Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do. There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Saturday 14 November 2020

From Wage Subsidy to Universal Social Security ?

 


 

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 should be first-time entrants into the EPFO

        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 (Aadhar seeding will help track the beneficiary

        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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