Know the Difference Between Organised and Unorganised Sectors

Know the Difference Between Organised and Unorganised Sectors

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Syed Aquib Ur
Syed Aquib Ur Rahman
Assistant Manager
Updated on Jun 6, 2023 17:42 IST

Discover the key differences between the organised and unorganised sectors in the economy. Understand the contrasting structures, regulations, and working conditions that define each sector.

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The organised sector refers to corporations and businesses registered with the government. Those not established with the laws and regulations of the government fall under the unorganised sector. 

This difference becomes too important to know when it comes to employment. Terms of employment, such as job security, working hours, retirement, etc., vastly differ in both the organised and unorganised sectors. 

Organised vs Unorganised Sector: Key Differences

To differentiate between organised and unorganised sectors, it is important to know the parameters. 

Parameters Organised Sector Unorganised Sector
Structure It is formal, with clear organisational structure and hierarchies It is informal, with no legal compliances and no clear organisational structure 
Regulation Operates under various labour laws and regulations that govern employment conditions, wages, benefits, working hours, etc. Regulations are limited here and employees may not be protected by labour laws.
Employment Benefits Regular wages, social security coverage, healthcare benefits, retirement benefits, paid leaves, and other statutory benefits There are little to no employment benefits, and workers may get paid on a daily or weekly basis
Contracts There are specific contracts of employment with entitlements and benefits There are no contracts
Skill Requirements Requires specialised skills, education, and training May not require special training or education
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What is the Organised Sector?

The organised sector is a segment of the economy with registered and regulated enterprises following relevant legal requirements. These companies typically have a formal structure, maintain clear hierarchies, and operate with established systems and procedures. 

The organised sector encompasses various industries, such as manufacturing, finance, information technology, healthcare, and professional services. Businesses in these industries comply with labour laws and regulations like the Gratuity Payment Act that offer employment conditions, wages, benefits, working hours, and other aspects. 

The government must ensure the enforcement of these regulations to protect the rights and interests of workers. 

Employees in this sector also receive various benefits, including regular wages, social security coverage, healthcare benefits, retirement benefits, paid leaves, and other statutory entitlements mandated by labour laws.

Workers in the organised sector typically have formal contracts that outline their terms and conditions of employment. These contracts specify their roles, responsibilities, remuneration, and other relevant details. 

What is the Unorganised Sector?

The unorganised sector comprises workers in transport, construction, or small businesses that may not comply entirely with legal regulations. The businesses in this sector have a flexible structure without any clear hierarchies. 

Working conditions in such businesses are not controlled, so the workers cannot claim health benefits from them as those in the organised sector can. Even there are no contracts which lead to a lack of job security.

Typical examples of employment in the unorganised sector are street vendors, domestic workers, agricultural labourers, construction workers, etc. These businesses play a significant role in many economies, particularly in developing countries, contributing to employment opportunities and providing livelihoods for many. 

In India, 93% of the workforce work in the unorganised sector. 

Parting Thoughts

The main difference between organised and unorganised sectors is that the former is a better option for employment, while the latter is not.

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FAQs

Is unorganised sector private or government?

The unorganised sector consists of private enterprises and workers. It is primarily composed of privately owned businesses and individuals engaged in various informal economic activities. These enterprises and workers operate independently and are not directly governed or regulated by the government in the same way as the organised sector.

What are terms in contracts of employment?

Terms in contracts of employment refer to the specific provisions and conditions agreed upon between an employer and an employee. These terms outline the rights, responsibilities, and obligations of both parties during the course of employment. They serve as a legally binding agreement that governs the employment relationship.

About the Author
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Syed Aquib Ur Rahman
Assistant Manager

Aquib is a seasoned wordsmith, having penned countless blogs for Indian and international brands. These days, he's all about digital marketing and core management subjects - not to mention his unwavering commitment ... Read Full Bio