Trend Towards Formal Employment Strengthens in 2022-23: Joint Report from FICCI and Quess Corp.

Mumbai: Quess Corp., India’s leading business service provider and FICCI (Federation of Indian Chambers of Commerce and Industry), have released a joint report called the Karnataka Jobs Report 2022-23. This was released as a part of a preliminary step towards building data-driven policies, programs, and strategies to achieve progress towards the formalisation of the labour market. The report suggests that there was an uptick in PF enrolment in India during 2021-22, with 1.38 crore net subscribers joining the Employees’ Provident Fund Organisation (EPFO) scheme, indicating a higher number of people joining the formal workforce. This trend is continuing in 2022-23, which suggests that formal employment is expected to increase further.

The latest EPFO payroll figures from the past five years (2017-22) indicate that Maharashtra, Karnataka, Tamil Nadu, Gujarat, and Haryana have contributed significantly to the overall net EPFO new payrolls, accounting for 60.54% of the total. These states also registered the highest number of new Employees’ State Insurance Corporation (ESIC) members as of March 2021, with steady growth in formal jobs observed in the top five states. Maharashtra, Karnataka, and Tamil Nadu are among the top-performing states in terms of GDP growth, which explains their consistent contribution to the EPFO database.

The report findings based on an analysis of EPFO, ESIC database and estimation of government employees showed that the state of Karnataka has about 24.7% of its workforce employed in the formal sector, which is 4.74% higher than the national average of 20%, creating promising opportunities for the state’s industry and trade prospects. The report also highlights that Karnataka accounts for nearly 11% of the net new formal job additions in India.

Commenting on this joint association, K Ullas Kamath, Chairman, FICCI Karnataka State Council, said, “The findings in the report indicate that Karnataka is a leader in formal job creation in India. As we move further towards a knowledge-based economy, the state is well positioned to leverage its large base of skilled workforce to attract firms to set up their operations in Karnataka. Undertaking skilling efforts at graduation level with a constructive partnership with industry, Government, and academia can fast-track the progress of formal job creation, especially in a large number of MSMEs, booming IT, and tech-driven sectors.”

Commenting on the report, Lohit Bhatia, President of Workforce Management, Quess Corp., said, “Given the burgeoning growth of key sectors in India and the noticeable uptick in formal employment there is a sense of optimism regarding the future of the country’s economy. The report accentuates the impact of favourable policies and strategies that are fueling this progress. While formalizing the informal sector still requires diligent effort, the data reveals encouraging prospects for the industry and trade in India.”

The expert services sector leads job creation with a 38% contribution in the last five years

According to the data, the expert services category, comprising manpower agencies, private security agencies, and small contractors, among others, has emerged as the primary formal job creator, responsible for approximately 38% of the new formal jobs generated in the last five years. The demand for temporary or contract-based workers across various industries has fuelled this growth. Additionally, the government’s efforts to formalize the informal sector have resulted in a higher number of small contractors and other informal businesses registering with the EPFO and contributing to the creation of formal jobs.

The remaining eight major sectors, including building and construction, trading and commercial establishments, engineering, developing electronic, mechanical, and general engineering products, textiles, and garment making, together added around 1.56 crore jobs, which is around 62% of the new formal jobs added. The Building and Construction sector is the second-largest job creator, with consistent growth in formal job creation. The growth is attributed to the government’s emphasis on creating smart cities and enhancing infrastructure, along with the rising demand for infrastructure and real estate projects. The textile industry has also shown signs of recovery with a significant increase in PF-linked employees in the last five years. This growth is attributed to the surge in demand for textile products both domestically and internationally, along with favourable government policies such as the Production Linked Incentive (PLI) scheme.

Agriculture dominates India’s informal job market with over half of e-Shram portal registrations

The report also delves into the analysis of India’s informal workforce and estimates that around 45.6 crore individuals are engaged in this sector. Out of India’s estimated working population of 57 crore, only 20% (11.4 crore) are employed in the formal sector. While the e-Shram portal (the centralised database of unorganised workers) has seen a notable 28.55 crore individuals registering as of December 2022, approximately 17.05 crore informal sector workers are yet to register. Uttar Pradesh has the highest number of registrations on the e-Shram portal, with 8.3 crore workers registered, followed by Bihar, West Bengal, Madhya Pradesh, and Maharashtra.

The dominance of the agriculture sector on the portal is apparent, with more than half (52%) of the informal job registrations being from this sector. This is because it is the largest employer in the informal sector in India. The construction sector (9%) has also witnessed a significant number of registrations on the portal. This is due to the increased focus on infrastructure development and urbanization in India, resulting in more employment opportunities in the sector. Workers may have registered on the portal to access better job opportunities. Apart from agriculture and construction, other sectors that have seen significant informal job registrations on the e-Shram portal include domestic and household workers (10%), apparel (6%), and miscellaneous (4%).

Methodology: This report is drawn from analysing data from Employee Provident Fund Organisation (EPFO) and Employee State Insurance Corporation (ESIC), estimating of government employees. Since, a majority of the workers in India remain in the informal job sector, particularly in agriculture and in rural areas, they lack access to social security benefits such as employee provident fund, medical insurance, gratuity, and maternity leave, making them extremely vulnerable to market uncertainties. This report only addresses the formal workforce data for Karnataka and India based on EPFO and ESIC monthly/annual reports and takes into account the number of states and central government employees who are a part of the formal workforce. It makes a comprehensive analysis of job scenarios in India based on age, sector, gender and state.