Formal employment in India seems to have gained pace as data from Employees Provident Fund Organisation (EPFO) and National Pension System (NPS) has shown significant increase.
According to EPFO, despite a drop in Fiscal Year 2023-24 on year-on-year basis, number of new subscribers doubled in the said year as compared to Fiscal Year 2018-19. It was 61.1 lakhs in FY 19 which surged to over 1.31 crore in FY24. The net addition of subscribers during last six and half years (since September, 2017 to March, 2024) is more than 6.2 crore.
It may be noted that organisations with 20 or more employees are mandatorily required to enroll their workers under EFP. It is voluntary for organisations with less than 20 employees. Also, EPF account registration is mandatory for salaried employees with an income of up to ₹ 15,000.
According to Balasubramanian A, Vice-President, TeamLease Services, the number of contributing members to PF has been growing at a CAGR of over 20 per cent since 2018, whereas the overall workforce has grown at about 2 per cent in the same period. Clearly, there has been growing formalisation of the workforce. One of the key factors driving this trend is the need felt by a large employers to have an organised, engaged and productive workforce with low attrition. Ensuring payments of statutory compliances ensuring social security, is a crucial contributor to stickiness.
“While this may cost more at the outset, it pays off by delivering greater business value overall. This wave of formalisation has picked up greater momentum post pandemic and several industries such as FMCG, Healthcare/Pharma, Retail, Industrial Manufacturing etc have prioritised this with alacrity,” he said, adding that he expects this momentum to continue in the future as well. “With the much-anticipated labour codes coming into effect hopefully in the near future, this pace could accelerate further,” he said.
Meanwhile, data also showed that in April this year alone, the EPFO recorded its highest-ever monthly increase of 18.92 lakh net members, marking a 10 per cent year-over-year growth. Notably, since May last year, over 55 per cent of new EPFO subscribers are in the 18-25 age group, indicating that a significant portion of new entrants into the organised workforce are youths and primarily first-time job seekers, a government official said.
In its research report, SBI has brought out an interesting fact by comparing EPFO data with KLEMS (K for Capital, L for Labour, E for Energy, M for Material and S for Services) Database. “When we took the share of EPFO with KLEMS, the FY24 share at 28 per cent is drastically lower than the average share of 5-year period (FY19-FY23) at 51 per cent. As EPFO data capture primarily low-income jobs, the declining share is quite encouraging and indicate that better paid jobs are getting available in the economy,” the report said.
National Pension System
Another indication of formal job creation is NPS. Officials said that during 2023-24, NPS registered more than 7.75 lakh new subscribers under the Central and State governments showing a 30 per cent increase from the previous year.This substantial rise underscores the government’s proactive steps to timely fill vacancies in the public sector, enhancing employment opportunities and security for new entrants.
“These statistics highlight the government’s effective strategies in promoting formal employment through various sectors, significantly impacting young job seekers and stabilizing employment in the public sector,” the official concluded.