Cabinet Approves ?2,280,008,150,000 ($31B USD) Employee Provident Fund Subsidy Scheme for Job Creation
December 17, 2020
On December 2nd, the Indian Cabinet approved a proposal to provide the massive employees' provident fund (EPF) contribution to those hiring additional workforce for two years. This would cost the government ?1,584,000,000K ($ 2.2B USD) in the current financial year and ?22,810,000,000 during the entire period, from 2020 to 2023. The proposal aims at generating 5-6 million jobs by June of next year.
Under the package, the union government will provide subsidy for two years in for new employees engaged on or after October 2020 and up to June 30, 2021. The government will pay employees as well as employers contribution at 12% of wages each towards EPF for new employees in establishments employing up to 1000 employees for two years. However, it will pay only employees' share of EPF contribution at 12% of wages in respect of new employees in establishments employing more than 1000 employee for two years.
A critical aspect of the scheme is that, employers will have to add at least two new employees if they have total workforce of less than 50 and will have to hire a minimum of five new employees if their workforce is more than 50. They will have to maintain this minimum net addition to their workforce each month from October this year to June 2021 to be eligible for the scheme, sources said.
While this will mostly impact manufacturing companies, it will be good for CHROs of services and financial services companies to know as it will impact their vendors and other services providers.