Keith Hart, a British anthropologist coined the term informal sector in 1970s. He identified certain characteristics of the workers that are specific to this sector like low skills, easy entry, low paid employment and primarily immigrant labor.
Informal organization of work is the one in which workers are not governed by fixed rules but by the directions of employer. Sometimes it is also synonymous with the unorganized sector. The term usually includes casual labor, contract labor, child labor, domestic labor etc. Informal organization is based on social contracts in which rules are implied rather than stated. Informal organization also escapes the legislations and rules of the land. They may also be organizations that are developed on the basis of personal linkages and rapport. It is a feature of the society where labor supply is higher and workers accept whatever is given to them in any conditions of work. Such type of work organization also makes workers especially women and children prone to exploitation. Developing countries have relatively larger population under informal organization. In India more than 90% of the workforce is in the informal sector. Informal work force has low social security as terms of employment are uncertain and little benefits are given to the employees in case of exigencies. Beyond the work place, informal organization can be viewed as an amalgamation of a set of personal relationships, social networks, communities of common interest like caste or creed based and even as an emotional sources of motivation. At the macro level, work is informally organized in traditional societies but in modern societies work is organized. Distinction between the two can be understood in terms of characteristics of work. From the theoretical point of view, formal and informal organizations cannot be separated from each other. According to Peter Blau, in his The Dynamics of Bureaucracy, 1963 – Informal structures exist even in formal organizations. Small informal organizations when they grow big require formal rules and procedures of working for better management of task. Informal relations exist at all levels even in the modern organizations.
According to Meyer and Brown in their Institutionalized Organization: Formal structures as Myths and Ceremony, 1977 formal rules and practices are often quite distant from the practices actually adopted by the members of the organization. Formal rules are like myths that people profess to follow but have little relevance. Formal rules and practices are followed in a ritualistic manner and people do them just for the sake of doing and use them as a means of approving what they have actually done. ILO came up with the definition of informal sector: The informal sector is broadly characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and income to the persons concerned. This sector encompasses a range of vulnerabilities and deficit in decent work. Informal organization working offers more flexibility over formal organization working. They have their limitations as way of informal decision making and working, some individuals may take more power in the organizations and may undermine its goals and principles. Informal relations can also be exploited to promote vested interests.