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Monday, November 30, 2020

Govt to bear 2 years’ share of PF for laid-off, new workers

The contribution of 24 per cent for both employers and employees for establishments employing up to 1,000 employees will be borne by the Centre and for establishments employing more than 1,000 employees, 12 per cent of the employees’ share will be contributed by the government.

By: ENS Economic Bureau | New Delhi | November 13, 2020 1:10:49 am
Stimulus measures, Govt stimulus measures explained, India job creation measures, Nirmala Sitharaman press conference, Nirmala Sitharaman, India economy, India lockdown impact,Union Finance Minister Nirmala Sitharaman. (PTI/File)

The government on Thursday announced an employment incentive scheme, Atmanirbhar Bharat Rozgar Yojana, under which it will provide subsidy for provident fund contribution for adding new employees to establishments registered with the Employees’ Provident Fund Organisation (EPFO). The Centre will provide the subsidy for two years for workers who lost jobs between March 1 to September 30 and for new workers employed on or after October 1.

Under the scheme, the central government will pay PF contribution for workers with wages up to Rs 15,000. The contribution of 24 per cent for both employers and employees for establishments employing up to 1,000 employees will be borne by the Centre and for establishments employing more than 1,000 employees, 12 per cent of the employees’ share will be contributed by the government.

The additional eligibility condition for the scheme specifies that the subsidy will be provided for employment of two new employees if the establishment has 50 or less employees and will be paid for five new employees if establishments have more than 50 employees. The reference base for employees would be September 2020. The subsidy amount under the scheme, which will be operational till June 30, 2021, will be credited upfront only in Aadhaar-seeded EPFO accounts (UAN) of new employees.

“99.1 per cent of the establishments will be covered under this scheme and 65 per cent of all employees in the formal sector are estimated to be covered in the first category, wherein EPF contributions will be given by the government by way of subsidy support,” Finance Minister Nirmala Sitharaman said.

Experts said the impact of this scheme will be positive but limited as it is not direct wage support but through the EPF route. “The EPF subsidy announced today will be distortionary in some senses. The employment creation condition in the package is inequitable as the establishments are classified into simple two categories, <50 and > 50 and the number of jobs required to be created is a minimum of 2 and 5 respectively. The > 50 category offers huge variation — for example according to the Annual Survey of Industries, 2016-17, 22310 factories employ 50-99 while 34,981 employ 100 plus. It is inequitable to ask these two disparate categories to create the same number of jobs for the same amount of subsidy for two years. There must have been finer gradations in a progressive sense,” XLRI professor and labour economist KR Shyam Sundar said.

He added that given the low wage aspect of the EPF subsidy, it will most likely lead to creation of low-skilled and low paying jobs and the total effect of these jobs and their incomes will have limited multiplier effects and, hence, less significant impact on the aggregate demand, especially in sectors that drive it like the automotive and the high-end industries.

The new scheme is similar to the earlier scheme of Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) which was implemented upto March 2019 to incentivise new employment. PMRPY was announced in August 2016, with the Centre providing for full employers’ contribution of 12 per cent (EPF and Employees’ Pension Scheme), for three years for new employees registered with the EPFO on or after April 1, 2016 earning up to Rs 15,000 per month. Total amount of Rs 8,300 crore has been given to 1,52,899 establishments covering 1,21,69,960 beneficiaries under PMRPY.

The Centre also announced additional outlay for employment under the earlier announced scheme of Pradhan Mantri Garib Kalyan Rozgar Yojana, under which it had earlier identified 116 districts across six states where at least 25,000 workers had returned in each district and employment was to be given for 125 days to migrant workers.

On Thursday, it said Rs 37,543 crore has been spent till date under the scheme, making an additional outlay of Rs 10,000 crore for PM Garib Kalyan Rozgar Yojana. Rural employment guarantee programme, MGNREGA was provided with Rs 61,500 crore in Budget for FY21 and Rs 40,000 crore was additionally provided in Aatmanirbhar Bharat 1.0. “As on date, Rs 73,504 crore has been released under MGNREGA and 251 crore person-days of employment have been generated,” it said.

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