MC Interview: EPFO to soon get a digital makeover to minimise delays in disbursal of claims: Labour secy Dawra

Labour secretary Sumita Dawra.

In a bid to further minimise delays in disbursals of claims, the government is making aggressive efforts to upgrade the world's largest retirement fund body's digital platform, including developing a central database to streamline payments, to match the best in the industry, said Sumita Dawra, secretary, Ministry of Labour and Employment.

The Employees' Provident Fund Organisation (EPFO) under the ministry provides social security coverage to all salaried employees in India.

In an interview with Moneycontrol, Dawra said, “There is a need to upgrade EPFO’s IT systems and they are in the process of doing it. Their IT systems should be on a par with the best financial institution in the country."

The secretary’s comments come at a time when a recent article co-authored by economist Sanjeev Sanyal pitching for an overhaul of EPFO’s systems led to an outpour of complaints around difficulties in claiming or withdrawing funds by subscribers.

Dawra added that there is a need for a database for a centralised payment system “whereby if you are transferred from one place to another, your records are all in a centralised database. That's very important for EPFO today. We are still working on that.”

The secretary said that in another two to three months, the government should be able to develop this database as she bet on a huge improvement in subscriber-centric workings of the retirement fund entity by the end of this year given these digital upgrades.

Dawra highlighted rejection of claims under EPFO have fallen steadily from 28.6 percent in 2021-22 to 25.5 percent in 2023-24 and to 21.9 percent in the current year so far.

The labour secretary spoke to Moneycontrol on a range of issues, including on the timeline for implementation of the three employment-linked incentive (ELI) schemes, and the long-pending labour codes.

Edited excerpts:

The implementation of streamlined labour codes has been pending for a while now. Could you give us an insight on the possible steps?

There are two aspects to the new labour codes: the labour welfare aspect and the ease of doing business aspect.

As part of the labour welfare aspect, there is a statutory right that has been created as part of the new codes for payment of minimum wages and timely payments. The payment of these wages will be through bank transfers and there are certain other provisions like the national floor wage. The minimum wages of the states will not go below the national floor wage, which will ensure (a minimum) living standard.

The process of calculation of the national floor wage is by considering living standards and there is a Supreme Court judgment which requires consideration of the education, health and recreational needs of the worker while fixing the minimum wages.

Labour welfare will also include occupational safety standards relating to their health, working conditions, overtime, hours of work, holidays and free-of-cost annual health checkup for the workers above a prescribed age. And formalisation of labour with appointment letters and prohibition of contract labour in core activities, which will encourage regular employment.

Extension of social security to unorganised workers is very important, including gig platforms, domestic workers. We will also create a social security fund.

Now, on the ease of doing business aspect, a number of measures have been taken to simplify the process and reduce the complexities in labour law compliances.

Could you tell us the timeline for implementation of the codes?

So far around 30 states have pre-published their new labour rules. There are certain rules that only the central government has to notify, certain rules that only the state has to notify and certain rules where both have to notify. All the draft rules from the Centre have been pre-published. We don't see huge issues arising from states wherein they will not pre-publish the rules. We had a very good interaction on June 20 with all the state governments. There is a capacity issue with some of the states and union territories and we are coordinating with them. We have also planned regional workshops. Before the regional workshops, our officers will also go and handhold them. Tamil Nadu and Delhi have partially done it. Delhi has pre-published one and Tamil Nadu has pre-published three codes. Both these states have the same concern, whether their existing schemes will be disturbed by the new labour codes. We have told them no, the state schemes will not be disturbed, and we will also give them the legal position on this in writing.

Are there states that are not on board with the proposed labour codes?

West Bengal is the only state that on June 20 said they will not do it. We have explained to them that this will be very good for labour welfare and also for attracting investments. I specifically requested the officer from West Bengal to give the correct picture to his seniors. We have planned a series of regional workshops where all the states will come together to discuss the rules. Our concerns on some of the pre-published rules are that a few states have left things incomplete, and that there are discrepancies between the central framework and the pre-published rules by some state governments. Another element is that there should be uniformity of compliance for businesses across the states. To ensure this, we will examine at our end, but we want more discussions so that we have a common view on where the gaps are.

Many states have implemented a number of measures suggested under the new labour laws, so the issues which were viewed with a certain degree of anxiety have already been implemented by many of them. We are a tripartite ministry and we want consensus with the labour unions, with the employers. The employers have their own concerns.

All parties need to move together and we feel that this kind of a sustained dialogue is how we will drive consensus and a common understanding. We have met six out of the 12 (national-level) trade unions in the country so far. And we feel that the regional workshops will give us more clarity.

We have of late seen a lot of global interest to set up shop in India, especially in view of the China+1 strategy of the developed world. How can India make it easy for foreign companies to do business in the country?

There have been talks about developing skilled labour in India and we feel the budget has made very significant intervention in that direction. One is the ELI (employment-linked incentive) schemes, which are for first timers. These are people who will work in these organisations to become more employable, rather than entering the unorganised sector and being forced to change jobs. Once the unorganised workforce joins the organised sector, they will be trained on the job.

The second is the internship intervention, which will bring a lot of employability. Another element is the training for the youth in collaboration with state governments and industry.

Over the next five years, the government, as announced in the budget, aims to provide 4.1 crore job opportunities; of these, 2 crore will be covered by the ELI schemes in the next two years.

We expect a good jump in terms of the employability aspect of labour. The government is also ensuring that there are decent working conditions that meet international standards of social security in place when international companies come to India.

We are working to ensure that all three the ELI schemes are operational by the end of this calendar year.

Most infrastructure companies say that they train their own labour before employing them. Is there an opportunity for the government to tie up with public and private companies to train workers?

The 1,000 ITIs (industrial training institutes) that were announced in the budget will be set up in collaboration with the state governments and industry. The only way to upgrade the content of training modules in ITIS is through collaboration with industry and that has been happening.

Infrastructure companies like Larsen & Toubro have said that India is losing a lot of its skilled labour to the ongoing boom in the Middle East due to lower taxation along with better public infrastructure. What steps are you looking at to keep Indian talent from moving abroad?

Why do you say the word lose, because Indian labour is getting employment opportunities abroad, right? We are working on a framework for mutual recognition of skills and qualifications. Some countries like Germany have a labour deficit now. And there are a couple of schemes that encourage migration of skilled labour. We have a demographic dividend, and it's not necessary that everybody will work within the country.

Those are the kind of benefits you get when there is a framework, either a partnership agreement on mobility of labour or formal sector workers—they move and remittances come to the country.

We are working with the MEA (Ministry of External Affairs). We have a task force on international migration of workers. Very soon there is a meeting of the task force and we will be moving ahead on possibly some more bilateral agreements where we can work towards mutual recognition of skills and qualification.

The government was conducting a few surveys including one on migrant workers. Can you give us an update on when it will be finalised?

We have a lot of information on migrant workers through the eShram portal. About 30 crore unorganised workers have already been onboarded on eShram and we are able to get a lot of disaggregated data on the age, profile and several other aspects. Coming to the migrant workers survey that is done by the Labour Bureau, we have yet to put that in the public domain. We have to review it.

Is the government planning to come out with any other employment data reports before the ELI schemes are implemented, because a survey would help align the direction of these schemes?

If you look at the jobs data landscape in the country, the backbone is the PLFS (Periodic Labour Force Survey). The PLFS data is of households, have a certain sample size and there is a certain frequency with which the survey is conducted.

The National Sample Survey Office is planning to conduct the PLFS quarterly and also monthly for the rural workforce. The PLFS gives us data in percentages, then the RBI (Reserve Bank of India) claims data gives us data in numbers across 27 sectors, but that again depends on the PLFS data. While we have the percentages coming from the household survey of PLFS, we have the sectoral data in numbers coming from KLEMS (K: Capital, L: Labour, E: Energy, M: Materials and S: Services) database.

Then you have the quarterly employment survey of the Labor Bureau which does a survey with about 15,000 units across manufacturing service sector, the non-farm sector and the annual survey of industry that the Ministry of Statistics and Programme Implementation conducts.

But now our ministry feels that there is a gap and let’s try and capture the data of the various centrally- and state-sponsored schemes that generate employment. We recently had a meeting on July 26 with about 24-25 ministries where we said that we will be collating the data on the various schemes where employment is created, either directly or indirectly.

The railways, for example, already have a very good portal place—Shramik Kalyan portal—where they are capturing the employment data of about 30,000-plus contractors who work for the railways across the country.

A collection of all this data and surveys will be the base of the ELI schemes.

We also have the National Career Service portal that tells us where the vacancies are coming from, who the employers are. We have something like 30 lakh employees registered on NCS and around 93 lakh people registered looking for jobs and on any one particular day we have about 15 to 18 lakh vacancies.

At the moment on NCS, the maximum jobs are from finance and insurance for 2023-24, followed by operations and support, then other service activities, IT and communication, manufacturing, education, specialised professional services. The kind of vacancies that are being posted gives us an idea about the demand. We are also aligning the SIDH—the Skill India Digital Hub portal with the NCS—to connect skilled workers with eligible jobs.

Recently, there was an opinion piece co-authored by economist Sanjay Sanyal wherein he spoke about the need to overhaul the EPFO to make it better and faster. Is the ministry planning better and faster processes for disbursal of claims?

Let us keep things in perspective. The Employees' Provident Fund Organisation is one of the biggest social security funds in the world today. There has been an addition of 6.3 crore net payroll subscribers in the last six and a half years. A lot of companies prefer to have their provident fund accounts with the EPFO. In fact, we see a trend now where many trusts are winding up and are transferring their funds to the EPFO. EPFO is giving 8.5 percent return on investment, which is higher than any other fixed deposit or saving account.

When people keep their account with EPFO, they also want to withdraw it for certain reasons. Till May, EPFO allowed automatic claim settlement up to Rs 50,000. In May, because of the reform agenda that has been followed, they have increased it to Rs 1 lakh and they brought in four categories.

Another reform is, if you have made a contribution with EPFO for six months or below, even then you can withdraw your money. This wasn't there earlier. This happened in June.

Third, in April and May, you have historic additions to the membership—19 lakh joined the net payroll subscription in April, and 20 lakh in May. Let me also give you data on new establishments. In 2019-20, registrations of new establishments with the EPFO grew to 2.94 lakh in 2023-24 from 1.17 lakh in 2019-20. Speaking of rejections, they have fallen continuously from 28.6 percent in 2021-22 to 25.5 percent in 2023-24 and to 21.9 percent in the current year so far.

Having said that, yes, there is a need to upgrade the EPFO’s IT systems and they are in the process of upgrading it. Their IT systems should be on a par with the best financial institution in the country. They are in the process of doing that. There is also a need for a database for a centralised payment system, whereby if you are transferred from one place to another, your records are all in a centralised database. That's very important for the EPFO today. We are still working on that. It will take us another two to three months to be able to reach that point and we have a partnership with C-DAC (Centre for Development of Advanced Computing) to develop this database. I think by the end of this year you will see a huge improvement.

We've seen a lot of firings and layoffs in startups as well as bigger multinational companies. Can the government in any way play a role in the private sector to tackle this issue?

Our central labour commissioner already plays a big role in cases where there has been a violation of laws. Otherwise, we don’t need to interfere in something which is legal or done as per the rules. Ease of doing business is as important as labour welfare.