unorganised sector examples

In this article, Aditya Swarup discusses how to Resolve the Problem of Identifying the Right Talent in Unorganised Sector.


When we discuss India’s mammoth workforce, be it in provincial or urban situations, what rings a bell is the ‘unorganised’ sector. They frame the hoards that don’t ‘have a place’ to a part administered by a huge number of measures as per work laws or business terms characterized by approach measures. These are the hoards, which fall outside the ambit of Central Government enactment relating to wages and compensations. They are governed by the laws of the state governments.

In an urban scenario, the two sector stands out distinctly. While a peon or a teacher in an unorganized sector may not have any benefit, no perks,  no job security but his counterpart in the organized sector would be cushioned.

Human Resource Management (HRM) necessary for the growth of any sector

The Indian economy is a preponderance of both organized and unorganized sector. Unfortunately, the unorganized sector rather than the organized sector has been neglected in a lot of terms in implementing human resource management.

Irrespective of the sector, growth generally depends upon the quality of people and worker working in that sector. Most of the unorganized sector do not have HRM policies due to which the sector generally suffer and are not able to grow according to its potential.

There may be many workers who might be excellent in working but they also suffer in these sectors due to the ineffective or absence of HRM.

Unorganized labor

  • All those workers who work without any labor agreement or without any job security or on a daily basis just for the sake of employment without enjoying any benefit from labor welfare programmes.
  • In the rural scenario, the landless labor forms the bulk of unorganized worker who is forced to work on other lands for the sake of employment. These are the same labors who finds a way to work as a construction worker in urban or semi-urban areas.
  • In the urban scenario, the homeless people who have usually migrated from one place to another in search of employment. These workers are usually ready to work on the lesser wage which is generally offered to a contractual laborer without any other benefits.
  • These are the same labor who generally migrate from one place to another in search of a job as their job is not secured and are continuously looking for better job options offering a better wage.
  • In India, this sector provides almost 90 percent of the total labor requirements which is generally higher than any other country’s ratio.

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How to resolve the problem of hiring the deserving one

Many a time we had been at a mechanic shop and soon after the problem is resolved we move out without asking the qualification of the worker but the precision by which the work was finished might have impressed us.

The formal qualification of a worker does not bother us if the quality of work done is above the mark. If suppose, work is not done is not properly, we generally complain to the chief worker who is generally a organized or qualified labor but he might be lacking practical knowledge about the work.

Most of the time their working style or technique surprises us. We take these skills for granted and never bother of asking from where they have learned those skills or how they are able to work with such a great efficient quality. Most of them are self-made and this puts us in a dilemma whether a qualified worker is good or who has more practical knowledge without any qualification is good?

So there exists a lot of problems and a lot of things decide who is qualified and who actually possess the practical knowledge. There are many roadside workers who usually possess better skills than a labor working in a formal sector but because of no-recognition of their talent or work, they are not able to secure deserved job in any sector of the economy.

Recognition of Prior Learning (RPL) under the Pradhan Mantri Kaushal Vikas Yojana

No matter from where the worker has learned or is possessing certain skills which help him to work or make him better than other work and he is able to complete his work in a best possible way, those workers must be given recognition about their work without asking about the prior qualification.

This is help them not only help them in putting their valid argument about their productivity or increasing their real income but will also help employers in implementing positive HR practices such as health, safety, compensation, certification, training and even in compliance of applicable laws which are generally which are not provided to them, in their workplace and that eventually will help help them to pull themselves away from the life which they have been living through ‘jugaad’.

Recognition of Prior Learning (RPL) is a platform present under the Pradhan Mantri Kaushal Vikas Yojana which generally provide recognition to the worker with prior skills or information to get equal acceptance to the formal way of learning. In short, RPL is a platform which gives importance to the knowledge possessed by a person rather than the way of processing that knowledge.

It basically aims to align the competencies of the unregulated workforce of the country to the National Skill Qualification Framework.

Scope of HRM in the Unorganised Sector

  • The economic survey conducted by the International Labour Organisation in the recent years indicated about the 93 percent of the total workforce engaged in the unorganized sector including those who are self-employed.
  • This may be due to the incapability of the organized sector to provide jobs to the semi-skilled or unskilled worker at the mass level.
  • Though, it does not mean that all the worker in these sectors do not possess any type of skills or are not capable to compete with the registered or workers.
  • Therefore if the competencies of these labor will be made properly, then their skills can be used properly for effective output and this will have a direct contribution to the Indian economy.
  • Considering the huge potential for employment and momentous contribution to NDP, the need for the implication of human resource management practices in the unorganized sector is not only relevant but also essential. Therefore, the need for the quality of human resource in the unorganized sector is highly expected.

Challenges for implementing HRM in Unorganised Sector

  • Generally, employees in the unorganized sector are not formally educated and at times employers also are not educated as well.
  • Consequently, very few of them have the awareness and understanding of human resource management practices. Most of the time, they assume employees as labor and not as human capital.
  • Employer-Employee interpersonal relations in the unorganized sector are very poor resulting in the further reluctance of adopting HRM practices.
  • Employees are hired through personal and informal references for a short span or for seasonal employment.
  • Even the roles and functions of their job are not defined properly.
  • This creates a sense of job insecurity and lack of functional clarity among the employees; leading to the tendency of leaving jobs without intimation.
  • Therefore, Human Resource Management becomes very challenging in the unorganized sector.

Some of the challenges are

Non-availability of skilled manpower

The unorganized sector is a labor-intensive sector which accommodates around 93 percent of the total workforce of India; however, there is a vast scarcity of skilled and trained manpower. This can be ascribed to the fact that very few courses and training or skill development programs are available which can cater to the demands of the sector.

Stress and working conditions

The working pattern of the unorganized sector requires employees to work for longer hours which cause work fatigue resulting in frustration and low motivation. Besides this, casual nature of jobs in unorganized sector results in very less or no job security, lower salary and poor working conditions end up in stress and other work-related issues affecting the productivity of employees.

Workforce attrition

In the absence of a formal employment contract, leaving the job without notice or intimation is a common phenomenon.


As skilled manpower is scarce in the unorganized sector, attracting employees of competitors by offering them higher salaries is an easy option.

What problem RPL will resolve?

The casual segment of business not at all like the formal division of business, comes up short on a solid information about a worker’s information on proficiency, training and work involvement, additionally, these workers may have an affair of taking a shot at various employment jobs and now and again may have worked over numerous segments. This circumstance makes it hard to translate their real ranges of abilities in a specific arrangement of assignments or exchange.

Because of this reason, managers regularly need to rely on the suggestion of merchants and temporary workers while contracting these workers for the sort of yield these workers can give.

  • The RPL under the Pradhan Mantri Kaushal Vikas Yojana(PMKVY) is a superb activity which empowers to have an instrument to check and formalize the real range of abilities and furthermore measure the degree of brilliance of a worker in a specific occupation.
  • The RPL program under PMKVY which surveys and affirms the workers for their aptitudes, not just encourages the business to think about the ranges of abilities of every worker that is procured, yet in addition causes the business to choose the preparation these workers may require according to the prerequisite of the venture they will take a shot at. Further, the confirmation additionally causes the workers to understand the holes in their abilities and further train themselves in a way that the expertise levels coordinate with the prerequisites of the activity to advertise.
  • In addition, such acknowledgment not just aides informally affirming their abilities of the laborers yet additionally allows them to procure better than average wages, profit arrangements of standardized savings and employer stability. Aside from that accreditation, it can likewise assist them with exhibiting their aptitudes while taking up work or even wish adventure out to take up independent work.
  • As it is very conceivable that the workers have worked crosswise over parts, RPL can assist the workers with validating their cross-division aptitudes which can, in the long run, help them turned out to be more employable over different segments.

Recommendations made by National Statistical Organisation on Unorganised Sector Statistics

The Committee noticed that the data gaps radiate from the uniqueness of the existing information accumulation instrument identifying with ideas, definitions, and the inclusion of unorganized labor requires a powerful information framework fitting in with the ILO system. The Committee recommends that a dedicated unit should be created within NSO for standardizing concepts, definitions, and harmonization thereof and promoting their use in census and surveys. This unit will also regularly interact with all national level institutions involved in the conduct of such surveys on the need for adopting harmonized concepts and definitions.

  • The Committee noted that the present questionnaire of NSS Employment and Unemployment Survey (EUS) is very lengthy and suggested the incorporation of few more probing questions pertaining to informal characteristics of the enterprises and the workforce, particularly in the quinquennial surveys.
  • The committee recommended that some extra things of data to catch the nature of business (profitability, toughness, consistency of work, security and wellbeing), with legitimate the determination might be consolidated into the overview instruments.
  • The Committee recommends that a special survey on informal sector relating to construction activities be undertaken on a priority basis.
  • Considering the important role of micro, small and medium enterprises in the national economy, the Committee recommends that systematic studies may be undertaken on their role in terms of output, employment, and export.
  • The Committee recommends setting up of a permanent unit, both at Central and State level, in line with the Population Census, to conduct the Economic Census at the regular and fixed interval of five years.
  • The Committee recommends that a framework for insights on the casual economy ought to have the component to catch information on immediate and circuitous linkages between the formal and casual divisions, considering viewpoints like types of association, presence of contrasts in business status like unpaid family specialists including independent work, women‟s support in expanded SNA exercises, variety in the idea of chaotic segment crosswise over various areas, and vulnerability of unorganized sector to shocks.
  • The Committee recommends that the National Statistical Organisation (NSO) may formulate methodological studies for strengthening database on such aspects of linkages of the informal sector and the formal sector as well as their relevance in activities like the trade.
  • The committee recommends that ordinary and convenient dispersal of casual segment measurements gathered by the open offices should frame a vital part of the national arrangement on dispersal of insights.


The Human Resource Management practices are very crucial for the growth and development of businesses in any sector, organized or unorganized. Unorganized sector being so vast needs better HRM practices. Many employers in the unorganized sector, particularly in manufacturing, trade, transport, and construction etc, have started acknowledging the importance of structural HRM practices of recruitment, selection, performance appraisals, compensation, training, and development etc. and their positive impact on the business. Challenges of the unorganized sector such as lack of skilled workforce, higher attrition rate, lack of formal education, insufficient skill development centers etc. can be addressed through a proper framework of HR policies and procedures may be implemented by Indian Government as statutory act.


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