Difference Between Organised and Unorganised Sector

Edited by Diffzy | Updated on: July 07, 2023

       

Difference Between Organised and Unorganised Sector

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The working population, businesses, services, etc. belong to two different sectors depending on government involvement. When a business requires government registration to operate it is an organised sector. The organised sector operates under government rules and regulations. The unorganised sector does not require any such registration. They operate outside government rules.

This article focuses on exploring the two sectors. It also explains the differences between organised and unorganised sectors.

Organised Sector vs Unorganised Sector

The organised sector has government registration. The businesses in the organised sector are subject to government rules and regulations. All their actions and procedures are legal. The employees have to follow strict rules in the workplace. They need to follow complicated procedures for receiving approval. Employees in the organised sector have job security. Their employers cannot fire them without just cause and prior notice. Employees receive regular salaries with opportunities for increments. They have the opportunity to get training and advance their careers. Organised sector offer benefits like paid leaves, pension, etc. Some jobs in the organised sector include bank jobs, government employees, government schools and colleges, etc.

The unorganised sector does not require government registration. The businesses and services under the unorganised sector do not follow government rules. Not all of their transactions are legal. They may be involved in illicit activities. The unorganised sector does not offer job security. Employees may lose their jobs at any time without any prior notice. They work variable hours and are not eligible for overtime compensation. Employees in the unorganised sector often do not get salary increments. They also lack extra benefits like paid leaves, healthcare, pensions, etc. However, they do enjoy a lot of flexibility in work and experience less stress. Some jobs in the unorganised sector are domestic workers, small-scale manufacturers, etc.

Difference Between Organised Sector and Unorganised Sector in Tabular Form

Parameters of ComparisonOrganised sectorUnorganised sector
MeaningThe sector of working units registered under the governmentThe sector of small-scale working units, not registered under the government
Government involvementYesNo
Governance by actsFactories Act, minimum wages Act, PF Act, Bonus ActUnorganised sectors are not governed by Acts
Job securityEmployees have job securityEmployees do not have job security
Presence of government rulesYes. Government rules apply to the organised sectorNo. government rules are not strictly followed in the unorganised sector
SalaryFixed MonthlyDaily wages
Working hoursFixed hoursVariable hours
Compensation for overtimeEmployees get paid for working overtimeNo payment for overtime work
Amount of salaryAs per government rulesLess than what the government decreed
Possibility for salary incrementYesRarely
BenefitsMedical, pension, travel, leaveNo extra benefits
JobsBank jobs, Information technology, government schools and colleges, etc.Domestic workers, small-scale manufacturers, street vendors, etc.

What is the Organised Sector?

The sector of working people under the government is the organised sector. This sector is under government registration. Hence, the people working in the organised sector have to adhere to government rules and regulations. There are many acts governing the organised sector like Factories Act, minimum wages Act, PF Act, Bonus Act, etc.

Employees in the organised sector experience many advantages compared to their counterpart, the unorganised sector.  They have job security. Employees do not have to worry about losing jobs unnecessarily. They receive a fixed amount of salary every month. Employees also have the opportunity to receive salary increments. Those in the organised sector only have to work fixed hours. If the organisation requires an employee to work overtime, they will pay compensation for the extra hours. Employees in the organised sector receive extra benefits like medical check-ups, paid leave, travel leave, maternity leave, pension, etc.

It is not easy to be a part of the organised sector. The enterprises should have proper registration. In addition, the government taxes this sector.  

The organised sector has access to a greater amount of resources. Hence, they are more efficient and productive. This sector consists of the following businesses, manufacturing, service, and retail.

  • Manufacturing- this business involves the production of various goods and their sales.
  • Service- this business involves providing various services to the people. The services can be in the form of transportation, healthcare, etc.
  • Retail- this business involves selling goods directly to the people.

Some examples of organised sectors are

  • Bank jobs
  • Government schools and colleges
  • Registered industry workers
  • Government employees
  • Finance companies
  • Information technology
  • Large manufacturing companies
  • Aviation industry

Advantages of Organised Sector

  • Employees working in the organised sector have job security. Even if there were sudden changes to the economy, government employees often retain their jobs.
  • Employees in the organised sector get overtime compensation. This rule helps employees to make some extra money when they need it. Employees can pick up extra work and shifts when they need extra money.
  • Employees in organised sectors cannot lose their jobs without proper reason and warning.
  • Employees in the organised sector receive many benefits like paid vacation, medical assistance, provident funds, etc.
  • Employees in the organised sector receive health and hygiene benefits.
  • Since all business in the organised sector is under government registration, they follow strict rules and regulations. All actions are legal. This rule provides added protection for both the employers and employees of the sector.
  • Strict adherence to rules and regulations also means higher accountability. Higher accountability means businesses in the organised sector cultivate more trust among their consumers and shareholders.
  • Businesses that are part of the organised sector have better credit access. Rules of the organised sector require that industries keep a detailed record of their financial operations. This record in turn helps business people when they want to apply for loans.
  • Businesses in the organised sector follow strict labour laws. Hence, the employees in the organised sector enjoy better working conditions.
  •  The organised sector has a crucial role in a nation’s economic growth.

Disadvantages of the Organised Sector

  • Employees in the organised sector have comparatively limited flexibility. They have fixed hours, a fixed number of paid leaves, etc. They have to be very careful with their paid leaves. They also have to plan their vacations months in advance to get their leaves approved.
  • In certain businesses within the organised sector, employees do not have many opportunities to make advancements in their careers.
  • Employees within the organised sector have to follow a lot of red tapes to get some approval for any changes. The strict adherence to rules and regulations may slow things down. It can make the work life of employees complicated.
  • Organised sector employees have limited control over their workload. They will have to follow strict procedures and submission deadlines.
  • It is difficult to get employment in an organised sector. Therefore, even if an employee feels dissatisfied with his current workplace, they may not quit the job to look for another.
  • Employees in the organised sector are more prone to stress and burnout. The jobs are often very demanding and have strict deadlines. Even if employees have to work overtime, they have to finish the work.

What is the Unorganised Sector?

The sector of business not under government registration is unorganised. Since this sector is not under the government, the workers do not have to follow the government rules and regulations.

The unorganised sector does not offer job security. Employees never know when they might lose the job they currently hold. They receive daily wages according to the work they perform in a day. The salary is not fixed and often less than the government-decreed amount. In addition, they usually do not have chances to get salary increments. Employees in the unorganised sector do not have regular working hours. Since their salaries depend on the daily work they perform; this irregularity could be a disadvantage. Employees also are not eligible for overtime compensation. Employees working in the unorganised sector may not receive the extra benefits enjoyed by those in the organised sector. They do not have access to paid leave, pension, etc.

Since businesses in the unorganised sector do not require government registration, it is easy to enter the sector. In addition, they are not subject to paying taxes.

The unorganised sector contains relatively fewer resources and employees compared to the organised sector. Usually, they have fifty employees or less. This sector also consists of the manufacturing business, service, and retail business. They contain small-scale businesses, private businesses, workshops, and petty trades. However, most of the unorganised sector has focused on the service business.

Some examples of unorganised sectors are

  • Construction workers
  • Farming
  • Hotel management
  • Street vendors
  • Small-scale manufacturers
  • Domestic workers (cleaning, cooking)
  • Self-employed people

Advantages of the Unorganised Sector

  • The majority of the nation's population works in the unorganised sector as the unorganised sector provides more employment opportunities. The unorganised sector provides comparatively more jobs than other sectors.
  • The unorganised sector offers more flexibility compared to the organised sector. Its work hours are more flexible. The time flexibility allows people working in the unorganised sector have a better work-life balance.
  • Businesses in the unorganised sector do not need government registration. Hence, it is easier for job seekers to enter the sector.
  • The unorganised sector does not need to follow government rules and regulations. This sector has fewer constraints. This benefit gives the workers freedom to be innovative and take a few risks.
  • The unorganised sector consists of local businesses and service workers. They provide the necessary goods and services to the local community. The workers in the unorganised sector are vital for community development.
  • Employees in the unorganised sector do not have to worry about red tape. They do not have strict rules and regulations to follow. The unorganised sector gives freedom to the workers to make decisions without going through elaborate and complicated procedures.
  • Employees in the unorganised sector experience less job-related stress and burnout. Hence, they can have a better quality life.

Disadvantages of the Unorganised Sector

  • Employees in the unorganised sector do not have job security. They do not know when they lose a job they have been doing. Changes in the current state of the economy could affect the jobs of the unorganised sector.
  • Employees in the unorganised sector receive a low salary. Often, they receive salaries less than the government-prescribed amount.
  • The unorganised sector does not offer benefits like healthcare, paid leaves, pensions, etc.
  • Unorganised sector is not subject to labour laws. This situation allows employers to fire employees without just cause or notice. Hence, the unorganised sector is unpredictable.
  • Workers in unorganised sectors often work in dangerous situations. Specifically jobs that no one else may prefer to work in. Unorganised sector often suffers from funding problems; hence, workers may not get access to the necessary protective equipment. Lack of protective gear can have major negative effects on the health of the workers.
  • Businesses in the unorganised sector may not be proficient in their account keeping. Not having a clear record of their accounts can affect their credit. Therefore, businesses in the unorganised sector may find it difficult to get loans. Lack of access to necessary financial help can further limit their chances to grow.
  • Employees in the unorganised sector may also have trouble acquiring loans, as they do not have job security. When the persons applying for loans cannot guarantee that they will be able to repay the money, the lenders will ne reluctant to provide the necessary financial help.
  • The unorganised sector does not offer any education or training opportunities. Hence, the workers have no means of advancing their skills. Without gaining better skills, the workers cannot make career advancement.
  • The unorganised sector is often involved in practices like tax evasion and other illegal activities.

Main Differences Between Organised Sector and Unorganised Sector (in Points)

  • The working sector that requires government registration is the organised sector. The sector of working people and businesses that do not require government registration or affiliation is unorganised.
  • Businesses in the organised sector have to follow strict government rules and regulations. The unorganised sector is not subject to government rules.
  • Employees of the organised sector have job security. Employees working in the unorganised sector do not have such employment guarantee. They can lose their jobs without any warning.
  • Businesses in the organised sector have better credit scores and can acquire loans easily. Those businesses in the unorganised sector have difficulty acquiring loans.
  •  Employees of the organised sector receive many benefits like paid leaves, pensions, etc. The unorganised sector does not offer these benefits.
  • The employees of the organised sector receive higher salaries than the unorganised sector.
  • Employees in the organised sector have fixed working hours and overtime compensation. The unorganised sector has no fixed work time or compensation for overtime.
  • Activities of the organised sector are legal. Hence, they protect the workers. The unorganised sector engages in many illicit activities.
  • The government taxes the organised sector. The unorganised sector is not subject to paying taxes.
  • The organised sector consists of large businesses and services. The unorganised sector contains small-scale businesses and services.

Conclusion

In short, the organised sector and unorganised sector differ because of their government registration. The former offers better job security, salaries, and benefits. However, it has limited flexibility and has strict rules and regulations. The latter one, the unorganised sector has greater flexibility. The employees are not subject to rules and regulations. However, employees do not have job security and receive less salary.


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"Difference Between Organised and Unorganised Sector." Diffzy.com, 2024. Thu. 18 Apr. 2024. <https://www.diffzy.com/article/difference-between-organised-and-unorganised-sector>.



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