Difference between Formal Sector and Informal Sector

Informalisation of the Workforce is a situation where the workforce in the informal sector increases to the total workforce of the country. According to the composition of the workforce in India, it has been divided into two categories; Formal or Organised Sector and Informal or Unorganised Sector. The Formal Sector consists of jobs that have specific working hours and fixed wages; whereas, the Informal Sector is where the workers or employees don’t have fixed working hours and wages. 

What is Formal/Organised Sector?

All the public and private sector enterprises that employ 10 or more hired workers come under the category of Formal/Organised Sector. The formal or organised sector consists of all the companies or enterprises where the employees have regular and guaranteed work and wages. It has certain rules and regulations and works by following formal procedures. In India, the employees of central and state governments, banks, railways, and so on can be called organised sector workers. The workers working in the formal or organised sectors are known as Formal Sector Workers. 

What is Informal/Unorganised Sector?

All the private enterprises that hire less than 10 employees come under the Informal/Unorganised Sector category. The unorganised sector consists of activities that focus on the primary production of goods and services and the generation of employment and income on a small-scale basis. In this sector, there is no guarantee of a fixed job or wages and no fixed working hours. People who work as ragpickers, moneylenders, brokers, etc., are considered a part of the informal or unorganised sector. The workers working in the formal or organised sectors are known as Informal Sector Workers. 

Difference between Formal Sector and Informal Sector