On 22 July 2024, the Government of India (“Government”) presented the Union Budget for the financial year 2024-2025 (“Union Budget”). The Union Budget focusses on 4 main themes viz. Employment, Skilling, MSMEs and Middle Class. The special focus on Employment and Skilling is reflected in certain announcements which aim at encouraging specific sections of society in the workforce. Some key highlights of the Union Budget for employers are provided below:

• Support to employers contributing to Employees’ Provident Fund Organization (“EPFO”) for new hires

In its bid to encourage generation of new jobs, the Government will reimburse to the employers up to Rs. 3000 per month for contribution to EPFO for a period of 2 years for all new hires employed by the employer.

• Job creation in manufacturing sector

Linked to first time employees, the scheme envisaged by the Government will incentivize additional employment in the manufacturing sector. An incentive will be provided at specified scale directly both to the employee and the employer with respect to their EPFO contribution in the first 4 years of employment.

• Facilitating higher participation of women in the workforce

In order to facilitate the higher participation of women in the workforce, the Government will be setting up working women hostels and establishing creches in collaboration with industry. In addition, the partnership will seek to organize women-specific skilling programmes, and promotion of market access for women self-help group (SHG) enterprises.

• Direct cash transfer to new employees in all formal sectors

The Government has announced a direct cash transfer of 1 month’s wage, up to a maximum of Rs 15,000, to all those newly entering the workforce in all formal sectors. The amount will be disbursed in three instalments. The eligibility limit will be a salary of Rs 1 lakh per month.

• Internship opportunities for youth in 500 top companies

The Government has envisaged a scheme to providing internship opportunities in 500 top companies to 10 million youth in five years. Under the scheme (yet to be launched), an internship allowance of Rs 5000 per month, along with a one-time assistance of Rs 6000 will be provided. The eligibility criteria to benefit from this scheme includes: (i) individuals whose age is between 21 years and 24 years, (ii) individuals who are not employed, and (iii) individuals who are not full-time students at the time of engagement.

• The amount of deduction allowed to employer for contribution to an employee’s New Pension Scheme (“NPS”) account increased from 10% to 14% of the employee’s salary

Under the new tax regime, an employee in private sector will be allowed a deduction of 14% of the salary for the employer’s contribution to their NPS account. Earlier, employees of Government establishments were allowed a deduction of 14% of the salary for employer contribution towards the employee’s NPS account. The deduction for other employees was limited to 10% of the salary. These amendments will take effect from 1 April 2025 and will, accordingly, apply in relation to the assessment year 2025-2026 and subsequent years.

While the Union Budget provides the proposals for next financial year, the Government (or nodal Ministries or Departments) will notify implementation and governing framework vis-à-vis each announcement. Such notifications may entail certain steps to be taken on the part of the employers. We will keep you posted as and when the Government takes such implementation focused steps.