorganised workers' bills are proposed as effective complementary efforts in order to smoothen the process of restructuring of the labour market. The advocates of Indian capital had been worried about the mismatch between the process of liberalization and labour legislations. In their opinion, labour market conditions were more distorted owing to ‘protective' legislations for the organized sector workers. On the other hand, 93 percent of the unorganized sector workforce that was not covered by any meaningful legislation was a potential detonator waiting to explode any time like the growing unemployed workforce. The proposed legislation is expected to act as a dampener and to postpone any possibility of explosion of the disgruntled lot of unorganized sector workers. It is an attempt to match labour market conditions with the process of liberalization. While the unprotected and cheaper unorganised sector workers are expected to compete with the global labour, the organized workforce in the country is expected to compete with the domestic unorganized labour. Unorganised Workers' Social Security Bill, 2005 and the accompanied legislation dealing with conditions of work in unorganized sector are attempts at labour reforms in favour of capital. Labour reforms to restructure the labour market corresponding to the pace of globalisation and liberalization process is something ‘inevitable' in order to resolve the so-called ‘mismatch'. Legislation on Special Economic Zones that would exempt the zones from the applicability of labour laws, amendments to Industrial Disputes Act that would make retrenchments and closures – hire and fire – much easier, allowing night work for women, amendments to the PF act that would make the fund meant for the protection of workers' future vulnerable to financial market fluctuations and handing them over to private parties through Pension Fund Regulatory and Development Authority (PFRDA), newly found ‘principle' of making markets to decide the wages of government employees that would guide the Sixth Pay Commission, and the proposed Unorganized Sector Workers' Social Security Bill, 2005 etc. are perfectly complementary to each other.

Increasing Inequality and Human Capital

We are a nation where 65 percent of workforce is still dependent on agriculture whose contribution to national income is steadily declining. The industrial capital has, till date, failed to absorb the surplus labour from agriculture and from rural areas. It's only the ‘push' factor – not the ‘pull' factor that normally accompanies industrial growth – that is mainly responsible for large-scale migration of rural work force to urban areas in search of employment. More than a decade-long implementation of globalisation and liberalization policies has resulted in the growth of gross inequality. Not only that the rich got richer, but more particularly, the poor got poorer and poorer. None of the efforts by any government of any colour had really addressed this serious and grave issue confronting the entire country. India would have added few more billionaires. But, the few could become billionaires only at the expense of millions of poor becoming further poorer and starving.

A vast unorganized sector that contributes 65 percent of the GDP, employing more than 35 percent of the total population and 93 percent of total workforce in the country is one major distinguishing feature of Indian capitalism. The unorganized sector in our country employs around 37 crore workers and is fast expanding as a result of the liberalisation policies. A vast majority of them – 23.7 crores – is engaged in agriculture. According to the NSSO data, out of the rest, 4.1 crores work in manufacturing, 3.7 crores each in services and trade, and around 1.7 crores work in construction. Though several legislations like the Minimum Wages Act, Maternity Benefit Act, Equal Remuneration Act, Beedi and Cigar Workers (Conditions of Employment) Act, Building and Other Construction Workers (RE&CS) Act, Workmen's Compensation Act, and Contract Labour Act, etc., are fully or partially applicable to the workers in the unorganized sector, none of these is being properly implemented. They do not have any job protection or social welfare benefits. Most of the workers in the unorganized sector, like home-based workers, domestic workers, hawkers and vendors, etc., are not covered by any protective legislation.

Barbara Harris White and Nandini Gooptu have rightly observed in ‘ Mapping India's World of Unorganised Labour ', “Not only does such a strategy (of maintaining large reserves of cheap labour – Ed) entail the suppression of political and trade union rights for the majority of wage earners, and deliberate fragmentation of the labour force, but also it presumes a poorly educated, semi-literate and badly nourished mass of labourers who are constantly vulnerable to exploitation – hardly one that can sustain mass demand for the goods and services produced by a modern economy integrated into the global system. At a time when Indian employers are pressing for wholesale deregulation of the labour market, in pursuit of short-term profitability, it is clearly in the long-term interests of the economy to have a labour force with the requisite level of training and job security. This presupposes an expansion of the laws protecting and regulating labour together with large-scale public investment in what is known in development circles as ‘human capital' (health, education, social and food security) and infrastructure (housing, sanitation, electricity and water), as well as a concerted political drive to create the social and legal conditions under which workers feel free to organize without fear of reprisal or caste atrocities”.

USWSSB: Conditions of Employment and Social Security are Inseparable

The Unorganised Sector Workers Social Security Bill is being framed now, on the one hand, because of the pressure from the working class movement and on the other hand, because Indian bourgeoisie cannot continue in the same old fashion in order to face the competitive global market scenario. It was born primarily out of the need of the bourgeoisie to restructure the labour market in tune with the liberalization policies. Labour being cheaper and unorganized is a symptom of great hurdle in achieving higher level of efficiency and increased level of productivity. Attaining some degree of organized nature while maintaining a largely and basically unorganized character of the workforce and throwing some crumbs at them, in fact, facilitates expansion and growth of the capital. This is also a pattern through which capital seeks to strengthen and stabilize its own markets.

Salient Points of the Draft Bill Proposed by the NAC

•  A wage earner or a self employed who are not availing benefits under ESIC Act and PF Act and individual insurance and pension schemes of LIC, private insurance companies, or other benefits as decided by the Authority from time to time, will be covered under the purview of the act.

•  Every unorganized sector worker as defined in 2 (o) who has completed eighteen years of age shall on the payment of prescribed fee become eligible for registration as a member and for the purpose, get a Unique Identification Social Security Number and identity card under this Act. No worker shall be eligible for getting more than one social security number. Worker shall be registered as a member once and this registration shall be periodically renewed and updated as decided by the Authority. The NCEUS adds an additional qualification of a monthly earning less than Rs.5000/.

•  Workers by registering themselves with the government through Workers Facilitation Centres, would be given an Identity Card and a ‘Unique Identification Social Security Number' that will remain with the worker for the whole life. This number will not change even in case of migration, rather that it would become the identity of the worker wherever he finds a job in the country.

•  Workers Facilitation Centres are to be opened, at least, one in each district. Workers Facilitations Centres are empowered to undertake various activities including opening of employment exchanges and skill upgradation training centres.

•  Self-Help Groups or their Associations, (ii) Post offices, (iii) All types of Co-operative societies, (iv) Micro-Finance Institutions, (v) Trade Unions, (vi) District Panchayat, (vii) Village Panchayat, (viii) Existing Welfare Boards, (ix) Urban local body, (x) Any other organization or agency dealing directly with unorganized workers, etc., – may be appointed as Facilitating Agencies by the Authority. Facilitating Agencies, in turn, would set up, maintain and run the functions of the Workers Facilitation Centres.

•  All registered workers are entitled to a floor level scheme shall include (i) health, life and permanent disability insurance; and maternity benefits without contribution from the member, and (ii) a contributory old-age benefit scheme including pension. Apart from that t he Authority may also notify the schemes as under, subject to sustainability of the Fund: Medical Care or sickness benefit scheme, (b) Employment injury benefit scheme, (c) Maternity benefit scheme, (d) Old-age benefit including pension, (e) Survivor's benefit scheme, (f) Integrated Insurance Scheme, (g) Schemes for Conservation of natural resources on which workers depend for livelihood, (h) Housing schemes, (i) Educational schemes, (j) Any other schemes to enhance the quality of life of the unorganized worker or her family.

•  Levy and collection of cess, tax or fees, grants and loans made to the Authority by the Union or State government, contributions made by the members and employers, donations, income generated by registration of member, etc., will be the sources of the welfare fund that would be operated by the authority.


There are more than 3 versions of the bill in circulation. These Bills have been prepared, on the one hand, by the National Commission for Enterprises in the Unorganised Sector (NCEUS) and, on the other hand, by the National Advisory Council (NAC) chaired by Sonia Gandhi. Perhaps, opinions are invited on the draft by the NAC, called ‘Unorganised Sector Workers' Social Security Bill, 2005'. But, this bill focuses only on social security aspect of the legislation and not on the conditions of employment. In that sense, it is not so comprehensive. Whereas NCEUS has drafted two bills, one on social security and another on conditions of employment, called ‘Unorganised Sector Workers (Conditions of Work & Livelihood Promotion) Act, 2005'. There cannot be any bill for unorganized sector workers that will deal only with either of these two aspects – conditions of employment or social security. Either these two bills should go together or a comprehensive one involving all aspects of unorganized sector workers' livelihood should be redrafted. Moreover, the government should also clear the confusions regarding the bills that are to be introduced in the parliament and whether they will enact a separate comprehensive legislation for agrarian labourers or not. As on date, there is no such proposal but for some media reports that mistake NCEUS draft for a draft bill for agrarian labourers.

Some major aspects of the Social Security Bill by NAC:

Social Security: Taxing the Unorganised

Parting a rupee a day from out of the swindled surplus is not a great thing for the Indian bourgeoisie if one look at the proportion of the profit that accrues to them by exploiting the very same workers of the unorganized sector. The moot point is that the entire cost of social security of the workforce is not bestowed on the employers, but only a part of it, to be precise, only a miniscule part of it; it is being proposed to be collected as cess or tax from the employers while a large part of the cost comes from people's money in the guise of government contribution. The worker, the employer and the governments – central and the state – are to pay Re.1 each so as to accumulate a yearly sum of Rs.1095 in each account. The central and state governments are to share at the ratio of 3:1 while the government will also contribute the share of the employer where the employer is not identifiable and also the share of the worker where worker is from a BPL household.

Perhaps, the unorganized worker is being taxed, for the first time, for being a worker. But, it is being projected as if it is very much justified as the worker is getting the benefit. Social security is not a benefit scheme but a contributory scheme. The worker is to pay Re.1 a day throughout the year. Ironically, one does not know if the worker's employment is guaranteed all through the year. Still, irrespective of whether one is getting a job throughout the year or not, one is bound to pay Re.1 a day throughout the year for the intended social security benefit. The bill is maintaining a grave silence over the issue of job security.

It also says that if the worker fails to continuously pay the contribution for about one year, then the account will become invalid unless valid and reasonable grounds are cited. Expecting an unorganized sector worker to pay Re.1 a day in an organized manner is totally unreasonable. On the other hand, we also have instances like construction labour welfare board membership where it is sufficient for a worker to pay Rs.25 during enrolment and Rs.10 for renewal. It is a simpler system and affordable money that can really work. Instead, expecting Rs.365 a year from an unorganized worker, who neither has a job security nor a regular flow of income, is a tall order. This may discourage, instead of encouraging the worker to become part of the scheme. Simpler way is to design the scheme as a benefit scheme, in place of contributory one and to make workers' contribution a small amount of one time or intermittent payment. Moreover, the worker should be allowed to revive one's account even if it is discontinued at any point of time for whatever reasons. But, the same bill has not come up with any penal provisions for employers who would not comply with the provisions of the act.

Allot 3% of GDP

The financial implications of the proposed social security scheme for all the 30 crore workers would be to the tune of Rs. 32,850 crore, of which the Union Government's share would be Rs. 17,548 crore and that of the State Government Rs. 5,010 crore. This adds up to a total of Rs. 22,558 crore, which is equivalent to 0.8 per cent of the Gross Domestic Product (GDP) in 2004-05. Taking into account administrative expenses as well as expenses for capacity building and related activities, the upper limit of the public outlay for the scheme would not exceed one per cent of the GDP. But, the social security outlay for unorganized sector should be pegged at a minimum of 3 percent. The government extends the coverage of social security for six lakhs workers in the first year and extends it to 30 lakhs within a period of five years like the NREGA. But, anything is possible only when any scheme is backed by the requisite level of funds. Talking so much about social security without even allocating 3 percent of the GDP can only be a mirage.

Ambiguous Definition

The definition of unorganised sector worker, according to the bill “ means a person who works for wages or income; directly or through any agency or contractor; or who works on his own or her own account or is self-employed; in any place of work including his or her home, field or any public place; and who is not availing of benefits under the ESIC Act and the P.F Act, individual insurance and pension schemes of LIC, private insurance companies, or other benefits as decided by the Authority from time to time”. This definition needs further clarification because many workers, for example contract workers in hazardous occupations, who might avail ESI benefits, may not get any other benefits like PF or insurance. But, the bill puts a blanket ban on the entry of workers under the purview of the bill who avail either of these benefits. The categorization of unorganized workers as wage earners and self-employed workers needs to be qualified. For example, a worker might be working under numerous employers and at the same time, one may not be a self-employed but a wage earner. In this case, the bill should find effective method to identify the employers and put the onus of responsibility on the employer.

Toothless Workers' Representation

National Social Security Authority for the unorganized sector workers is represented by its executive office and the powers are vested with these officials. The proposed supervisory board that comprises workers' representatives is a toothless body that would not have any power or authority over the officials. They can only suggest, advise or receive reports from the Managing Director of the executive office. The bill has proposed appointment of a special committee by the central government to recommend resolution in case of discord between the executive office and the supervisory board. One can be sure that it cannot be an adhoc one as the discords between these two bodies cannot be expected to be occasional given the nature and interests these two bodies are supposed to represent. To be brief, actual authority is vested with the executive office that would represent the employers as we have been witnessing in case of labour offices throughout the country and the supervisory body that would have workers' representation, albeit in a minority, will be an ornamental one, sitting tight as a mute spectator. Moreover, the bill also provides legal immunity to the authority and jurisdiction of any civil court over the authority is barred. The worker for whom the whole project is being visualized or any citizen of public concern should have access to legal remedies if any wrong or mistake is committed by the authorities. In a democracy, no one can be above the law. These anomalies should be rectified in the present bill.

On the Bill on Conditions of Work & Livelihood Promotion:

Conditions of Employment or Conditions of Employers

This bill prepared by NCEUS has two parts – one dealing with conditions of work for the unorganized agricultural and non-agricultural workers and another part that deals with livelihood promotion for the self-employed. The first part is further divided into Part A&B that deal with conditions of work of the agricultural wage workers and the non-agricultural wage workers. Both are almost the same but for the usage of sub-titles ‘agricultural' and ‘non-agricultural'. In that sense, it has not taken care of particularities of each category. Moreover, in a country like India where more than 65 percent of workforce is still dependent on agriculture, trying to include agrarian labourers in a general category of ‘unorgnaised workers' is not doing justice to the toiling rural masses. Recognising differences in conditions of employment in the agricultural and non-agricultural sector should be the point of departure for any meaningful legislation. Nothing else can be an effective replacement for a comprehensive legislation for agrarian labourers. The UPA government should pay urgent attention to this demand of the people's movement.

Farce Called Penal Provisions

The UPA government has not at all given any serious thought over the most important aspect in the legislation for unorgnaised workers that deal with the conditions of employment. The bill does not have any stringent penal provision for employers who contravene the provisions of the bill, but for some soft approach of laying down a penalty of a maximum of Rs.5000/, which is nothing in today's world. Even Food Security Bill has proposed a penalty of Rs.1 lakh while the bill for labour is not prepared to go beyond Rs.5000. The bill makes itself a laughing stock when it eqates a penalty that extends upto Rs.5000/ to the imprisonment that extends upto one year mentioned in the Food Security Bill. The track record of labour legislations that include similar provisions have never seen any employer arrested in the whole country for violating labour laws while workers are arrested and severely punished for exercising their legal rights. Penal provisions cannot carry any meaning unless they are much stringent on employers who violate the law.

Fix the Principal Employer

Another important point that does not find a place is the question of ‘principal employer'. There is a whole lot of manufacturing operations that are being outsourced and the labour force is being informalised in the era of globalisation. Many big corporate houses engage only in trading having their own trademarks, etc. In such cases of outsourcing, ancillarisation, etc., the principal employer – irrespective of whether one is a manufacturer or a trader – should be held responsible for maintaining the working conditions as well as for paying the social security benefits to the workers.

It is appreciable that the onus of responsibility of proof of compliance with the provisions of the act lies with the employer instead of the employee unlike the Indian Evidence Act. But, at the same time, the criteria for fixing the employer who mostly operates with no records in the unorganized sector and the responsibility for fixing the same should be clarified in the bill. Otherwise, it will be a big loophole for the employers who habitually engage in unfair labour practices.

Sexual Harassment

The bill does mention about sexual harassment at work places but is not prepared to extend the legislation to ban sexual harassment and no stringent penal provision is proposed for the purpose. The guidelines issued by the Supreme Court in Vishaka case should be made part of the bill. The Sexual Harassment Prevention Bill should be extended to unorganized sector as well.

 Enforcement Abandoned

The bill says that no employer shall employ a worker in contravention to the Bonded Labour System (Abolition) Act, 1976, Child Labour (Prohibitions and Regulation) Act, 1986, The Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act, 1993, and Minimum Wages Act, 1948. But, the bill does not talk about the income security and job security. The bill does not have anything to offer for the workers who are thrown out of job as and when they form a trade union or become members of a trade union. The bill does not provide any protection against retrenchment or dismissal or winding up of operations and does not have anything to offer as compensation in case of extreme, genuine cases of unemployment. The bill does not talk about recognition of trade union by the employer.

A vast majority of workers in unorganized sector, like textiles that are even export oriented and even cater to the international markets, are languishing in semi-bonded conditions of employment, in spite of the so-called act that abolishes bonded labour system. No unorganized sector worker is getting minimum wages as per the act. No worker is getting legally due double wages in case of working overtime beyond stipulated eight hours of work. The bill is conspicuously silent about enforcement of existing legislations. No employer in unorganised sector is seen to be reaching the negotiating table for resolving any problem. Workers have no other option but to articulate their genuine demands by making it a law and order issue. Even, beedi workers, having exclusive protective legislation for them, have to resort only to such methods of struggle in order to get their grievances redressed. Beedi employers evade Gratuity Act by reducing the work in the last 12 weeks that is counted for computing gratuity of a worker due to be retired. The bill does not talk about any foolproof enforcement machinery. Enforcement machinery can become effective only when penal provisions are stringent.

The unorganized sector workers should also be extended the benefits under other industrial legislations like Industrial Disputes Act, Trade Union Act, Payment of Wages Act, Equal Remuneration Act, Workmen's Compensation Act, Contract Labour (Regulation and Abolition) Act, Maternity Benefit Act, Employees' Provident Fund Act, Employees State Insurance Act etc. The applicability and coverage under these legislations should be made universal.

Disputed Justice

The bill has proposed ‘Dispute Resolution Council' vested with the powers of a civil court to be constituted in each district, which will play the role of conciliation machinery. In case of failure, the Council itself will forward the complaint to the appropriate authority for adjudication. This mechanism is totally inadequate to address the grave issues confronted by the unorganized sector workers. The bill should give more thought to make the dispute resolution mechanism more effective. Otherwise, poor unorganized workers languishing at the gates of courts for years expecting justice to be rendered cannot be ruled out.

Promotion of Livelihood of the Self-Employed

The bill has suggested provision of credit, access to banking institutions, right over common property and natural resources, right to share public space to engage in economic activities, more concern for street vendors and hawkers in city and rural development planning, etc. But, it has not offered anything in concrete but for expressing its wishes. It is not possible to make it a practical plan unless and otherwise the vision is inked to a concrete plan. The bill has to go a long way in this regard. The Centre for Civil Society (CCS) has made a quite a lot of useful comments in this regard.

In Lieu of Conclusion

As Barbara rightly observed, both employers and government authorities are currently working on the short-sighted assumption that India 's comparative advantage lies in the undisputedly low cost of labour. Unfortunately, what they do not understand is that large reserves of cheap labour cannot constitute the foundations of a modern, globally competitive economy.