In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced three schemes under the Employees’ Provident Fund Organisation (EPFO) to attract more youth to the formal sector and ensure financial security. These schemes provide incentives for the first-time employees and employers and are part of the Prime Minister’s five welfare proposals targeting around 4.1 crore youth over the next five years. Organisations employing 20 or more people must register with EPFO and provide employees with employees’ provident fund (EPF) accounts. They must also extend the EPF facility to those drawing a monthly salary of up to Rs 15,000. EPF enjoys higher interest rates and tax benefits than other small savings schemes.

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Current Employment And EPFO Trend:

Employment has been a major issue for the political parties in the recent-held Lok Sabha polls. As per the Economic Survey 2024, “Indian labour market indicators have improved in the last six years, with the unemployment rate declining to 3.2 per cent in 2022-23. Rising youth and female participation in the workforce presents an opportunity to tap the demographic and gender dividend”. The report further adds, “The net payroll additions under EPFO have more than doubled in the past five years, signalling healthy growth in formal employment.”

According to the Labour Ministry’s latest payroll data, there has been a net addition of 19.50 lakh members in EPFO in May 2024, the highest in a month since April 2018. The net payroll data of people aged 18-25 was the highest in May 2024 since the first payroll data.

The survey also highlights a few pressing concerns. It says, “Generative artificial intelligence raised profound concerns about massive labour disruptions and inequality,” and it requires a coordinated effort from the government, the private sector, and the academia to address them.

Also, as the gig economy grows, it may open up new employment opportunities for various groups, including youth, persons with disabilities, and women. According to the Economic Survey, an average of 78.5 lakh jobs must be created annually until 2030 to meet the demand.

So, the government intends to create more employment opportunities, increase youth enrollments in EPFO, and skill the workforce. To improve employment in the formal sector, it has introduced three new EPFO schemes in the Budget.

Also Read: Union Budget 2024-25: Deduction On Family Pension Increased To Rs 25,000, Standard Deduction To Rs 75,000

Let’s get into the details.

EPFO Incentives For Employees And Employers In Budget 2024:

Considering the increasing workforce in non-farming sectors, the changing job dynamics due to AI, and the need to create more jobs, the Budget has introduced three EPFO incentives for employees and employers.

Scheme A:

This scheme is only for those whose monthly salary is not more than Rs 15,000. Under this scheme, the government will give first-time employees one month’s wage. The aim is to assist the first-timers before becoming fully productive. This scheme applies to all sectors. The benefits will be paid in three installments to people who join the workforce with EPFO benefits. The first installment will be provided after they join the company. The second installment will be transferred when they complete a compulsory online financial literacy course, and the third installment will be after that.

This scheme is for two years. The employer will refund the wage if the employee leaves within 12 months. The scheme is expected to benefit 210 lakh new employees.

Scheme B:

This scheme applies to first-time employees in the manufacturing sector. All such employers (corporate and non-corporate) with a three-year track record of EPFO contribution will be covered under this scheme. To get benefits, employers will require non-EPFO enrolled 50 employees or 25 per cent of the baseline, whichever is lower. Baseline here means the previous year’s number of EPFO employees.

Employers must maintain the employment threshold throughout, or the subsidy will stop. In this scheme, employees with a salary up to Rs 1 lakh will be eligible. For those with a salary of more than Rs 25,000 per month, the incentive will be calculated at Rs 25,000. Like Scheme A, it will also end if the first-time employee’s employment ends within one year of recruitment. It will benefit around 30 lakh new employees and employers.

Scheme C: 

This scheme is for employers who annually increase employment above the baseline. It will be available if they add two employees (those with less than 50 employees) and five employees (those with 50 or more employees), and maintain that level.

Unlike schemes A and B, under scheme C, new employees need not be first-timers to the EPFO. The government will reimburse the employer up to Rs 3,000 per month for every additional employee hired in the previous year. If an employer adds over 1,000 employees, it will be refunded quarterly. This scheme is expected to help employ 50 lakh persons.