Rising Joblessness: EPF sops for industry, workers to be extended by 6 months

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“As on 17.02.2021 benefits are to be provided (under ABRY) to 8.42 lakh beneficiaries through 38,320 establishments,” labour minister Santosh Kumar Gangwar said in the Lok Sabha on March 28, 2021.

The government is likely to extend the provident fund subsidy scheme aimed at incentivising new recruitment by businesses by six months from the current deadline of June 30, as it seeks to arrest the rise in unemployment rate, an official source said.

If the scheme is extended, a large section of the industrial and commercial establishments in the country and the relatively low-earning new employees joining them till the end of calendar year 2021 will be able to avail the specified incentives for two years from the date of joining.

The relatively low utilisation of the funds earmarked for the scheme – less than a couple of hundred crores so far, against Rs 22,810 crore approved by Cabinet for the period till 2022-23 – is also a reason for the extension.

The scheme – Atmanirbhar Bharat Rojgar Yojana (ABRY) – was first announced on November 12, 2020, as part of the Atmanirbhar Bharat Package 3.0, and the Cabinet gave the approval for it on December 9.

“The current situation warrants that ABRY be extended. Fund are also available under the scheme,” the source said.

Under the current scheme, the government provides subsidy for two years in respect of new employees recruited between October 1, 2020, to June 30, 2021, in the form of 12% employees’ contribution and 12% of employers’ contribution (24% of wage or basic pay plus DA) towards Employees’ Provident Fund (EPF) in respect of new employees earning up to Rs 15,000 per month in a firm employing up to 1,000 people. Also, the government pays employees’ share of EPF contribution (12%) in respect of new employees in establishments employing more than 1,000 employees for two years.

The benefit shall be available for two years from the date of registration of the employee.

The beneficiary employee must not have been working in any establishment registered with EPFO before October 1, 2020; they also should not have a universal account number or EPF member account prior to that date.

Establishments with less than 50 workers will have to recruit at least two new employees and those with a staff strength of more than 50 must employ at least five new employees for eligibility.

ABRY, when it was first announced, was seen to require an outlay of Rs 36,000 crore for the period till FY23 end, but the Cabinet later re-estimated the spending requirement at Rs 22,810 crore.

“As on 17.02.2021 benefits are to be provided (under ABRY) to 8.42 lakh beneficiaries through 38,320 establishments,” labour minister Santosh Kumar Gangwar said in the Lok Sabha on March 28, 2021.

The second Covid wave has led to a sudden spike in India’s unemployment rate – it rose to 11.9% in May from 7.97% in the previous month, as per the Centre for Monitoring Indian Economy (CMIE). The rate had last reached double digits in June last year, when it was 10.18%.

According to the CMIE, barring in April, May and June last year and May this year, the monthly unemployment rate had never breached the double-digit mark at least since January 2016.

It reached its peak of 23.52% in April last year amid a countrywide lockdown, but started falling from the next month. In May last year, the country’s unemployment rate was 21.73%.

Formalisation of employment has been a focus area of the Narendra Modi government; it has, for instance, sought to expand the EPF base via assorted subsidy scheme, including the Pradhan Mantri Rozgar Prosthahan Yojana for the textiles and garment sector.

However, official documents showed the process of formalisation of employment – jobs with essential social security cover– has taken a big hit due to the pandemic since gathering pace for a few years till 2020-21.

New enrolment under the two prominent social-security organisations – EPFO and ESIC — fell nearly a quarter on year in 2020-21, according to official data. Clearly, not just job creation, but even formalisation, which has been incentivised by the Modi government with significant fiscal cost, has suffered as the pandemic ravaged the economy.

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