What do EPF numbers say about employment scenario in last 3 months?
Sai Krishna Muthyanolla
August 28, 2020
Almost everyone agrees that COVID-19 will have a grave impact on employment in the country. But do the numbers indicate the extent of job losses? We look at the EPF payroll data on the number of subscribers till June 2020 to find an answer.
In an attempt to control the spread of COVID-19 in India, the Central Government had imposed a nation-wide lockdown on 24 March 2020, for a period of 21 days, which was further extended thrice until 31 May 2020.
The reports and visuals of migrant workers travelling back to their native places, indicated their apprehensions about the future due to the prevailing economic & pandemic situation.  In context of the near zero economic activity during the lockdown period, there were many reports of job losses even in the formal sector.  Surveys and reports of few independent organizations also point to substantial job losses because of the prevailing situation.
As per a joint report released by ILO (International Labour Organization) & ADB (Asian Development Bank), nearly 41 lakh youth in India lost their jobs due to COVID-19. It also forecasted an increase in the youth un-employment rate to around 30% in 2020 compared to 23% in 2019.
A report by independent organization CMIE, states that around 18.9 million salaried employees lost job since April’20. These are some of the estimates that provide a picture of the employment situation in India. However, the government of India has not yet released any official employment statistics for this period. The only comprehensive data available to analyse formal employment numbers in India is the EPF numbers released by the Ministry of Labour.
In this story, we take a look at some of the official numbers available with various government departments like EPF information, data provided by RBI etc., to understand the employment situation in India, especially in the formal sector.
Major fall in net new subscribers to EPF for the month of April ’2020
The Provisional Monthly Estimate of Payroll report published by Employee Provident Fund Organization (EPFO) India, provides numbers related to EPF contributions. This information gives a fair estimate of – total payroll during a period, new contributors to the EPF, members who have exited etc. This data can be used to estimate the number of active salaried employees, number of new employees, employees who left employment etc. It has to be noted that since the EPF is a voluntary scheme for those above a certain salary level, the correlation with these  numbers may not be accurate. However, these numbers indicate a general trend.
As per the EPF payroll estimates, the monthly average net new subscribers for the period 2019-20 (April-March) was 6.54 lakhs. The total number of net new subscribers added for the entire year of 2019-20 was more than 78.58 lakhs.
It was an improvement over the previous year 2018-19, where in the total net new payroll for the year was around 61.12 lakhs i.e. the monthly average net new subscribers for that year was around 5.1 lakhs.
The EPFO  began furnishing these details from September 2017. During that financial year , the total net new payroll from September 2017 – March 2018 was 15.52 lakhs i.e. the monthly average net new subscribers was 2.21 lakhs.
The report also provides monthly payroll figures for April – June 2020. As per the available data, the net new subscribers added in April 2020 fell to 20,164.  It has improved in the next two months. May 2020 reported the net new subscribers increasing to 1.72 lakhs and June 2020 reporting the net new subscribers at pre-lockdown levels of around 6.55 lakhs.
Gradual fall in number of New EPF members with a subsequent increase in the number of re-joined members
The monthly net subscribers to the EPF is the net value of three components – New monthly subscribers, Members exited & members who re-joined EPF.
The monthly average of ‘New EPF members’ during 2017-18 was 12.08 lakhs. This has gradually decreased in the next two years, with 11.62 lakhs in 2018-19 and 9.2 lakh in 2019-20.
During the lockdown, there was a sharp decline in the number of new EPF members with 1.77 lakhs in April 2020. This has slightly improved in May 2020 and June 2020 with  3.03 lakh and 4.98 lakh new EPF subscribers respectively.
Apart from the ‘New EPF Members’, the number of EPF members exiting has also shown a downward trend. During 2017-18, an average of around 11.03 lakhs exited EPF every month , which fell to a monthly average of 10.24 lakhs and 9.16 lakhs in 2018-19 and 2019-20 respectively.
In April 2020, there were 4.08 lakh claims submitted to exit EPF. It increased in May 2020 to 4.45 lakh claims but fell in June 2020 to 2.96 lakhs. The exit numbers are based on the number of claims submitted by the employer and is done only after two months of non-contribution to EPF. Hence the numbers might not correlate exactly to the month of exit.
Meanwhile, there has been an increasing trend in the number of exited members re-joining EPF, prior to lockdown. Indicating mobility between the jobs. The monthly average number of exited members re-joining EPF increased from 1.17 lakhs in 2017-18  to 3.72 lakhs and 6.51 lakhs in 2018-19 and 2019-20 respectively.
During the lockdown period  in April 2020, around 2.5 lakh employees re-joined EPF, i.e. 40% of the monthly average during 2019-20.  This has increased in May 2020 to 3.14 lakh members and 4.53 lakhs in June 2020.
The fall in the new EPF numbers but a comparative increase in the number of exited members re-joining, possibly indicates a situation of paucity in entry-level or first-time formal jobs, while there is considerable mobility with people changing the jobs.
Decline in the number of organizations contributing EPF for the first time
Apart from the subscribers to EPF, the report also furnished details of the organizations who have contributed to the EPF for the first time. This would either mean that they are new organizations or that an organization has reached the eligibility criteria to be under the purview of EPF.
Even prior to lockdown, there has been a decreasing trend in the number of new organizations contributing towards EPF.
From September 2017 to the end of 2017-18, more than 38 thousand organizations contributed EPF for first time i.e. a monthly average of 5,480.  In the ensuing year of 2018-19, there were a total of 60.8 thousand firms which contributed to EPF for the first time, an average of 5073 per month. In 2018-19, it fell further to an average of 4394 per month, with a total of 52.7 thousand organizations making their first contribution to EPF.
As seen in the case of new EPF subscribers, even the number of organizations contributing to EPF for first time fell to 820 in April 2020. Although there was an improvement in May 2020 & June 2020 with 1802 and 2390 respectively,  it was not back to pre-lockdown levels as seen in case of EPF subscribers.
These numbers indicate a slowdown in the establishment and growth of organizations, a trend which would further impact the employment opportunities in the country.
Other information on organised employment indicates a slowdown in employment even prior to lockdown
Reserve Bank of India’s annual report for 2019-20, provides an update on the organised sector employment in the country. The reference information is drawn from EPFO, ESIC (Employees State Insurance Corporation) and National Pension System (NPS).
RBI observes that as per available information for EPF, there has been an increase in the job creation until 2019-20. This is based on the Net increase in the monthly EPF subscribers. However, as seen earlier in the story, the net increase is due to the increase in members re-joining EPF, while there is a downward trend in the number of new EPF subscribers. The indication of a fall in entry-level jobs is asserted by the decline in the ESIC numbers over the years, as most of the subscribers to ESIC are employees in the lower pay grade.
RBI also refers to other surveys, which indicate a pessimistic trend in regard to the employment in services sector, whereas the PMI survey indicates a positive upward shift during the last quarter of 2019-20.
The RBI data does not provide information on the trends during the lockdown period but does highlight the prospective challenges in employment due to COVID-19. The EPF data and other information like ESIC point towards employment contraction over the past couple of years, especially in the creation of new jobs.
While the net EPF data does point towards a movement to pre-lockdown days, it is mostly powered by former EPF members joining other jobs during the period – may be due to voluntary/involuntary job change.
A clearer picture of people who might have lost jobs and applied for EPF claims could emerge over the next few months.
Featured Image: COVID-19 impact on employment