Informal Employment

• 8% of India’s labour force gets minimum wages, employment benefits, safe working condition and leave benefits.
• India’s economically questionable employee benefits regime means that the take home salary of someone earning Rs 55000 per month is 9% less than gross salary while the take home salary of person who earns 5500 a month is 49% less than their gross salary.
• India will benefit more from fixing the current regressive benefits regime, which requires 6 times greater deductions for a person earning a 10 time lower salary is not competitive has ensured that 100% of net job creation since 1991 has taken place in informal sector.
• Increase in Formal employment growth shall be with 5 changes in following-

1. Mandatory 12% employee provident fund contribution must be abolished. Poor management and harassment by EPFO created more orphan accounts.
2. Employee pension scheme must be scrapped and shall have choices for other EPS schemes.
3. Employees must have option between EFPO and the national pension scheme.
4. Employees must be allowed to choose between the employee’s state insurance corporation and health insurance.
5. Five-year limit or gratuity must be removed.

• Increasing formal job creation is India’s biggest challenge and right direction would be to fix employment benefits regime.