Budget
Employment schemes aim to shift workforce from informal to formal jobs
Summary
- The schemes are an incentive to boost workforce movement across regions as many people leave the lower-end jobs within weeks of joining and drop out of the workforce.
The focal point of the government's aim is to shift a large chunk of the workforce from the informal sector to the formal. The employment-related schemes are an incentive to boost workforce movement across regions as many people leave the lower-end jobs within weeks of joining and drop out of the workforce.
Under the 'Employment Linked Incentive’, finance minister Nirmala Sitharaman said that one month's wages will be given to all employees entering the workforce in all formal sectors. "The direct benefit transfer of one-month salary in 3 instalments to first-time employees, as registered in the EPFO, will be up to ₹15,000. The eligibility limit will be a salary of ₹1 lakh per month. The scheme is expected to benefit ₹2.1 crore youth," Sitharaman said on Tuesday.
Job creation takes precedence at a time when the Economic Survey released on Monday noted that the Indian economy needs to add 7.85 million employment opportunities annually in the non-farm sector until 2030.
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The survey suggested that the youth unemployment rate has decreased from 17.8% in 2017-18 to 10% in 2022-23, accompanied by a rise in youth participation in the labour force. However, only 4.4% of the young workforce is skilled.
Recruiters in the staffing sector have noted that the split of ₹15,000 over three months will prevent many from taking the benefit in the first month and leaving the jobs. The budget provisioned that an incentive of a specified scale will be given directly both to the employee and the employer with respect to their Employees' Provident Fund Organisation (EPFO) contribution in the first 4 years of employment. The scheme is expected to benefit 3 million youth entering employment, and their employers.
"The three schemes proposed by the government for encouraging new employment for fresh candidates shall propel the employment scenario in the country—the wage subsidy for the employees and the support to the employers shall encourage employers to hire fresh candidates for their organisations whereas the linkage to EPFO registration shall help the cause of formalisation of jobs in the country," said Shantanu Rooj, founder and CEO, TeamLease Edtech.
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The government will also reimburse employers up to ₹3,000 per month for two years towards their EPFO contribution for each additional employee.
"Credit of one month salary in EPF account for first-time employees may also impact gig economy given this incentive being applicable to formal employment sector," noted Anshul Prakash, partner, Employment Labour & Benefits, for law firm Khaitan & Co.
