Relief after job loss: Who will fund the Atal Bimit Vyakti Kalyan Yojana?

The Ministry of Labour and Employment on Wednesday announced a scheme to financially support those who lost their jobs and were covered under the Employees' State Insurance Act, 1948. Somesh Jha explains the key features.

What are the key features of the Atal Bimit Vyakti Kalyan Yojana (ABVKY)?
 
The ABVKY is a scheme approved by the Employees’ State Insurance Corporation (ESIC) that aims to benefit its subscribers, who are mainly formal sector workers who have become unemployed for whatever reason, by providing cash through bank account transfer. At present, the government of India does not provide any unemployment allowance. The ongoing Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) benefits formal sector workers registered with the ESIC.

 

Why was there a need for a new unemployment allowance?
 
The labour and employment ministry said in its official statement on Wednesday that the move was necessitated “considering the change in employment pattern and the current scenario of employment in India which has transformed from a long-term employment to fixed short-term engagement”. The government is signalling that permanent employees in the economy are on a decline and the industry is more inclined towards hiring workers on a contract now. This has been facilitated by the government’s policy validating fixed-term employment for all businesses earlier this year. The government allowed industries to hire workers on a fixed-term contract on condition that they receive similar allowances given to a permanent worker in the same organisation. That said, due to the unavailability of official data on employment, there is no evidence to suggest that permanent jobs are on a decline and contract workers are being hired more.

 
How is the new scheme an improvement over the previous one offered by the ESIC?
 
The RGSKY was introduced in 2005 for employees who were left unemployed for three reasons — the closure of factory or establishment, retrenchment or permanent invalidity. However, if an employee became unemployed for some other reason, no unemployment benefit was offered to him/her under the RGSKY scheme. The ABVKY will provide cash allowance to ESIC subscribers who are unemployed for at least three months in a row after leaving their previous jobs, for reasons apart from retrenchment and factory closure. The new scheme will be availed of by those who are insured by ESIC for a period of at least two years.

 
Is there any data to measure the performance of the earlier scheme?
 
According to official data, in 2016-17, 508 people availed of the unemployment allowance under the RGSKY scheme, down from 1,146 in 2015-16 and 1,030 in 2014-15. According to the ESIC, the number of beneficiaries declined largely because the allowance was solely dependent on closure of a factory or retrenchment. In 2016-17, Rs 37.2 million was paid to unemployed people compared to Rs 54.8 million in 2015-16 and Rs 44.7 million in 2014-15, under the RGSKY scheme.
 
In 2016, the ESIC made the RGSKY more attractive by allowing those who had subscribed to the ESIC for at least two years to avail of the benefits, as against three years previously. Also, the benefit period was enhanced from one year to two years. Despite these measures, the scheme remained unattractive due to its limited scope, according to the ESIC.

 
Who will fund the new scheme?
 
The scheme will be funded by the employees themselves. Nearly 4.75 per cent of a worker’s monthly salary goes towards ESI as the employer’s contribution, 1.75 per cent of the income is the employee’s share. Those who had subscribed to the ESIC for two years continuously will be allowed to avail of the unemployment benefit to the tune of 47 per cent of their total contribution. The ESIC conducted a sample survey in Noida and Varanasi to find out the financial implications on the basis of the average number of persons leaving the job in the two areas. The expected expenditure for all-India coverage of the scheme is estimated to be Rs 16 billion a year, according to the ESIC. The move is expected to benefit over 1 million workers.