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Informal Sector: Platform Work and Code for Social Security, 2020

Introduction to Informal Sector of India

  • Indian workforce is primarily employed in the informal sector. The Informal Sector can be simply defined as part of the economy that is neither taxed nor regulated by any arm of government. It’s popularly known as Grey Economy/Unorganised Sector.

  • According to the National Statistical Survey of India (NSSO), the Informal enterprises are all the unincorporated proprietary and partnership enterprises.

  • National Accounts Statistics (NAS) also includes cooperative societies, trust, private and limited companies into the NSSO definition of Informal Sector.

  • Labour Force Survey 2017-18 says that about 90.6% of India’s workforce was informally employed during the year.

  • Governmental initiatives like GST, Demonetisation, Provident Fund reforms, Skill-India, Fixed Term Contract etc. in the past few years have helped formalize the informal sector up to some extent but there still is a long way to go.

  • The onset of the Corona Virus Pandemic and the struggle of the economy in the past couple of years have had the worst impacts on the Indian markets and it’s expected that formal enterprises are even more likely to increase the hiring of informal workers in coming years in order to cut labour costs.


Platform Work

  • According to the Social Security Code 2020, Platform Work can be defined as a kind of work arrangement outside of a traditional employer-employee relationship.

  • In Platform Work, the organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for money, mostly on a performance basis.

· Significance of Platform Work

  • Platform Work ensures flexibility and ownership for workers concerning the delivery of work.

  • Platform Work Sector saw an unprecedented rise amid Corona Virus Pandemic and it holds significance for delivery of essential services.

  • Platform Work is an employment-intensive work with a wide scope for growth.

  • A majority of Platform Workers hail from rural areas and the remittances sent by them to their natives boost the rural economy.

Challenges related to Platform Work

  1. Generally, the pay-outs for the employees are governed by the algorithm of the companies which affects pricing per unit of work, its allocation and hours.

  2. There is a considerable scope for exploitation of workers engaged in platform work. Most of the platforms require certain assets to be present with the worker if he wants to signup for the job. For instance, if a man wants to join a food delivery service or an online taxi service, he has to have a vehicle. For this, the Companies introduce finance schemes and make the workers get stuck in a vicious cycle of monthly instalments and mandatory work.

  3. The contracualisation of the workforce is a common practice in Platform Work and this leads to a lack of job security in the sector.

  4. The Platform work promotes Gig economy which can be defined as a free-market system containing temporary employee positions for short-term commitments. After the task is accomplished, the workers no longer continue to work for the company eg a Movie Project, a Live Concert, etc.


Code on Social Security, 2020

The Indian Government, citing the struggles of the informal sector employees, framed and introduced a unified code on Social Sector and for the first time defined 'platform workers' as a new category of workers employed in the informal sector.


  • The government launched three labour codes on industrial relations through Lok Sabha in the last quarter of 2020. These codes were based on occupational safety, health conditions, working conditions and social security.

  • Through new labour codes, the government proposes to simplify the country’s years-old labour laws and pushing the economic activity without any sort of compromise with the rights and benefits of the workers.

  • These labour codes clubbed with Code on Wages Act 2019 can have a metamorphic effect on labour relations in India. These laws can make the business conduct much easier by merging state and union labour laws.

Provisions of the Code

  • One Code for Social Security: The Code on Social Security 2020 has been envisaged to replace nine social security laws, including the Maternity Benefit Act, Employees’ Provident Fund Act, Employees’ Pension Scheme, Employees’ Compensation Act etc.

  • Universalisation of Social Security: On the lines of the American System of Social Security, this Code universalises social security coverage to the unorganised sector workforce, such as migrant workers, gig workers, and platform workers.

  • Contributors in the Social Security Fund: The Aggregators including digital intermediaries, buyers' market places, service subscribers, intermediaries to connect with the seller or the service provider, etc. are specifically required to contribute to the social security fund.

  • Inclusion of Agricultural Labour: This code will extend social security to agricultural workers for the first time in India.

  • Faster Transfer of Benefits: Through this code, the government aims at reducing the time limit for receiving gratuity payment from the continuous service of five years to one year for all kinds of employees, including fixed-term employees, contract labour, daily and monthly wage workers.


Muddles in the Informal Sector

  • Tendency of Hiring: The Informal Sector tends to hire low-skilled and less productive workers. As a result, the wages of formal sector employees stay high.

  • Low Productivity: According to a World Bank Report, an average informal firm in an emerging market in developing economies is only one-fourth as productive as average firm operating in a formal sector.

  • Absence of Social Sector Benefits: The informal sector employees are often kept away from social service benefits like Provident Fund, Health Insurance, maternity leave etc.

  • Possibility of Exploitation: The Informal Workforce often doesn't receive work-place security conferred to them by the Labour Laws of India. This creates a buffer for companies to exploit these workers.

  • Economic Constraints: The government also faces problems as tax evasion is a common practice in the informal sector.



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