How does the increase in EPFO net additions reflect on the quality of formal employment in India?

The Employees’ Provident Fund Organisation (EPFO) tracks formal employment in India by registering workers in the organised sector. A record high in EPFO net additions is often seen as a positive indicator of increasing formal employment. However, to assess the quality of jobs, it is important to look beyond just the numbers.

• Formalisation of Workforce: Higher EPFO net additions suggest more workers are entering the formal sector, gaining access to social security benefits like provident fund, pension, and insurance.
• Nature of Employment: Not all jobs added under EPFO are permanent or high-quality. Many additions may be due to contractual, temporary, or gig workers who are formally registered for compliance but may lack job security and other benefits.
• Wage Levels: EPFO registration is mandatory for employees earning up to ₹15,000 per month. A rise in net additions could also reflect more low-wage jobs being created, not necessarily better-paying or skilled jobs.
• Shift from Informal to Formal: Sometimes, existing informal jobs become formal due to stricter enforcement or government incentives, which increases EPFO numbers without actually creating new or better jobs.
• Multiple Accounts and Data Quality: There may be duplication because workers often change jobs and create new EPFO accounts, inflating the net addition figures.
• Contractualisation Trend: Many employers hire workers on short-term contracts to avoid long-term liabilities. These workers may be registered with EPFO but do not enjoy the stability or benefits of permanent staff.