BackGovt extends wage subsidy via EPFO to spur job creation
The move will increase take-home pay of fresh recruits, reduce employee cost of companies
PremiumThe Union government on Monday extended the wage subsidy scheme for nine more months via the Employees’ Provident Fund Organisation (EPFO), which will potentially boost formal job creation albeit at the lower band of the salary structure.
The move will also increase the take-home pay of new employees or those who are re-joining after being retrenched during the covid-19 pandemic and also reduce the employee cost of companies as the statutory monthly EPF dues will be taken care of by the government.
The scheme, which was coming to an end for fresh enrolment by 30 June 2021, will now continue till 31 March 2022. Effectively, all employees with a maximum salary of ₹15,000 per month who joined or are joining between 1 October 2020 and 31 March 2022 shall get EPF subsidy from the government, under the scheme that was announced in November.
The Union government will pay 24% of EPF dues, 12% each that would otherwise be paid by employees and employers, of this category of workers who join work during this period for two years from the date of joining. Every month, an employee pays 12% of his basic wage and part of some allowances as statutory EPF deductions. A matching amount is given by the employer. The government subsidizing this amount will be a direct saving for both employees and employers.
This will be applicable to all firms employing up to 1,000 workers. Companies where the headcount is more than 1,000, the government will pay only the 12% share of the employees.
Union finance minister Nirmala Sitharaman on Monday said the scheme “incentivizes employers for creation of new employment (and) restoration of loss of employment through EPFO". Since the launch of the scheme, benefits of ₹902 crore have been given to 2.14 million beneficiaries till 18 June 2021, the minister said. These beneficiaries are working with 79,577 establishments and firms.
In December, the Union cabinet had approved an outlay of ₹22,810 crore for the scheme for its entire life period. The government on Monday did not provide any details about any further allocation for this or whether or not further funds are needed.
This scheme covers nearly 95% of all the employers. It could boost job creation at a time the unemployment rate in India is high and millions of people have lost their jobs and many more have seen a reduction in income.
Jobs creation has been a prickly issue in India even before the outbreak of coronavirus in the country. Following the outbreak, both formal and informal labour markets have been devastated, with millions thrown out of jobs.
The first wave of the pandemic in 2020 pushed about 230 million Indians into poverty, according to a survey by the Azim Premji University. Data from the Centre for Monitoring Indian Economy showed that the pandemic’s second wave led to almost 23 million job losses in April and May alone.
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