Context :
Govt’s
wage subsidy via EPFO to spur job creation /
MINT – 13 Nov
Highlights :
ELIGIBLE
EMPLOYEES
:
( A ) New Employees
Any person with monthly wage of less than Rs 15,000 and not registered
earlier with EPFO. these workers
system
( B ) Old Employees
Those who lost job between March 01 and Sept 30 AND whose wage was
less than Rs
15,000
( C ) Period for grant of
Subsidy
2
years from date of employment ( any date between Oct 20 and June 21 )
( D ) Method of subsidizing
The subsidy support will be credited upfront in Aadhar-seeded EPFO accounts
of ELIGIBLE NEW
employees (
better )
( E ) How many establishment will get covered ?
More
than 95
% of the establishments
( F ) Funds
allotted
Rs 6,000
crore [
Rs 600,000 lakh ]
===================================================
SUMMARIZING
=====================================================================
Size of Employer Company |
No of NEW employees that must be
hired ( above the base of September 2020 employee count ) |
Subsidy = 12 % of NEW employees’
share |
Subsidy = 12 % of Employer Company’s
share for each NEW employee |
Less
than 50 workers |
2 |
yes |
yes |
More
than 50 workers |
5 |
yes |
yes |
Less
than 1,000 workers |
5 |
yes |
yes |
More
than 1,000 workers |
5 |
yes |
NO |
===================================================
Let us assume ( for a Company with employee count of less than 1,000 ) as follows :
Ø Every
NEW hire ( or re-hired who had lost job ) is paid a monthly wage of Rs 15,000 /
- ( simplifying )
Ø 24%
of Rs 15,000 = Rs 3,600 ( = Amount of subsidy per month )
Ø So
, for a full year, subsidy will amount to Rs 43,200 (For 2 years = Rs 86,400
per NEW employee )
So , with fund allocation of Rs 600,000 lakh, how many
NEW employees can benefit from this scheme for full 2 years ?
Rs 600,000 lakh
/ Rs 0.86 lakh = 6, 97, 674
Now the “ Number of NEW employees that must be hired by
a company to take advantage of this scheme , ranges between minimum 2 to 5 (
depending upon the current employment number )
Let us say, average would be 3 NEW employees per “
benefiting “ organization
Hence, the number of organization that would benefit
from this scheme, would be :
6,97,674 / 3 ( ave. no of NEW employees per organization
) = 2,32,558
Now, as per latest estimates , we have some 65 million
( 650 lakh ) MSME companies in India , employing close to 140 million workers
So this scheme would benefit :
Ø Some
6.97 lakh NEW workers against existing employee strength
of 1400 lakh in MSME alone
Ø Some
2.32
lakh companies against existing 65 million ( 650 lakh ) MSME companies alone
===================================================
May be I am going terribly wrong with my assumptions
and data ! So, I looked up following news report in Business Line ( 14 Nov ) :
Govt
to take help from industry chambers to create jobs under new scheme
Distribution of Factories in operation by size of
employment
Employment Size |
No of Factories |
Ave Employees ( assumed) |
Total No of Employees |
0 -
14 |
75,179 |
7 |
526,253 |
15 -
19 |
16,965 |
17 |
288,405 |
20 -
29 |
20,672 |
25 |
516,800 |
30 -
49 |
22,419 |
40 |
896,760 |
50 -
99 |
23,058 |
75 |
1,729,350 |
100
- 199 |
16,034 |
150 |
2,405,100 |
200
- 499 |
11,980 |
350 |
4,193,000 |
500
- 999 |
4,749 |
750 |
3,561,750 |
1000
- 1999 |
2,487 |
1500 |
3,730,500 |
2000
– 4,999 |
1,390 |
3500 |
4,865,000 |
5000
and above |
652 |
7000 |
4,564,000 |
|
|
|
|
TOTAL
|
195,585 |
|
27,276,918 |
Irrespective of the correctness of ASSUMPTIONS regarding
the “ No of Employees / No of Employers “
data, following questions will need to be correctly answered ( by human verifiers
or by software ) , in respect of each person
hired before SUBSIDY CLAIM from any company can be entertained :
Ø What
date did he join ? { before 01 Oct 2020 / Between Oct 2020 – June 2021 / After June
2021 }
Ø At
what wage-level did he join ? { < 15,000 / = 15,000 / > 15,000 }
Ø Is
he a NEW ( first time ) employee or an OLD employee who had lost job ? What
proof ? He could have lost job in company X and got re-hired by company Y !
Ø Is the
company submitting “ claim “ ( for subsidy ) , registered with EPFO or not
registered ?
Ø Has
this ( claimant ) company hired any NEW / OLD workers after Sept 30 , 2020 ?
Ø If
yes , how many ? More or less than the stipulated numbers ?
Ø What
was this company’s actual Employee strength as on 30 Sept 2020 ?
Ø What
is the PROOF that this company really / actually hired the persons claimed ?
Ø A
Company may go on hiring NEW / OLD employees , every month between Oct 20 –
June 21 . Should that company submitted CLAIMS every month ? Imagine 27 million
companies filing SUBSIDY CLAIMS ( for anywhere between 1 to a hundred workers )
EVERY MONTH for 9 months !
I cannot escape the feeling that the,
Ø Compliance
( record-keeping / feeling up ONLINE claim forms ) burden by the claimant
companies, and
Ø Administrative
burden by EPFO / Finance Ministry / Income Tax Department et.,
- would far exceed the benefit to be derived !
I believe Finance Ministry plans to submit a CABINET
NOTE re this scheme within 15 days ( for Cabinet approval )
I urge Smt Sitharamanji , to re-assess the COST /
BENEFIT aspects of this scheme before asking Cabinet nod
She may even consider to modify this scheme ( with a
HUGE simplicity of administering and not a single form to be filled by
companies ), as suggested in my following earlier e mail :
SOMETHING
IS BETTER THAN NOTHING ………………………………..[ 07 Feb 2016 ]
With regards,
Hemen Parekh /
15 Nov 2020
/ hcp@RecruitGuru.com
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