Atmanirbhar 3.0: Is hiring headed for a subsidy-backed boost?

The Atmanirbhar Bharat Rozgar Yojana (ABRY), announced by Finance Minister Nirmala Sitharaman on November 12, has evoked a fairly positive sentiment in industry corridors. That the Government is willing to incentivise hiring, given the current pandemic, economic and jobs reality, has inspired most of the cheer.

The new ABRY scheme aims to incentivise creation of jobs in the country by offering subsidy to establishments for new hiring. The Government offers to cover the provident fund contributions of both employees as well as employers for two years.

“To offer a programme that will create some kind of an impetus for employment generation is a very positive attempt,” says Adil Malia, chief executive, The Firm. “The goal is to generate employment and ensure more number of people get hired. It also works as an incentive for employers to consider rehiring employees they may have let go,” adds the HR veteran.

“Given that the Government is picking up the subsidy, it is an overall positive scenario,” notes Praveer Priyadarshi, HR consultant and former chief people officer. “The economy has to be revived so this is a good step towards infusion of stimulus,” he adds.

“Contributing the PF for both the employer and employee is not a joke,” points out Anil Mohanty, head – people & culture, Medikabazaar. “It’s a huge amount so I think it’s a good initiative.”

“It will instill confidence in both the industry and workforce, which will improve consumer sentiments and create a virtuous cycle of holistic economic development.”

 

Win some, lose some

Considering the monthly salary limit is set at Rs 15,000, the new scheme is likely to benefit potential employees in the lower rung of the pay scale, who are also the economically worst-hit by the pandemic-led nationwide lockdown. However, the salary limit also means the scheme may not be relevant to all small enterprises.

“We are a startup with less than 1,000 employees, but our salary levels are on the higher side. We have very few roles within that salary limit,” notes Mohanty. “Effectively, it has contributed to the lower segment of employees. For them, obviously it’s a good gesture,” says Mohanty, who believes it is fair to have a salary limit. “The objective is to support the workforce that needs it the most.”

“When more employees have money in their hands, the demand for products will go up and that will provide a stimulus for greater economic recovery.”

Baby steps to recovery

With workforce-strength based guidelines for EPFO-registered companies, the finance minister’s plan is expected to benefit modest-sized enterprises the most which again, are presumed to be the most in need of aid. “It will definitely lead to new job creation, particularly in the MSME sector,” says Priyadarshi. “A majority of the companies in our country have employees less than 1,000,” he explains. “Taking away 24 per cent PF contribution liability from such employers is a very positive sign,” adds Priyadarshi, who predicts this could work as a force multiplier.

More employed people leads to a natural rise in economic activity, one of India’s most pressing needs. “Right now, the demand is not much. This scheme puts money in the hands of potential employees, which has a direct impact on the economy,” notes Priyadarshi. “When more employees have money in their hands, the demand for products will go up and that will provide a stimulus for greater economic recovery,” he explains. It is great for employers too, notes Priyadarshi, “They have more free cash flow in their books, which helps them invest more in the business which will also spur the economy.”

The scheme’s focus on job creation and social security will help boost optimism, believes Amit Das, director – HR, Times Group. “It will definitely instil confidence in both the industry and workforce, which will consequently improve consumer sentiments and create a virtuous cycle of holistic economic development.”

“Effectively, it has contributed to the lower segment of employees. For them, obviously it’s a good gesture.”

Dictating numbers

To be eligible for the PF subsidy, establishments with less than 50 employees must hire two new employees and those with more than 50 should have five new hires between October 1, 2020, and June 30, 2021. Malia believes it may not always be such a good idea for the government to suggest the number of employees a private enterprise should hire.

“Whilst this is an incentive and it is good that they’re trying to use positive incentives and not penalising organisations, in a way, it is saying that you have to employ a certain number of people,” points out Malia. “One cannot direct private-sector companies to employ certain numbers based on one’s economic agendas. It may not always be sustainable for the company to be able to afford that kind of employment,” he explains. “One may be giving a subsidy in terms of PF contribution but what about the balance? That is still a cost the company has to bear.”

While it is a welcome incentive, Malia believes such a line of thinking is best limited to employment in the government sector. “Right now, COVID-19 is the reason but India’s problems are never-ending so you may then have governments saying that for every X kind of turnover, a company must employ Y number of people. That can get dangerous.”

“To offer a programme that will create some kind of an impetus for employment generation is a very positive attempt.”

Ache din for job seekers

Will the new scheme, a part of the Modi government’s Atmanirbhar Bharat 3.0, announced ahead of Diwali in a bid to support the country’s recovery from the pandemic, motivate India Inc. to create more jobs in the coming months?

“A company’s manpower and efficiency requirements must be left to the free forces of the organisation and the market,” says Malia. “It must be left to the relationship dynamics at play between companies, their value chains and the market.”

“Hiring is always a function of demand,” agrees Priyadarshi, “No company is going to overhire at this point of time.” To be able to benefit from the scheme effectively, it is key for enterprises to “do proper employee resource planning and a proper assessment of growth and manufacturing forecast,” suggests Priyadarshi.

“It is a Hobson’s Choice. India’s problem is real and the Government’s intention is clear, but we’ll have to evaluate the effect of this on the private sector and see how it’s going to work out,” says Malia.