Mint Quick Edit | Employment-linked incentives are an odd way out
₹15,000—from the government, which will also give a cash incentive to employers and employees for their contributions to India’s state-run provident fund (PF) scheme. Further, the PF contribution of employers will be reimbursed up to ₹3,000 per month over two years for each additional employee hired. Broadly speaking, this proposal seems modelled on the production-linked incentive (PLI) scheme run by the Centre for manufacturers.
There is a big difference, though. Enlarging output is an aim backed by the profit motive of a business anyway, but recruiting more people enlarges its wage bill, which is a cost. These are contrary objectives.
This means that the inducement for hiring needs to be truly tempting for it to be effective. So, will it work? This depends entirely on the finances of companies. Also, every firm’s optimal staff size has a limit and it’s rare for an employer to stay understaffed for too long.
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