Fresh formal hiring up 2.5% in July to 1.05 million, shows EPFO data

New Delhi: The number of monthly fresh formal hirings under the Employees’ Provident Fund (EPF) increased 2.6% on month to 1.05 million in July, according to the latest monthly payroll data released by the Employees’ Provident Fund Organisation (EPFO) on Monday. This signals a recovery in the formal labour market.

The EPFO data is considered crucial as only the formal workforce enjoys social security benefits and is protected by labour laws.

New EPFO subscribers in June were 1.02 million, 985,000 in May, 887,000 in April, 747,146 in March, 777,717 in February and 807,865 in January.

Increase in youth, women

The share of young people in the 18-25 year age group of the total 1.05 million new EPF subscribers also slightly increased 59.4% month-on-month to 625,000 in July.

This is crucial because subscribers in this age group are typically first timers in the labour market, thus reflecting its robustness.

Also read | Women directors are paid better. Their roles are bigger too

Additionally, the proportion of women among the new subscribers was 29% or 305,000 in July, which highlights a positive trend in female participation in the workforce.

Meanwhile, the net payroll additions—calculated by considering the number of new subscribers, the number of subscribers that exited, and the return of old subscribers to the social security organisation—was 1.99 million in that month.

Maharashtra tops in net new additions

An industry-wise breakup of the net payroll numbers indicates that nearly two of every five net additions came from expert services, including manpower suppliers, contractors and security services among others. Similarly, a state-wise breakup showed that with 20% contribution, Maharashtra reported the highest number of net new additions during the month. Maharashtra along with Karnataka, Tamil Nadu, Haryana, and Gujarat accounted for around 59.3% of the total net member additions in July, collectively adding 1.18 million members, according to the EPFO payroll data.

Also read | EPFO alert! How to avoid, deal with rejections, delays

The net monthly payroll numbers are provisional and often revised sharply the following month. That is the reason why the new EPF subscriber figure is considered more reliable than net additions. Payroll data is provisional since data generation is a continuous exercise, like the updation of employee records. The previous data gets updated every month.

“This indicates creation of new jobs through expansion activity in the economy i.e., services or industry. Employment is a function of investment or output. Wages are another factor. If wages increase, demand for jobs also increase and vice versa. We haven’t seen wages increasing. Rather it is more of an increase in investment. RBI data also suggests that there is an increase in the private sector credit uptake. Additionally, the government is also spending on investment activities. This is contributing to new jobs that are being created,” said N. R. Bhanumurthy, director of Madras School of Economics.

From informal to formal sector

He said the informal sector becoming formal is another major reason behind the increase in numbers. "There are some conditions that are being put up on companies regarding filing returns and those jobs are shown as formal jobs. Over a period, there is an increase in formal jobs shifting from informal,” Bhanumurthy added.

After the formation of the new cabinet, the labour and employment minister Mansukh Mandaviya in July led inter-ministerial discussions to create a centralised database of jobs generated in the economy, an idea he broached citing employment data scattered across agencies and ministries, which could be a reason for the lack of a comprehensive picture on hirings.

Employment numbers are generated by several entities, such as the Reserve Bank of India and the statistics ministry, which carries out quarterly and annual Periodic Labour Force Survey.

Payroll data are also generated or maintained by the EPFO, the state-run retirement fund manager, the Employees’ State Insurance Scheme, the National Pension Scheme, and the state-run think tank Niti Aayog, among others.

And read | Pvt coal miners may get EPFO option