The Unorganized Sector is an economic concept in India, often used interchangeably with the Informal Sector, which consists of all unincorporated private enterprises owned by individuals or households engaged in the production of goods or services. The National Commission for Enterprises in the Unorganised Sector (NCEUS) defined it as enterprises operating with less than ten total workers. This sector is characterized by ease of entry, uncertain legal status, labour-intensive methods, and a lack of social security benefits for its workers.
The concept's origin is rooted in the recognition of a vast workforce operating outside formal legal protection, which the First National Commission on Labour (1966-69) noted was unable to organize due to constraints like the casual nature of employment and the small, scattered size of establishments. The sector comprises the overwhelming majority of India's workforce, with over 80% to 90% of workers in the informal economy.
To address the lack of protection, the Unorganised Workers' Social Security Act, 2008 (UWSSA) was enacted, which mandated the Central Government to formulate welfare schemes for life and disability cover, health and maternity benefits, and old age protection. Section 10(3) of the UWSSA, 2008, provided for the registration of every unorganized worker and the issuance of a portable identity card with a unique identification number.
The UWSSA, 2008, was recently replaced by The Code on Social Security, 2020, which is one of the four new Labour Codes that consolidated 29 older labour laws. This new framework connects the unorganized sector to a broader social security net by extending benefits to previously uncovered groups like gig and platform workers. However, the new codes have also amended certain provisions, such as raising the threshold for prior government approval for layoffs from 100 to 300 workers under the Industrial Relations Code, 2020.