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EPFO data suggests growth in formalisation of workforce, but there are riders

EPFO data suggests growth in formalisation of workforce, but there are riders

EPFO data suggests growth in formalisation of workforce, but there are riders
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By Anshul  Nov 22, 2022 10:59 AM IST (Updated)

The net addition in EPFO subscriptions is an indicator of the extent of formalisation of the job market. So, the latest EPFO data may suggest a significant acceleration in the formalisation of the job market but there is more to note.

The formalisation of workforce under the Employees’ Provident Fund Organisation (EPFO) jumped by 9.1 percent in September to 1.68 million compared to 1.54 million added in September 2021. The net enrolment during the month is 21.85 percent higher than the monthly average recorded during the last fiscal.

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As per data, around 2,861 new establishments have started complying under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 ensuring social security cover to their employees.
But can we actually consider this as a proof of employment generation?
Broadly, the net addition in EPFO subscriptions is an indicator of the extent of formalisation of the job market. So, the latest EPFO data may suggest a significant acceleration in formalisation of the job market.
It is noteworthy here that EPFO data is administrative and may suffer from fragility. Experts say that administrative data at times may be subject to some margins of error.
A company becomes eligible for EPFO only when it has more than 20 employees. The payroll data is provisional since the data generation is a continuous exercise, as is updating employee records.
Another thing to note here is that among the new additions, many EPFO members would have joined it for the first time. Simply put, they would have joined the organised sector after completing their education.
If we look closely, there is a higher increase in the new subscribers in the age groups between 18-28 years. This could mostly be first-time job seekers or those with changing jobs.
This data comes at a time when several people across companies are facing job losses due to commercial shutdowns, mass lay-offs, and business re-establishments.
Trends from EPFO data
The EPFO payroll data further indicates that the overall number of new EPF subscribers in 2021-22 is still lower than 2018-19. Age-group-wise figures also reflect the same trend. New EPF subscribers in 2021-22 have increased, but the annual numbers are still less than pre-pandemic figures.
The data indicates that in the total 16.82 lakh members added during the month, around 9.34 lakh new members have come under the coverage of EPFO for the first time. Among the new members, the highest number was registered for the age group of 18-21 years with 2.94 lakh members. This was followed by the age group of 21-25 years with 2.54 lakh members.
Approximately 58.75 percent are from the age group of 18-25 years of age.
During the month, approximately 7.49 lakh net members exited but rejoined EPFO by changing their jobs within the establishments covered by EPFO and opted to transfer their funds from the previous PF account to the current account instead of opting for final settlement.
Gender-wise analysis of payroll data indicates that the enrolment of net female members has been 3.50 lakh in September 2022. A year-on-year comparison of enrolment data shows that the net membership of females in the organized workforce has increased with a growth rate of 6.98 percent in September, 2022 comparing with the net female membership during previous year in September, 2021.
Among the total new members joining EPFO during the month, enrolment of female workforce is recorded as 26.36 percent.
 
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