Economy

Business enterprises to get support through EPFO contribution for job creation

Our Bureau New Delhi | Updated on November 12, 2020

Over 99 per cent of business establishments will get indirect wage support through EPFO contribution of 24 per cent for two years under Atmanirbhar Bharat Rozgar Yojana. It will come into effect from October 1. Employees enrolled till June 30 will get the benefit. The scheme will cost ₹6,000 crore.

The scheme intends to “incentivise creation of new employment opportunities during the Covid recovery phase” through support by way of contribution towards Employee Provident Fund. Finance Minister Nirmala Sitharaman said that this scheme will not just encourage formal sector but also prompt informal sector to get registered under EPFO for the benefit.

The new scheme will cover any new employee joining employment in EPFO registered establishments on monthly wages less than ₹15,000. Also, EPF members drawing monthly wage of less than ₹15,000, who lost job during March-September but re-employed on or after October 1, will be covered.

According to the scheme, if an enterprise has 50 or less number of employees as on September 30, it will need to add at least two employees in October to get the benefit. Similarly, an enterprise with more than 50 employees as on September 30, needs to add at least 5 new employees to get the benefit under the scheme.

Subsidy for two years

The Centre will provide subsidy for two years in respect of new eligible employees engaged on or after October 1. For establishments employing up to 1,000 employees, subsidy will be employee’s contributions (12 per cent of wages) and employer’s contributions (12 per cent of wages) totalling 24 per cent of wages. Establishments employing more than 1,000 employees will have only employee’s EPF contributions (12 per cent of EPF wages). The subsidy support will get credited upfront in Aadhaar-seeded EPFO Account (UAN) of eligible new employee.

Reduce employers’ burden

Lohit Bhatia, President, Indian Staffing Federation, said the package primarily helps the employers reduce their burden of cost on social security, mainly the employees’ provident fund besides increasing take-home packages in the hands of the employees.

This benefit is almost the same as the previous benefit of the PMRPY which the government had set up in 2019 after which it was not extended. However, during that period also over 1 crore employees and employers benefitted under PMRPY and formalisation of employment had happened in India.

“It’s a net benefit for both the employment and formalisation, currently the government has allowed it till June 30, 2021. ISF will implore the government to that it should be offered for a period of 2 years which will allow many manufacturers and industries to take long-term bets on new employment generation,” he said.

Vivek Bindra, Founder & CEO at Bada Business, hopes the scheme gives the economy a greater push towards formalisation and employment creation helps infuse much-needed demand into the economy. However, the problem with having a large informal sector is that the direct benefit of multiple government schemes fails to reach a large number of small and micro enterprises which are part of the informal economy.

Published on November 12, 2020

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