NEW DELHI: A little-noticed amendment to the Pradhan Mantri Rojgar Protsahan Yojana brought into play in April 2018 may have led to a jump in new net additions to formal sector employment data.
The formal sector payroll data released by the Employees’ Provident Fund Organisation (EPFO) late on Saturday showed a jump in net new enrolments from 1.64 lakh in October 2017 to 5.09 lakh in April 2018. This increased to 6.33 lakh in December 2018, going on to a peak of 8.94 lakh in January 2019 and register a steady rise of 8.61 lakh jobs in February 2019.
A Union labour ministry notification dated April 12, 2018, had amended the existing rules, and decided that the government would pay “the full employer’s contribution [towards Employees Provident Fund (EPF) and Employees Pension Scheme (EPS)] as admissible from time to time, with effect from April 1, 2018, for three years to new employees and existing beneficiaries.” This scheme guaranteed payments for three years. The last date for registering new beneficiaries was March 31, 2019.
The original scheme notified in August 2016 had promised that the government will underwrite employers’ contribution of 8.33 per cent to EPS in all sectors and 3.67 per cent contribution to EPF in the textile sector for any new employee earning less than Rs 15,000 per month for three years from April 1, 2016.
Officials say the new promise to underwrite the EPS and EPF contributions of all employees, including existing beneficiaries, could have prompted firms to retain workers as they expanded, instead of hiring new employees whose pension contributions were already guaranteed by the government.
Interestingly, the number of new EPF subscribers in February 2019 was 8.25 lakh. The number of members who exited the provident fund scheme in the same month was 2.99 lakh. However, as some 3.35 lakh who had earlier left the EPFO rejoined, the net payroll addition was above the number of new EPF subscribers at 8.94 lakh.
The original scheme in 2016 had been worked out after it was noted that despite 7-8 per cent GDP growth in the last decade, growth in jobs was low. The offer of underwriting PF and pension contributions was made to not only encourage job creation, but also improve the quality of jobs by encouraging firms to register under the Provident Fund Act.
“Last year’s tweak in EPFO guidelines for underwriting employers’ contribution was a move to ensure twin objectives: job creation and retention in organisations as well as getting workers the benefits of formal sector jobs,” said a labour ministry official.
The amendment
A notification on April 12, 2018, said the government would pay the full employer’s contribution towards EPF and EPS for three years to new and existing beneficiaries
This may have prompted firms to retain workers, instead of hiring new ones