To accelerate job creation in the formal sector, the government may enhance its contribution to the Employees’ Provident Fund (EPF) for new employees under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) by additional 1% of their basic pay. Under the scheme launched in August 2016, the government is obliged to pay the entire employee pension scheme (EPS) component of the employer’s EPF contribution for workers with a salary up to Rs 15,000 per month for the first three years of their employment.
Of the employer’s share of EPF kitty, 8.33% goes to EPS, 3.67% to EPF, 0.65% towards administrative charges, 0.5% to Employees’ Deposit-linked Insurance Scheme and 0.01% for EDLI maintenance. Under PMRPY, the EPS share is provided by the government so that firms are encouraged to recruit unemployed persons and also bring informal workers into the payroll. A few months after the PMRPY launch, the government also relaxed the condition of “new employees” and extended its benefit to all new recruits in a firm, including those who replaced previous ones.
While sources told FE that PMRPY was going to be reinforced, it was not immediately clear whether the additional 1% EPF share of the government will go to the provident fund or be in the form of waiver of administrative charges/payment of insurance premiums.
The PMRPY scheme has so far generated only moderate response. Only 6,588 establishments availed the benefit and over 3 lakh workers had enrolled under the scheme till July 30, 2017. While the budget sanctioned for the scheme was Rs 1,000 crore, only Rs 31 crore has been spent so far.
While PMRPY has had a slow start, the Pradhan Mantri Paridhan Rojgar Protsahan Yojana for the textile sector too hasn’t met the policymakers’ expectations so far. While a crucial component of the textile labour package was an undertaking that the government will bear the entire 12% employer’s contribution to the retirement fund for the first three years — against 8.33% for other sectors under PMRPY — just 40,500 new workers had enrolled under the scheme till July-end. The scheme’s objective was, of course, very ambitious: To create 1 crore jobs, achieve a cumulative increase of $30 billion in the export of textiles and garments and Rs 74,000 crore investments in the employment-intensive sector over three years.
The EPFO had received Rs 1,232 crore under the EDLI scheme (insurance fund) in 2015-16, up from Rs 936 crore in the previous fiscal. It also received Rs 4,908 crore in 2015-16 as administrative charges, up from Rs 4,904 crore a year earlier.
The Centre also pays an additional 1.16% of the total wages of an employee towards pension scheme for all existing EPFO subscribers. In 2015-16, it remitted the retirement fund a sum of Rs 3,030 crore towards its contribution on the EPS, up from Rs 2,300 crore a year ago.