By Dr. Gyan Pathak
Decent job creation in India will remain elusive, because Union Government has no plan to modify EPFO schemes for now, though it plans to roll out full implementation of the new labour codes from April 1, 2026. The Social Security Code 2020 has a clause repealing the EPF Act, but that repeal clause has not yet been notified. It has resulted into EPF is still being administered under the old EPF Act while the new code framework exists simultaneously since November 21, 2025. It has overlapping impact and that will continue.
In a written reply to a question raised by MP Santosh Kumar in the Rajya Sabha, Union Minister of State for Labour and Employment Shobha Karandlaje has recently clarified, “As per Code on Social Security, 2020, Section 164(2)(b),the existing EPFO schemes shall remain in force, to the extent they are not inconsistent with the provisions of the Code, for a period of one year from the date of commencement of the Code.”
The issue of EPFO is important because this is the only scheme in India, coverage under which is considered as a decent job outside the realm of the government jobs. The Code on Social Security 2020 has either replaced or merged several labour laws related to social security benefits which included the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The purported aim of the Code on Social Security was to streamline social security provision and expand coverage.
As of now, the continuation of the old EPF and the new labour code frameworks are being implemented simultaneously, creating a dual system. The new labour code framework has kept the threshold of applicability of EPF and 20 workers, as it was in the old framework. That is why there is limited scope of coverage of EPF.
Data from the Sixth Economic Census and MSME studies show that India has about 6.34 crore MSMEs, and around 6.3 crore enterprises employ fewer than 20 workers. According to the Niti Aayog data, only about 12.8 lakh enterprises have 20 or more workers, which are covered by EPF. About 95.5 per cent of establishments employ fewer than 6 workers and only about 1.37 per cent of establishments employ 10 or more workers. These data show that India’s firm structure is dominated by very small enterprises, and therefore the 20-worker threshold is already very high. Only about 1-2 per cent of firs fall under EPF regulation.
In this backdrop, and substantial increase in decent jobs will depend on two things – First, the growth in formal employment under EPFO payroll, and secondly, growth in establishments registering with EPFO.
EPFO payroll data suggests only moderate but fluctuating growth in formal employment. About 12.9 million net formal jobs were added in FY2024-25 under EPFO. This is lower than 13.1 million in FY2023-24 and 13.8 million in FY2022-23, showing a slight slowdown in recent years. Monthly additions sometimes exceed 2 million new EPF members, indicating continued formal sector hiring. Estimated annual growth rate of EPF employment remained roughly 4–6% in recent years depending on the year and schemes like Atmanirbhar Bharat Rojgar Yojna (ABRY).
The number of new companies entering the EPF system is actually growing slowly. Recent estimates show that around 52,309 establishments registered for the first time in FY2024-25, which is slightly lower than the previous year. Moreover, only about 45,000–50,000 establishments are added annually in recent years.
The data speaks clearly. Growth in the number of EPF-covered firms is relatively small. The formal employment increase often happens within existing companies, not because many new firms cross the 20-employee threshold.
Then there is a peculiar behaviour prevailing among companies which is called “19-workers ceiling” syndrome. Many firms intentionally stay below 20 workers to avoid labour compliance costs. Though there is greater formalisation of jobs, though they are increasing slowly, there is a disturbing fact underneath. A large part of EPFO payroll growth reflects that Existing jobs becoming formal, not necessarily new jobs, and very few small firms growing into large firms.
If the current trend continues, the new EPF establishments per year will be about 45,000 – 60,000. Formal employment growth will be only roughly 4 to 6 per cent annually, and growth in EPF covered firms will be only in the range of 2-3 per cent. It is a matter of serious concern that most formal job growth occurs inside existing EPF covered companies, and not because many small firms are crossing the threshold.
For FY 2025-26, complete annual EPFO payroll data is not yet fully released publicly, but monthly payroll releases give a clear picture of net formal job creation and exits in the EPF system. Monthly EPFO payroll additions in 2025 shows the EPF system has been adding only 20-22 lakh net formal jobs per month. Data is available upto September 2025, and thereafter, no monthly data is released. If this pace continues through the year, the annual net addition in FY 2025-26 would likely be around 1.2–1.3 crore jobs, similar to recent years.
Now here is a catch. One needs to understand the data. There are three categories – New subscribers (first time entrants), member who exited EPF, and who rejoined EPF. Let us tame example of June 2025 data which says net addition 21.89 lakh. It also mentions 10.62 lakh new subscribers and 16.93 lakh who rejoined after exit. It means the exits that month was roughly 5 to 6 lakhs workers.
For decent job creation, the government had announce ELI scheme in the Union Budget 2024-25, but was delayed because EPFO was not ready for implementation. It was delayed for a year and implemented in financial year 2025-26, from 1 August 2025. We have EPFO monthly data for September 2025 in public domain, and then no monthly data available. Why? Nobody exactly know, and one speculation is that ELI scheme has just failed.
Under the ELI Scheme incentive were linked to EPFO-registered employment. It will run until July 2027, with a Rs 1-lakh-crore incentive budget aimed at generating about 3.5 crore formal jobs. The status is not known, because government has stopped EPFO monthly data after October 2025. ELI may artificially increase EPFO roll numbers without creating equivalent new jobs. All these indicate that decent job creation will suffer, as it suffered under the old EPF regime, which government is not going to modify, while implementing the new Code of Social security framework. (IPA Service)
