By Abhijeet U Pai

The modern working relationships require the law to recognise non-standard forms of employment and address the lack of traditional employment benefits like social protection for them. Informal employment is seen as a job-based (based on nature of job rather than status of the enterprise) concept that cuts across different sectors of economic activity and thus is defined as ‘informal economy’ rather than ‘informal sector’, in terms of employment relationship and protections associated with the job of the worker. Any attempts at formalisation should include the meaningful extension of social protection to informal workers, by ensuring their health and safety, insurance, fair wages, and training of the working force. A large portion of workforce in India falls in the grey area between the ‘statistical inclusion and legal exclusion’ due to the differences in the statistical and legal concepts of informality causing a significant impact on ensuring social protection for the informal workers. The statistical categories often define informality based on whether the workers receive social security benefits while on the other hand the legal definitions of informality focus on the characteristics of the enterprise or employment, which excludes workers in smaller and precarious arrangements but who actually require and deserve legal protections. The attempts to address the problem should include going beyond the binary and simplistic definitions of “formal” and “informal”. A hybrid approach should be adopted by formalising employment relationships where feasible like for gig workers or organised informal sectors whereas informal employees like the self-employed don’t fit into the employee framework making formalisation impractical. So, in such cases it would be easier to adapt existing schemes like EPFO, ESI etc. without changing their employment status.

Source SSRN