The labour ministry plans to soon release details of a scheme aimed at incentivising employers to create additional jobs following an announcement in the Budget.
The move is expected to create more jobs besides increasing formalisation as 90% of the country's workforce is in the informal sector.
Finance Minister Arun Jaitley had in his Budget speech said that to incentivise creation of new jobs in the formal sector, the Centre will pay the Employee Pension Scheme (EPS) contribution of 8.33% for all new employees enrolling in Employees' Provident Fund Organisation ( EPFO) for the first three years of their employment.
"This will incentivise the employers to recruit unemployed persons and also to bring into the books the informal employees," Jaitley had said.
Under the Employees' Provident Funds and Miscellaneous Provisions Act, employees contribute 12% of their salary towards the EPF, with a matching contribution from the employer. However, 8.33% of the employers' contribution subject to a maximum ofRs 1,250 a month goes to the EPS for social security benefits of the subscriber.
"The ministry will reimburse 8.33% to the employer for any new employment generated for the first three years to ensure that jobs are not only created but also sustained over a period of time," the official said. The employer will have to show the additional hands hired and subsequently claim the benefit after submitting the required proof.
The idea was first mooted by a group of secretaries at the behest of PM Narendra Modi.