Date : 21.11.2017

Employee Provident Fund members rising, but this does not reflect new jobs creation.

Some senior government functionaries including the human resource development minister Prakash Javadekar have said the accelerated pace at which the EPF subscriber base has expanded this year reflected a pick-up in job creation.

Since January this year, over 1 crore new accounts have been added under the Employees’ Provident Fund Organisation (EPFO) compared with an annual increase of a quarter of that previously.

Since January this year, over 1 crore new accounts have been added under the Employees’ Provident Fund Organisation (EPFO) compared with an annual increase of a quarter of that previously. Some senior government functionaries including the human resource development minister Prakash Javadekar have said the accelerated pace at which the EPF subscriber base has expanded this year reflected a pick-up in job creation. But a closer look at this year’s extra EPF registrants would reveal that a good number of them had jobs already and simply got either a first-time or an additional EPF account this year. According to official sources, an amnesty scheme for EPF-defaulter firms that was in force during the first six months of 2017 itself brought over 20 lakh workers under EPF ambit. Under the scheme, employers who were supposed to have registered their employees under EPF (a unit employing 20 or more persons and earning up to Rs 15,000 a month is mandated to provide EPF benefits to the workers) but haven’t added all or part of their workforce to the EPFO were given certain incentives like waiver from damages and certain administrative charges to be compliant.

Additionally, a large segment of the workers under the rolls of contractors attached to government bodies like municipal corporations and certain public sector undertakings have got added to the EPFO subscriber base this year after these bodies asked the contractors to get their workers registered. The obligation of EPF contribution does not lie with the contractors but the principal employers—in this case, the municipalities and other public-sector entities. But conventionally, the public-sector units have been lax in getting these workers into EPF as their inclusions would have inflated their costs. Over the last few months, the government has made the state-run bodies, which exert considerable influence on the so-called government contractors, link several lakhs of workers with the EPF system.

The impressive number of 1 crore new EPF accounts in less than a year should be further discounted because persons with many might have got counted multiple times, the sources added. For instance, a person with UAN from a previous job must have got counted again as a fresh EPF registrant if his new employer has got him a new EPF account after January 2017. The sources said that under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), which lowers the employers’ EPF cost, 12.6 lakh have got EPFO registrations so far while firms have already applied for another 5.25 lakh but are waiting for the Aadhaar linkage to get these formalised. Under PMRPY, the government is obliged to bear the entire cost of employee pension scheme (EPS), which is 8.33% of basic pay, for “new workers” with a salary up to Rs 15,000 per month for the first three years of their employment. PMPRY has also been an incentive for units to bring workers who have hitherto been outside EPF ambit under the social security cover. Again, the condition of “new employment” for availing the PMRPY benefit offered by the government has later been relaxed by removing the requirement of “creation of new posts”, which meant that replacement jobs too are eligible for the benefit.

When contacted, VP Joy, central commissioner, said that some 3-4 lakh people are getting added to the EPF base every month thanks to PMRPY. The scheme, for which the government has already expended Rs 165 crore, would get a further boost if the rider that firms receiving EPF subsidy (as under PMRPY) cannot avail income tax sop for creation of new employment, Joy added. Since April this year, under Section 80JJAA of the Income Tax Act, firms are allowed deduction of “an amount equal to 30% of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided”. But this concession won’t be available if the firm availed of an EPF subsidy. Currently, the EPFO has an active subscriber base of 4.7 crore and a corpus of around Rs 9 lakh crore. The annual incremental EPF deposits is around Rs 1.5 lakh crore.

The Financial Express