Employment: Formal and informal

Formal employment is created through contractual arrangements between an incorporated company and an individual employee. In developed economies, many sectors of the economy, such as the extractive industry, manufacturing, and provisions of services, are typically part of the formal economy. This includes the energy industry. But in developing and emerging economies, informal employment is very prominent.

The informal economy is by definition difficult to measure but comprises more than half of the labour force across the global economy. According to the ILO, the term encompasses a large number of different situations and circumstances. Informal workers either pursue livelihoods on their own account or are part of (unincorporated) micro and small enterprises. Some of these are family-owned (with family members contributing non-remunerative work); others are formal enterprises that do not offer formal employment arrangements to all its workers. Informal jobs typically require less-developed technical skills, pay less than formal sector jobs, and offer little or no benefits or job security.

In most parts of the renewable energy industry, formal employment is likely to be dominant. However, the agricultural segment of the supply chain for biofuels, biomass, and biogas (i.e., feedstock growing and harvesting; gathering of agricultural or food wastes) in poorer developing countries may entail informal forms of employment. Also, in the energy access context, certain activities such as retailing of solar PV equipment, may be informal in nature (e.g., commissioned sales agents).