New Delhi
India needs to create a large number of formal sector jobs and deal with regulatory issues that force firms to opt for contract workers due to slow labour reforms, the Economic Survey said.
The pre-budget document also suggested that formal sector workers should be given a choice of not investing in social security schemes run by retirement fund body EPFO as it would reduce the cost of hiring and incentivise more people into formality (formal sector jobs).
“The employer’s 12 per cent contribution to EPF/EPS would be unaffected. The only difference would be that employees could choose whether or not to save 12 per cent of their salary into EPF or keep it as take home pay,” it said.
“Such a change would effectively reduce the tax on formal sector labour while leaving informal sector labour costs unchanged. In a relative sense, it would therefore reduce the cost of hiring workers in the formal sector and incentivise more people into formality, where productivity levels and growth are higher,” it added.
