Author: GT. Lalitha Kumari, Sastra Deemed University

The informal sector is a part of India’s labor market, but it is only loosely connected to the formal system of labor rules and social security. This article looks at the relationship between labor law and the informal sector in India, following the changes from older laws to the current combined labor codes. It also reviews important Supreme Court rulings on unorganized labor. The paper discusses recent developments such as the Code on Wages, 2019, and the Code on Social Security, 2020. The main argument is that although there is progressive constitutional law and a legal framework, issues with implementation still weaken the protection of informal workers

Keywords

Informal sector, Informal economy ,  Unorganised workers, Social security, Labour codes

India's informal sector is composed of a wide range of economic activities carried out by small, unregistered, and weakly integrated units into formal regulatory and social security systems. A large majority of Indian workers, in construction, domestic work, street vending, home-based production, and other occupations, are found to be informally employed without written contracts, stable wages, or social insurance. This situation inevitably causes precarious livelihoods, limits bargaining power, and increases vulnerability to economic shock—all factors running counter to the "decent work" agenda that focuses on fair income, security, and dignity at work.

Historically, Indian labour legislation evolved around the organized sector, assuming clearly identifiable employers, fixed workplaces, and standard employment relationships. Thresholds based on size of establishment, sector-specific coverage, and registration requirements ensured that most informal workers fell partially or entirely outside core protective laws. Recent reforms, in the light of the above, have been carried out through four central labour codes, notably the Code on Wages, 2019, and the Code on Social Security, 2020, with a view to rationalize the legal framework and extend formal protection to broader categories of workers, including those in the informal economy. The moot question is whether these reforms can surmount entrenched structural and enforcement challenges to effectively regulate and protect informal workers.

According to the International Labour Organization’s reports regarding informal employment and social protection in the informal economy, informality is a structural and persistent characteristic of labour markets and consequently, all workers deserve to be covered by social security through the combination of contributory and tax financed schemes. These documents together with the Delhi Group of the Ministry of Statistics on concepts and classifications of the informal sector and informal employment lay down the theoretical foundation for this article’s differentiation between informal enterprises and informal jobs and its insistence on the universality, portability and adequacy of social security for unorganised workers.

The effort of Women in Informal Employment: Globalizing and Organizing(WIEGO) and Indian research like this paper and such articles show the hardship of informal workers in terms of getting very low paid, doing long hours, working in unsafe conditions, not having written contracts and the total absence of social protection that is effective. These readings contribute to the paper's part about the profile of India’s informal workforce and “Regulatory Challenges” by providing evidence of the gender and caste-based vulnerabilities, the invisibility of home-based and dispersed worksites, and the challenges involved with enforcing minimum wages and social security in multi-layered contracting situations.

Research and working papers that deal with social security for unorganised workers, such as the studies on the Building and Other Construction Workers (BOCW) welfare regime, and broader social assistance schemes reveal reasons like chronic under-utilisation of cess funds, low registration of eligible workers, documentation barriers, and the lack of gender-sensitive design. The article takes these findings into account while discussing “Protection and Social Security: Design and Delivery Gaps,” and it asserts that, notwithstanding progressive legislation and substantial financial resources, informal workers in practice still have very limited access to health, pension, housing, and education benefits. On the other hand, doctrinal writings and case-based analyses of Supreme Court decisions—namely, judgments on the BOCW Acts, suo motu proceedings concerning migrant workers, and public interest litigation relating to app-based transport workers—demonstrate how the Court has often pointed out shortcomings in the administration and called for the proper use of welfare funds, as well as the acknowledgment of the plight of gig workers. These sources serve to augment the article’s section on “Supreme Court and Unorganised Workers” by reinforcing the thesis that judicial interventions highlight the disparity between legal guarantees and the reality of non-implementation, and are, in fact, a critical lens for assessing whether India’s labour codes really do afford protection to the informal workforce.

The objectives of this article are fourfold:

1. To explain the concepts of the informal sector and informal employment, and their relevance for labour regulation in India

2. To analyse the statutory framework governing informal workers, with emphasis on the Code on Wages, 2019 and the Code on Social Security, 2020.

3. To identify key Supreme Court decisions and pending litigation on unorganized and gig workers, and their implications for regulation and protection.

4. To identify persistent challenges and suggest reforms to make Indian labour law more inclusive, worker centric and aligned with the decent work framework.

The research employs a doctrinal and analytical approach, which rests upon constitutional provisions, statutory texts, Supreme Court decisions, government reports, and secondary sources. It scrutinizes the definitional and institutional choices made in the Code on Social Security, 2020, and the Code on Wages, 2019, and provides an analysis of the Supreme Court's key decisions regarding construction workers and unorganized labor, as well as the current court cases on gig and domestic workers. There is no empirical fieldwork involved; rather, the research is aimed at legal interpretation and normative evaluation from the point of view of the vulnerable informal workers

The term "informal sector" internationally denotes unincorporated, usually household-based production units functioning under low levels of organization, not much distinction between labor and capital, and employment relationships based on personal or casual arrangements rather than formal contracts. "Informal employment" is a wider concept, comprising all the jobs without sufficient social security and legal protection, whether they are in informal enterprises, households, or in formal firms that depend on casual, temporary, or outsourced labor with no effective coverage. These ideas highlight that informality is characteristic of both businesses and workers which has significant regulatory implications.

The informal workforce in India is found widely in the agriculture, construction, small-scale manufacturing, trade, transportation, domestic labor, and a range of service occupations sectors. The workers' conditions are generally marked by low and erratic incomes, no written contracts, long working hours, unsafe or unregulated environments, and total exclusion from the benefits of provident fund, employee state insurance, and pension schemes. Women are disproportionately represented in home-based work and domestic service, while migrant workers are primarily found in the construction sector, thus the intersection of gender, caste, class, and immigration status creates vulnerable situations for the workers. This profile indicates that the task is not only to "formalize" enterprises but also to stand by the workers' right to proper labor conditions no matter where and how they are employed

The Indian labor laws before the code were fragmented and gradually introduced. Different statutes for wages, social security, occupational safety, and industrial relations existed, each having its own limits and sectoral reach. A lot of laws were applicable only to establishments having a minimum number of workers or to certain scheduled employments, thus excluding micro-enterprises, home-based units, and domestic workplaces mainly from the formal legal framework. Moreover, even if protective measures were in theory applicable to smaller units, the enforcement in the widely dispersed and household-based worksites was minimal, thus a large disparity between legal text and the actual situation existed

The Code on Wages, 2019 bundles together the minimum wage laws, payment of wages, bonus and equal remuneration, and aims at establishing a world-wide minimum wage for all workers. Theoretically, it moves away from highly detailed scheduled employments and expands the wage protection to a larger number of informal workers including those who work in small establishments. The Code on Social Security, 2020 is a merger of nine important social security laws that is very comprehensive and clear in its definition of unorganised workers, gig workers, and platform workers thus the government getting the power to create schemes and appoint a National Social Security Board and State Boards for their welfare. Sections 109–114 of the Code provide for the establishment of social security funds and schemes specifically for these categories with their financing coming from the government, employers and aggregators’ contributions.

The Supreme Court has taken interventions many times to show the weakness of the unorganised workers and to force the implementation of the welfare laws that were made for them. In a series of cases regarding the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the Building and Other Construction Workers’ Welfare Cess Act, 1996, one including Uttar Pradesh Power Transmission Corporation Ltd v CG Power and Industrial Solutions Ltd (SLP (C) No. 8630 of 2020, decided 12 May 2021), the Court examined not only the collection but also the allocation of the cess coming from the construction activities and pointed out that the laws were particularly formulated to create funds for welfare of the construction workers of the unorganised sector. It mentioned that the practices of improper assessment, collection, and use of cess and not registering of workers eligible to be registered with welfare boards, kill the protective purpose of the legislation and erode the constitutional right to dignity under Article 21.

The development of the gig economy has made its way to the Court's docket via the public interest litigation Indian Federation of App-Based Transport Workers v Union of India (W.P. (C) No. 1068 of 2021), wherein drivers and delivery workers using apps seek acknowledgement as “unorganised workers” and ask for social security benefits in accordance with the existing labour and social security laws and the 2008 Act. The petition argues that the classification of gig workers as “partners” and thereby the denial of access to social security schemes, infringes their rights under Articles 14, 21 and 23 of the Constitution and the Court is asked to interpret the protective intent of unorganised-worker legislation in a way that includes new types of platform-mediated informal work. Similarly, the Supreme Court has very recently requested the Union Government to deliberate on a comprehensive legal framework for domestic workers, admitting that this majorly informal and female-dominated section of the workforce is still outside effective regulation and institutional protection

The regulation of working conditions in the informal sector poses different structural and institutional difficulties. A large number of informal workers work in small, scattered, and often changing places such as construction sites, street markets, private homes, and waste-sorting yards; these locations do not conform to the traditional factory-centric inspection model. Different layers of contractors and intermediaries frequently mediate employment relationships, making it hard to pinpoint a legally responsible employer for compliance with minimum wage, safety, or social security obligations. The lack of written contracts, payslips, or proper records makes it even harder for workers to prove their employment and claim violations in any legal venue.--

Labour departments are restricted in their operations by the limited number of personnel and financial resources available to them as well as by the change in policies that have shifted emphasis to the “ease of doing business” approach that relies on risk-based inspections and self-certification. Complaint-driven enforcement assumes that workers know their rights and are ready to go to the authorities, which is unrealistic for most informal workers who are afraid of retaliation or losing their jobs. In such a situation, even the most advanced legal provisions run the risk of being only symbolic acts, as the regulatory institutions are unable to reach the daily realities of informal labor.

On the side of protection, there are several laws and schemes that seek to provide social security to informal workers but their coverage is limited. The experience with the Building and Other Construction Workers' welfare regime serves as a good example: a large amount of cess has been collected from the employers, but official statistics and court hearings show that the number of workers registered is very low and the funds allocated for health, education, housing, and pension schemes are under-utilized to a large extent. Barriers are low awareness among workers, complicated and documentation-intensive registration processes, and sluggishness in welfare boards' administrations

The Code on Social Security, 2020 and the latest government pronouncements are stressing the point of universal social security and even, for the very first time, explicitly mentioning unorganised, gig and platform workers as benefitting from the aforementioned Sections 113 and 114. Nevertheless, the whole operational design leans on a compulsory self-registration through digital platforms and portals, which can possibly result in the disqualification of workers without steady connections, smartphones or identity documents. While the contribution-based schemes are still to find the right balance between being a source of sustainability and being affordable for the erratic and poor-income workers, tax-financed social protection floors are still in the making. Gender-responsive design has not yet reached its full potential as a lot of women informal workers do not have effective access to maternity protection, childcare, and their recognition of home-based production and unpaid care work through the social protection system is still nonexistent

The analysis conducted points out that Indian labor law, despite undergoing significant reforms, still remains largely dependent on formal, establishment-based employment and informal workers are relegated to the periphery in both the design and enforcement. The transition from a fragmented legal system to consolidated labor codes has increased the scope of formal protection through the application of universal minimum wages to all and the clear recognition of unorganized, gig and platform workers, but in reality, the access to these rights is still limited by various factors including administrative skills, the divide caused by technology and the lack of proper enforcement. The Supreme Court has pointed out several times the serious shortcomings in the welfare systems for construction and unorganized workers, showing that the promise of legislation does not necessarily result in the actual protection of rights

The situation for informal workers keeps being tough as they have to deal with the same old problems like low and irregular incomes, unsafe workplaces, and lack of social security coverage. This is all in spite of the constitutional guarantees of dignity and the international decent work framework. The reform that is being done now might result in letting the enterprise-level formalization and digital compliance to be more important than the rights-based, worker-centered approach which will provide basic protection regardless of the form of employment. The workers won't get the protection they need if the labour administration is not strengthened, if the registration and benefit delivery is not simplified, and if the participation of workers' organizations in governance is not assured. The legal frameworks will still be far from the experiences of the people

The engagement of labor law with the informal sector in India is indicative of a conflict that has not gone away between the high hopes of universal social justice and the hard fact of widespread informality. One of the major developments in terms of norms and institutions is the unification of labor laws and the explicit recognition through the Code on Social Security, 2020 and the Code on Wages, 2019 of unorganized, gig and platform workers which has been somewhat reinforced by the supporting legal interpretations of the Supreme Court regarding construction and unorganized workers. On the other hand, there are still the structural features of informal work, chronic under-resourcing of labor institutions, and design flaws in social protection schemes which have all contributed to the limited transformative potential of these reforms.

Books, reports, and articles

1. International Labour Organization, “Extending Social Security to Workers in the Informal Economy,” ILO Social Protection Department, Geneva.social-protection​

2. International Labour Organization, “Informal Employment, Precariousness, and Decent Work,” 2022.pmc.ncbi.nlm.nih​

3. Women in Informal Employment: Globalizing and Organizing (WIEGO), “Understanding the Informal Economy.”wiego​

4. N. Sambodhi, “Navigating the Gaps: Labour Laws and India’s Informal Workforce,” 2025.sambodhi​

5. Drishti IAS, “Labour Code for Informal Sector,” Daily News Editorial, 2021.drishtiias​

6. India Development Review, “Do India’s Labour Codes Address Informal Workers’ Needs?” 2025.idronline​

7. VV Giri National Labour Institute, “India’s Social Security Code, 2020: A Catalyst for Promoting Social Security,” 2021.vvgnli​

8. Ministry of Statistics (with ILO), “Concepts, Definitions and Sub-Classifications of Informal Sector and Informal Employment,” Delhi Group Manual.mospi​

9. “Challenges Faced by Informal Sector Workers in India,” International Journal/online article.ijllr​

10. “Issues of Informal Worker,” NIDAN, 2020.nidan​

11. “India’s Labour Codes: Transformative Step Towards Inclusive Economic Growth,” CII Blog, 2025.ciiblog​

12. “India’s New Social Security Laws: Labour Codes,” law firm / policy brief, 2025.sgcms​

13. “Labour Law Reforms on Unorganised, Gig and Platform Workers under the Code on Social Security,” IJIREM Article.ijirem​

14. “Social Security of Unorganised Workers in India,” SSRN Working Paper.papers.ssrn​

Statutes and policy documents

1. The Code on Wages, 2019, No. 29 of 2019. 

2. The Code on Social Security, 2020, No. 36 of 2020 (as introduced and as enacted).labour+2​

3. Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.wb​

4. Building and Other Construction Workers’ Welfare Cess Act, 1996.wb​

5. Unorganised Workers’ Social Security Act, 2008 (now subsumed).papers.ssrn​

6. Press Information Bureau, “Building and Other Construction Workers Welfare Cess,” 2018.pib​

7. Press Information Bureau, “Code on Social Security, 2020: Towards Universal and Inclusive Social Security,” 2025.pib​

8. Press Information Bureau, “India’s Labour Reforms: Simplification, Security and Welfare,” 2025.pib​

9. Ministry of Labour & Employment, “Four Labour Codes Herald Transformational Change,” 2025.labour​

Supreme Court and related cases / proceedings

1. Uttar Pradesh Power Transmission Corporation Ltd v CG Power and Industrial Solutions Ltd & Ors, Supreme Court of India, SLP (C) No. 8630 of 2020, Judgment dated 12 May 2021 (BOCW cess/coverage).argus-p​

2. In Re: Problems and Miseries of Migrant Labourers, Suo Motu Writ Petition (Civil) No. 6 of 2020, Supreme Court of India (registration and database of unorganised workers, reference to Code on Social Security, 2020).livelaw+1​

3. Indian Federation of App-Based Transport Workers (IFAT) v Union of India & Ors, Writ Petition (Civil) No. 1068 of 2021, Supreme Court of India (social security rights of gig and platform workers – pending).biicl+1​

4. Supreme Court orders/judgments on BOCW welfare boards and utilisation of cess in various writ petitions concerning construction workers’ conditions.sci+1​

5. Supreme Court observations calling for comprehensive legislation for domestic workers’ benefit, protection and regulation (2025 order).scconline

   
   
   
   
   
   

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