30 Social Securities and the Unorganised Sector

Learning Objectives

By the end of this chapter, the reader will be able to:

Define social security as a regulatory and welfare concept and identify its principal components: contributory social insurance, non-contributory social assistance, employer-provided benefits, and universal welfare entitlements.
Trace the historical evolution of Indian social security legislation from the Workmen’s Compensation Act, 1923 to the Code on Social Security, 2020.
Identify the principal components of the Indian social security framework, including the Employees Provident Funds and Miscellaneous Provisions Act, 1952, the Employees State Insurance Act, 1948, the Payment of Gratuity Act, 1972, the Maternity Benefit Act, 1961, and the Employees Compensation Act, 1923.
Distinguish the organised sector from the unorganised sector and identify the special social security challenges facing unorganised workers, who constitute approximately 90 per cent of the Indian workforce.
Identify the principal Indian social security schemes for the unorganised sector, including the Unorganised Workers’ Social Security Act, 2008, the Pradhan Mantri Suraksha Bima Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana, the Pradhan Mantri Shram Yogi Maan-Dhan Yojana, and the e-Shram portal.

30.1 Introduction

Module 4 of this book opens with social security legislation. The four chapters that follow take up the principal contributory social security statutes: the Employees Provident Fund Act in Chapter 31, the Payment of Gratuity Act in Chapter 32, and the Employees State Insurance scheme in Chapter 33. The closing four chapters (34 to 37) take up industrial relations and the Industrial Disputes Act, 1947.

This chapter introduces social security as a regulatory and welfare concept, traces its historical evolution in India, identifies the principal components of the Indian framework, and examines the distinctive challenges of social security for the unorganised sector.

flowchart LR
    A["Indian Social Security <br> Framework"] --> B["Organised Sector"]
    A --> C["Unorganised Sector"]
    A --> D["Universal Programmes"]

    B --> B1["Workmen's Compensation Act, 1923"]
    B --> B2["ESI Act, 1948"]
    B --> B3["EPF Act, 1952"]
    B --> B4["Maternity Benefit Act, 1961"]
    B --> B5["Payment of Gratuity Act, 1972"]

    C --> C1["Unorganised Workers' SS Act, 2008"]
    C --> C2["e-Shram Portal"]
    C --> C3[PM Suraksha Bima Yojana]
    C --> C4[PM Jeevan Jyoti Bima Yojana]
    C --> C5[PM Shram Yogi Maan-Dhan]

    D --> D1[PMJDY]
    D --> D2[PM-JAY]
    D --> D3[NPS]

    E["Code on Social Security, 2020"] --> A

    %% Style
    classDef dark fill:#2a4d69,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;
    class A,B,C,D,B1,B2,B3,B4,B5,C1,C2,C3,C4,C5,D1,D2,D3,E dark;

30.2 The Concept of Social Security

Social security is, in its broadest formulation, the set of arrangements by which a society protects its members against the financial consequences of life contingencies that cannot be addressed through individual savings alone. The principal contingencies include sickness, injury, occupational accident, unemployment, old age, disability, and death of the breadwinner.

The contemporary Indian framework, drawing on the international instruments developed by the International Labour Organization, organises social security around four principal mechanisms:

Four Mechanisms of Social Security

Contributory social insurance — schemes financed by contributions from employers, employees, and (sometimes) the state, providing benefits as a matter of right based on contribution history. Examples: ESI, EPF.
Non-contributory social assistance — schemes financed by general taxation, providing benefits to identified vulnerable populations. Examples: old-age pensions for the elderly poor, widow pensions, disability pensions.
Employer-provided benefits — schemes mandated by law and financed entirely by the employer, providing benefits as a matter of statutory entitlement. Examples: gratuity, maternity benefit (in non-ESI establishments).
Universal welfare entitlements — schemes financed by the state and made available to all citizens or residents on the basis of need or status. Examples: PM-JAY health insurance, PMJDY financial inclusion.

The Indian framework historically emphasised the first and third mechanisms, focused on the organised sector, with limited coverage of the unorganised sector. The post-2014 expansion of universal welfare programmes has substantially extended coverage, although gaps remain.

30.3 Historical Evolution of Indian Social Security

30.3.1 The Workmen’s Compensation Act, 1923

The first Indian social security legislation was the Workmen’s Compensation Act, 1923 (renamed the Employees Compensation Act, 1923 in 2010), enacted by the colonial government. The Act imposed on employers the obligation to compensate workers for personal injury sustained in the course of employment, on a no-fault basis according to a statutory schedule. The Act was modelled on the British Workmen’s Compensation Act, 1897.

30.3.2 The Employees State Insurance Act, 1948

The Employees State Insurance Act, 1948 was enacted by the Indian Parliament shortly after Independence, drawing on the Beveridge model of comprehensive social insurance. The Act established the Employees’ State Insurance Corporation (ESIC) and a contributory scheme covering sickness, maternity, employment injury, disablement, and death due to employment injury, financed by contributions from employers and employees.

30.3.3 The Employees Provident Funds Act, 1952

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 established the Employees’ Provident Fund Organisation (EPFO) and the contributory provident fund scheme covering retirement savings. The Act has since been substantially expanded to include the Employees’ Pension Scheme, 1995 (providing monthly pensions on retirement) and the Employees’ Deposit Linked Insurance Scheme, 1976 (providing insurance benefit on the death of the member).

30.3.4 The Maternity Benefit Act, 1961

The Maternity Benefit Act, 1961 codified the maternity protection earlier provided through the Factories Act and other statutes. The Act has been substantially amended in 2017 (examined in Chapter 22) to expand maternity leave to 26 weeks and extend creche obligations to all establishments with 50 or more employees.

30.3.5 The Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 mandated employer-funded gratuity for workers completing five years of continuous service, calculated by formula. The Act is examined in detail in Chapter 32.

30.4 The Principal Components of the Indian Framework

The Indian social security framework comprises several distinct schemes addressing different contingencies. The principal components are summarised below.

Comparative Summary of Principal Indian Social Security Schemes

Scheme	Year	Subject	Financing	Coverage
Employees Compensation	1923	Employment injury and occupational disease	Employer	Workers earning below specified wage threshold
Employees State Insurance (ESI)	1948	Sickness, maternity, employment injury, disablement, death	Employer (3.25%) + Employee (0.75%)	Workers earning ₹21,000 per month or less
Employees Provident Fund (EPF)	1952	Retirement savings	Employer (12%) + Employee (12%) of basic wage	Workers earning ₹15,000 per month or less (mandatory; voluntary above)
Employees Pension Scheme (EPS)	1995	Monthly pension on retirement	Diversion of 8.33% from employer EPF contribution	EPF members
Employees Deposit Linked Insurance (EDLI)	1976	Insurance benefit on death	Employer (0.5% of wages)	EPF members
Maternity Benefit	1961 / 2017	Maternity leave and creche	Employer	Women employees with 80 days of work in 12 months
Payment of Gratuity	1972	Lump sum on completion of 5 years	Employer	Workers completing five years of continuous service

The schemes are generally complementary rather than alternative, with most workers in the organised sector covered by multiple schemes.

30.4.1 Wage Thresholds and Coverage

Each scheme has its own wage threshold and coverage rules. The wage thresholds are revised from time to time and have substantial implications for which workers are covered. The Code on Social Security, 2020 contemplates harmonisation of these thresholds and coverage rules.

The Indian Social Security Coverage Has Substantial Gaps

A practitioner observation worth emphasising is that the Indian social security coverage, despite the apparent comprehensiveness of the statutory framework, has substantial gaps. The wage thresholds exclude middle-income workers from some schemes; the establishment-size thresholds exclude small establishments; the worker classification rules exclude many casual, contract, and unorganised workers. The Code on Social Security, 2020 addresses some of these gaps but does not eliminate them entirely.

30.5 The Unorganised Sector

30.5.1 Definition and Scale

The unorganised sector in India is defined, in the Unorganised Workers’ Social Security Act, 2008, as enterprises owned by individuals or self-employed workers and engaged in the production or sale of goods or providing service of any kind, where the enterprise employs less than ten workers. The definition captures the substantial fraction of Indian economic activity that operates outside the organised industrial and commercial sector.

The unorganised sector accounts for approximately 90 per cent of Indian employment, including:

Agricultural labourers and small farmers;
Construction workers, including migrant workers;
Domestic workers;
Street vendors and hawkers;
Home-based workers and outworkers;
Self-employed artisans and craftspeople;
Workers in micro and small enterprises below the statutory thresholds;
Gig and platform workers (an emerging category increasingly recognised in policy and statute).

The scale of the unorganised sector is the principal reason for the gap between formal coverage of the social security framework and substantive coverage of the workforce.

30.5.2 The Distinctive Challenges

Social security for the unorganised sector faces several distinctive challenges:

Workers do not have a clearly identifiable employer, or have multiple employers, or are self-employed;
Income is variable and often informal, making contribution-based schemes difficult to operate;
Workers may not have the documentation (bank accounts, identification, work history) required for scheme enrolment;
The traditional employer-employee structure of the contributory schemes does not fit the unorganised work pattern;
The territorial dispersion of workers makes administrative coverage difficult.

The Indian policy response has been multi-track, with specific schemes designed for the unorganised sector and broader universal programmes that include unorganised workers.

30.5.4 The Major Universal and Unorganised-Sector Schemes

Major Indian Schemes Covering the Unorganised Sector

Scheme	Subject	Premium / Contribution
Pradhan Mantri Suraksha Bima Yojana (PMSBY)	Accident insurance up to ₹2 lakh	₹20 per year
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)	Life insurance up to ₹2 lakh	₹436 per year (revised 2022)
Atal Pension Yojana (APY)	Guaranteed monthly pension of ₹1,000 to ₹5,000 from age 60	Age-based contribution
Pradhan Mantri Shram Yogi Maan-Dhan Yojana (PM-SYM)	Pension of ₹3,000 per month from age 60 for unorganised workers	₹55 to ₹200 per month based on age
Pradhan Mantri Jan Arogya Yojana (PM-JAY)	Health insurance up to ₹5 lakh per family per year	Funded by central and state governments
Pradhan Mantri Jan Dhan Yojana (PMJDY)	Basic bank account with overdraft and insurance	None
e-Shram Portal	National database of unorganised workers, support for benefit delivery	Free registration

30.5.5 The e-Shram Portal

The e-Shram portal, launched in August 2021, is the Indian government’s national database of unorganised workers. The portal enables self-registration by workers (with assistance available through Common Service Centres), captures basic demographic and occupational information, issues a unique e-Shram identity card, and integrates with various government welfare schemes. By 2024, the portal had registered more than 30 crore workers, making it one of the largest worker databases in the world.

30.6 Case Studies

30.6.2 Case Study 2: An Aggregator Platform and Gig Worker Welfare

A large food delivery platform operates with thousands of gig delivery workers across multiple cities. The platform engages the workers as independent contractors rather than as employees, with consequent uncertainty about the application of the ESI, EPF, and other social security statutes.

The Code on Social Security, 2020 introduces specific provisions for gig and platform workers, contemplating contributions by the aggregator platform to a Social Security Fund. The platform anticipates implementation of these provisions and is designing its compliance framework, including (i) registration of all gig workers in the e-Shram portal; (ii) facilitation of voluntary enrolment in PMSBY, PMJJBY, and PM-SYM; (iii) provision of supplementary insurance for accident and disability beyond the universal schemes; (iv) preparation for contribution to the Social Security Fund on full notification of the Code provisions.

Discussion Questions

To what extent should the platform proactively offer worker benefits beyond the statutory minimum, and what are the competitive and reputational implications?
How does the platform’s worker classification (independent contractor versus employee) interact with the social security obligations under the Code?
What lessons does the case offer for the broader gig and platform economy in India?

30.6.3 Case Study 3: An Unorganised-Sector Worker’s Access to Benefits

A construction worker, registered on the e-Shram portal, faces a serious accident at a worksite. The worker’s eligibility for benefits is examined.

The worker, as an unorganised sector worker registered on e-Shram, is automatically eligible for:

PMSBY accident insurance (subject to having paid the ₹20 annual premium);
PMJJBY life insurance for the family in case of death (subject to having paid the ₹436 annual premium);
Coverage under any state-specific construction worker welfare scheme (most states have welfare boards funded by a cess on construction contracts).

The worker is not, however, automatically covered under ESI (which requires formal employment) or EPF. The worker’s specific employer at the worksite may have liability under the Employees Compensation Act, 1923, depending on the contractor structure.