Incentivizing Employment ?

During last budget, Shri Jaitley announced a scheme to incentivize employers to increase employment

Under this scheme , Government would pay 8.33 % EPS , on behalf of Employers , for NEW hires drawing a monthly salary of Rs 15,000 or less , enabling employers to pass on this " saved " amount to the said employee , thereby increasing his " take home " salary

For an employee at exactly , Rs 15,000 pm salary , this would amount to Rs 1250 pm or Rs 15,000 in a year ( like a one month bonus ! )

If  ALL  those  NEW  employees were to be drawing Rs 15,000 pm , then the budget provision of Rs 1,000 cr would benefit some 666,000 persons

But , considering that many may be drawing a monthly salary of less than Rs 15,000 , the number of beneficiaries could go up to ( say ) 1,000,000  ( 1 million against 12 million persons entering job market each year ! )

But implementation of this scheme is anything but simple !

MINT ( 22 Aug 2016 ) talks of the following problems facing the government :

#  How to verify that Companies are simply sacking OLD employees and hiring NEW replacements to avail of the incentive ?

#  To avoid any duplication , the government will verify the number of people employed in a company through the electronic challan-cum-returns ( ECR ) that companies file to submit PF contributions online and UAN and PAN details to ascertain whether a person was employed previously ( since no incentive in case of persons who have worked elsewhere earlier, even for a short period ! )

#  A govt officer said : " What we are trying to do is creating a system where companies cannot  MISUSE govt

 money . We are trying to put up a FOOL-PROOF  system where  ONLY FRESH  JOB creations are incentivized "

#  If a base employment number of a firm falls at any time , the company will not be eligible for any incentives

#  The government will pay the EPS contributions for a period of 3 years, ONLY 

if a NEW RECRUIT works with the company for at least as many years

Given these complexities / hassle , what kind of Companies are likely to claim the incentive ?

Certainly not the large / organized companies , even though they have totally computerized PAYROLL SYSTEMS ! It would just not be worth the trouble !

But , small scale companies employing a few hundred persons - and needing to hire 10 / 15 FRESHERS each year , may get tempted with this scheme

Only to discover that it takes them hundreds of hours of clerical effort to claim that incentive , since their payroll is manual !

I would not be surprised if the Scheme ,

*  manages to provide jobs to no more than 10,000 FRESHERS

*  ends up distributing less than Rs 14  crore by way of incentives

*  costs the government, Rs 50 crores by way of " administering / monitoring / distributing " expenses !

Truth may come out with a RTI application , this time next year !

I earnestly request Shri Arun Jaitleyji / Shri Bandaru Dattatreyaji / Shri Prakash Javadekarji , to create millions of FRESH jobs through implementation of my following suggestion ( sent to them earlier through E Mail )

Create  Wealth to  Create  Jobs 

(  http://myblogepage.blogspot.com/2014/02/create-wealth-to-create-jobs.html  )

(  26  Feb  2014  )

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Here is my suggestion :

Set in motion , " INVERSION  of JOB  REDUCTION " regime , under which ,

"  The more jobs a company creates , the less Corporate Tax it pays "

Example :

*    Up to employment of 100 persons  ...............................30 %

*   101  -  500 persons....................................................  25  %

*   501 - 1000 persons ...................................................  20  %

*   1001 - 5000 persons ..................................................  15  %

*   5001 - 10,000 persons ................................................. 10  %

*   Above 10,000 persons .................................................    5  %

Let us celebrate those who provide employment to large number of persons

Let us celebrate BIGNESS

Let us create hundreds of  WORLD SIZE  corporations and take on the World

On top of this , provide  Additional Tax - Breaks  ( Discounts ? )  to corporate as follows :

*   Average Age of Employees at 30 years.......................  1 %

*   Ave age at 25 years.................................................  2 %

*   Ave age at 20 years .................................................  3 %



Of course , very strict and transparent rules will need to be framed to compute :


>    Number of Employees  ( Only Permanent - not Probationers / Trainees / Apprentices  )


>   Average Age ( as on 31 March of Tax year )......etc




But , here is an important aspect of this ,


" Incentivize  Job  Creation  "  Scheme

Today's labour laws make it extremely difficult - if not impossible - for employers to layoff / retrench workmen , if demand for their products / services , shrinks


Hence , to take advantage of this Scheme , employers are unlikely to hire thousands of youth , if they cannot easily trim the workforce , to match the shrinking demand


So , an important corollary of this Scheme is to modify our existing Labour Laws to facilitate layoff / retrenchment , when situation so demands , while protecting the interests of the workmen concerned

BENEFITS  OF  MY  SUGGESTION :

*  Emphasize on TOTAL employment number and not on " Additional Hire of only FRESHERS " , during a year

*  No linkage to types of employees , or amounts of salaries / wages ( whether covered by EPS or not )

*  Only year-end ( 31 March ) Employment Numbers form the basis ( Just ONE figure )

*  No need for any BASE YEAR

*  No need for complicated " checks " for duplications

*  Involvement of just ONE government department , viz: Income Tax Department

*  No need for checking whether FRESHER worked for 3 years or not ( or had earlier worked anywhere else )

*  Companies from all around the World, would rush to "set up shop" in India and close their operations elsewhere

To know how simple it would be to implement my suggestion , read detailed procedure in my following blog

( also sent to the NDA ministers as email , on 01 June 2016 ) 

From  BAD to  MAD

(  http://myblogepage.blogspot.com/2016/06/from-bad-to-mad.html  )

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25  August  2016

www.hemenparekh.in / blogs