Nepal has over 4.4 million informal workers, majority of them underpaid and excluded from social protection: Report

Nepal has seen reforms in labor and social security acts but these reforms have made little to no impact on the lives of informal sector workers, the report says.

Representational image. (File photo/Amnesty International)

Prasun Sangroula

  • Read Time 3 min.

Kathmandu: A report by the Centre for Social Change (CSC) titled “Under the Shadows of Informality: A Vulnerability Assessment of Informal Sector Workers of Nepal” states that almost 62.2% of the country’s working population, that is over 4.4 million Nepalis, is involved in the informal sector and a majority of them are excluded from social protection, healthcare and social security schemes and are paid lower than the minimum wage determined by the government. Within the formal sector, about 1.5 million workers are employed informally, the report states.

“As of 2021, the Government of Nepal has ensured a minimum wage of NRs.15,000. 

The recently reformed Labour Act (2017) and Social Security Act (2018) have also taken strides in ensuring welfare and wellbeing of both workers and employers,” states the report. “However, these reforms fundamentally target workers in the formal sector and have made little to no impact for informal sector workers.”

CSC prepared the report by conducting research for 15 months in different places, including Kathmandu, Lalitpur, Morang and Sunsari. Altogether 98 persons were chosen for the research study. Out of which 80 were informal workers and the rest 18 were stakeholders and experts who were informal sector-specific. Out of 80 respondents, 46 were female and 34 were men.

The report highlights the vulnerabilities of informal workers in economic, occupational and social, and political facets. The informal workers who were the respondents of the research were selected from five different sectors, including street vending, domestic work, construction, transportation and agriculture.

The study found that all informal workers from various sectors have different kinds of risks and vulnerabilities, specific to the nature of their work. Street vendors, for instance, lack safe and sanitary workplaces, which in turn increases their vulnerabilities to harassment and discrimination by regulatory bodies. Moreover, they face adverse effects of poor sanitation and extreme environmental conditions like harsh weather, and pollution, among others.

‘As the informal sector is easily accessible and needs less skill for enrollment, a huge number of people are involved in it. This creates unbalanced competition in the market. A bottle of water that costs Rs 10 could be sold for Rs 5 by the informal workers.’

Domestic workers, on the other hand, face different sets of risks and vulnerabilities. The lack of legal employment contracts has made them susceptible to being overworked and underpaid. Informal workers in the construction sector lack health or life insurance and that has increased their vulnerabilities to workplace injuries and even death.

As the informal sector is easily accessible and needs less skill for enrollment, a huge number of people are involved in it,” said Prakash Sharma, national project coordinator at the International Labor Organization. “The informal sector creates unbalanced competition in the market. For instance, a bottle of water that costs Rs 10 could be sold for Rs 5 by the informal workers.”

Similarly, the informal workers also do not pay tax to the government. In this regard, Sharma urges the government to build a mechanism that would register the informal workers.  

The government of Nepal hasn’t defined the informal sector yet. But the widely accepted definition of the informal sector includes “units engaged in the production of goods and services with the primary objectives of generating employment and incomes for the persons concerned. These units typically operate at a low level of organization, with little or no division between labor and capital as factors of production and on a small scale.”

According to the report, the informal sector includes unpaid workers in family enterprises, casual wage employment, home-based workers or service providers and street vending.

“The issues of informal workers are not addressed yet because the government has not defined them in the constitution and any of the country’s law,” said Keshav Bashyal, a faculty member at the Department of International Relations and Diplomacy and Labor Studies, Tribhuvan University. Bashyal was recently appointed as the advisor to the minister of Labour, Employment and Social Security. “Most probably very soon the government will work on defining the informal sector.”

Neetu Pokharel, program officer at Alliance for Social Dialogue, said that the report helps shape a new perspective about informal workers and their rights. “It adds value to the debate about workers’ rights,” she said.