EPFO wage subsidy scheme boosts job creation, provident fund enrolment in FY21

(Representational image)

The government’s scheme that funds provident fund contributions of low-paid workers as well as their employer appears to have helped create jobs as 75 percent of total net additions to India’s retirement fund body EPFO came in the last six months of the fiscal.

The scheme, Atmanirbhar Bharat Rozgar Yojana was announced by Finance Minister Nirmala Sitharaman in November for companies registered with the Employees’ Provident Fund Organization (EPFO). It is effective from October 1, 2020.

Fresh enrolment and re-joining of old members jumped from October. Out of the 77.08 lakh net payroll addition for the fiscal year, 58.11 lakh were in the last six months. An increase in enrolment indicates job creation in the economy.

Net payroll addition is arrived at by clubbing together new subscribers, number of fresh exits, and those who re-joined after exiting EPFO earlier.

While the experts have attributed the unlocking of the economy as the primary driver of job creation and resultant increase in enrolment under EPFO, they have also acknowledged that the wage subsidy scheme would have incentivised the employers to hire more.

Prashant Singh, Vice President and Business Head-Compliance and Payroll Outsourcing, TeamLease Service said, "EPFO enrolment numbers went up only due to festive quarter, relaxation in lockdown and opening up of businesses since at that time, the economy was in recovery mode. But the scheme could have played a multiplying effect over the other factors."

K R Shyam Sundar, Professor, HRM, XLRI, Xavier School of Management said: "I think it is a combination of both the unlock that happened  as well as the scheme as it would have incentivised the employers and industries to take the benefit of the scheme and hire the fresh workers and the ones that had to let go off due to lockdown."

He said the scheme would have definitely played a role in boosting the hiring sentiment but more data was needed to understand the extent to which it helped.

Labour and Employment Minister Santosh Gangwar had informed Parliament in a written reply that about 16. 5 lakh individuals had registered under the EPFO subsidy scheme until March 9, 2021.

Under the scheme, for the establishments employing up to 1,000 workers, the central government will provide employee’s contribution at 12 percent of the wages and employer’s contribution at 12 percent of the wages thereby covering a total of 24 percent of the wage.

It aims to incentivise job creation during the COVID-19 recovery phase, wherein the government will give the subsidy for the new employees joining an EPFO-registered establishment with a monthly wage less than Rs 15,000, who lost job due to the COVID-19 pandemic and regained employment after October 1, 2020.

The scheme is slated to be operational till June, 30, 2021.

The scheme is expected to provide dual benefits. Apart from encouraging business establishments to hire more workers, it will help a large number of people find jobs in EPFO-registered establishments.