The government is likely to come out with a definition for the term ‘new employees’ for implementing its Budget promise of footing the bill for pension scheme contribution in a bid to create more formal sector jobs.
Accordingly, ‘new employees’ may be defined as those in excess of the average employee base of a firm for the previous three years, a senior labour ministry official said.
“The payment of the EPS contribution will be in the form of reimbursements to employers. The scheme will be applicable for the new employees, earning Rs.15,000 a month, who have worked for 240 days during a year in an establishment,” the official said.
About 3.5 lakh establishments, which hire more than 20 workers, will be covered under the scheme, ministry officials said.
The Finance Minister had said the government had decided to pay 8.33 per cent of wages to Employees Pension Scheme (EPS) on behalf of employers for workers during first three years of employment for which an allocation of Rs.1,000 crore had been made in the Budget under the scheme, Pradhan Mantri Rojgar Protsahan Yojana.
“Employment tax subsidy has been tried in Western countries on a limited scale.
“The scheme looks good but it will increase regulation in the labour market which firms would not prefer as there will be increased scrutiny of their books,” said K.R. Shyam Sundar, professor of human resource management at XLRI Jamshedpur.