Reduced PF Contribution for Women Employees

February 08, 2018
12 months

What is the issue?

  • The Budget proposal to reduce the provident fund (PF) contribution of women employees is a welcome move.
  • But the real need is addressing the employer's concerns in hiring women employees, to bring in gender balance in workplace.

What is the budget proposal?

  • The Budget proposes to reduce the provident fund (PF) contribution of women employees to 8% from the standard 12%.
  • This will be for the first three years.
  • The move comes without any change in the employer’s contribution.
  • In general, both the employer and the employee pay an equal contribution towards provident fund.

What are the shortfalls in the approach?

  • As stated in the Budget speech, PF relief is targeted at improving women’s participation in the workforce.
  • However, the reasons for the steady fall in female workforce participation rates are varied.
  • So, how far will the move appreciably effect gender balance in workplace is uncertain.
  • Workplace - Absence of a conducive workplace environment for women is a major reason for low participation.
  • This ranges from providing the infrastructural facilities to protection from sexual harassment.
  • This prime issue is little to be addressed by PF contribution.
  • Maternity leave - Government recently expanded the provision for paid maternity leave from 12 weeks to 26 weeks.
  • It also mandated the provision of crèche facilities in firms employing 50 or more employees.
  • Multinational IT subsidiaries offer these facilities.
  • State-owned entities also follow the mandates as they have the wherewithal to sustain such costs and are bound to follow the law.
  • However, for many Indian companies, costs of meeting out these regulations may be burdensome.
  • This acts as strong disincentive for hiring more women.
  • MSME - This is particularly true with the medium and small scale (MSME) sectors.
  • MSMEs remain the critical employment generators in India.
  • Notably, many remain outside the formal employment arena.
  • Embedding the incentive only in the organised sector would thus produce only a little change.
  • As, this account only for a minuscule proportion of employment in India.

What should be done?

  • Incentivising women to join the workforce addresses only a part of the problem.
  • When it comes to gender balance in the workplace, the issue at stake is about incentivising companies.
  • This is essential in the first place to encourage them to hire more women.
  • The monetary and non-monetary costs on companies for the payment of maternity and childcare benefits must be recognised.
  • The government can thus consider offering subsidies to minimise this burden.
  • Offering tax breaks for the companies on maternity benefits and expenditure on crèche facilities is also another viable option.


Source: Business Standard

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