Herculean task of providing social security cover for informal workers awaits EPFO in 2021

By: |
December 25, 2020 2:15 PM

There are over 40 crore unorganised workers in the country like gig and platform workers

retirement fund body EPFO , Employees' Provident Fund Organisation , Bharatiya Mazdoor Sangh's, Aatmanirbhar Bharat Package 3.0EPFO which now provides social security for more than six crore formal sector workers.

Providing social security cover for over 40 crore unorganised sector workers, re-modelling existing schemes and incentivising fresh hiring will pose challenges for retirement fund body EPFO in the new year. The Employees’ Provident Fund Organisation (EPFO), which now provides social security for more than six crore formal sector workers, will have a herculean task in improving the delivery of services with focus on implementation of the ambitious Aatmanirbhar Bharat Rojgar Yojana (ABRY) that seeks to boost fresh hiring in 2021.

With the Code on Social Security likely to come into force from April 1, the EPFO will also have to remodel its schemes and services as unorganised sector workers too will come under the social security umbrella. There are over 40 crore unorganised workers in the country like gig and platform workers. The latter are those who are not on rolls of an establishment and don’t get social security benefits like provident fund and gratuity.

Bharatiya Mazdoor Sangh’s (BMS) former General Secretary Virjesh Upadhyay told PTI that the implementation of the Code on Social Security “would bring new challenges for the EPFO in 2021”. “The EPFO would have to expand the ambit of its schemes as well as network for providing social security to unorganised sector workers. These workers would get social security benefit under the Code,” he said.

Upadhyay, also an EPFO trustee, opined that the body would have to remodel its schemes and services to provide social security for the unorganised sector workers. Earlier, there was an issue on who will provide for the employers’ share of contribution towards social security schemes run by the EPFO in case of informal workers.

Now, either the government will provide for the employers’ share or the informal sectors will be allowed to subscribe to social security schemes wherein there will be contribution only from their side. Depending on the model, the EPFO would have to redesign its system for delivery of services.

Presently, the EPFO has the infrastructure to provide services to over six crore subscribers and the same will have to bolstered so that it can cater to additional 40 crore workers from the unorganised segment. Talking to PTI, Labour Secretary Apurva Chandra said the “main focus of the EPFO in 2021 would be on the ABRY to incentivise fresh hiring”. Chandra is also the Vice-Chairman of the EPFO’s apex decision making body Central Board of Trustees.

“The other efforts on delivery of services would also continue. But the main focus would be on job creation through the ABRY,” Chandra noted. In post-pandemic times, employment generation would be a daunting task for the government and it has chosen the EPFO to implement the ABRY. Earlier this month, the central government approved the ABRY to boost employment in the formal sector and incentivise creation of new employment opportunities under the Aatmanirbhar Bharat Package 3.0.

Total outgo for the scheme would be Rs 22,810 crore during 2020-2023 period. In the current fiscal, the outgo is pegged at Rs 1,584 crore. The coronavirus pandemic has significantly impacted economic activites and there are now signs of recovery. Against this backdrop, the ABRY has been unveiled. Under the scheme, the government will provide subsidy for two years in respect of new employees engaged on or after October 1, 2020 and up to June 30, 2021. It will pay both 12 per cent employees’ contribution and 12 per cent employers’ share — 24 per cent of wages towards Employee Provident Fund (EPF) — for two years. This will be for workers in establishments employing up to 1,000 people.

However the government will pay only employees’ share of EPF contribution for two years in respect of new employees in establishments employing more than 1,000 employees. The EPFO has been mandated to develop a software for the scheme as well as a procedure that will be transparent. It will also work out the modalities to ensure that there is no overlapping of benefits provided under the ABRY with any other scheme implemented by the EPFO.

The pandemic has already posed many challenges for the EPFO this year and has kept its workforce on their toes in terms of delivering services in an efficient manner. Earlier this month, Labour Minister Santosh Gangwar said that the EPFO has settled 52 lakh COVID-19 non-refundable advance claims, and disbursed Rs 13,300 crore.

After the nationwide lockdown was imposed in March, the government allowed over six crore subscribers of the EPFO to withdraw an amount not exceeding their three-month basic pay and dearness allowance from their respective EPF accounts.
For 2019-20 period, the EPFO has decided to pay an interest of 8.5 per cent, the lowest in seven years. In the coming year, the body will also take a call on the interest rate on EPF for 2020-21 based on its income estimates for the fiscal.

Now, it has to be seen whether the EPFO would be able to maintain 8.5 per cent rate of interest for 2020-21 as well.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Union Budget 2021: Need clarity on ambiguities and issues related to tax deduction on employer’s contribution to social security funds
2PF or NPS? Decoding employee retirement benefit dilemma
3Submission of investment proof: All you need to know to minimise tax deduction