top of page
  • Writer's pictureSamVidhiforum

Impact On Employment In India Due To The Covid-19 Pandemic

By: Piyush Pahwa* |


The Coronavirus disease also referred to as COVID-19 which was documented as early as December 2019, today had manifested itself as a pandemic and affected all spheres of life imaginable. As the disease spreads through human contact, and has no potential vaccine to cure the same, the Government of different countries to control the outbreak adopted the practice of social distancing with complete or partial lockdowns in areas with dense population or extreme outbreak. Though this move was necessary, it had effects which were both devastating and long term on the global economy. In terms of COVID-19’s effect on India, some of the effects which were seen immediately seen in the economy were- sharp downfall in the capital market; black marketing of essential products; shutdown of small businesses and startups etc. But the most important among these is the heavy rise in the level of unemployment and job offer cancellation for fresh graduates which would be our main focus.


The Supreme Court in the case of Olga Tellis & Ors. v Bombay Municipal Corporation & Ors., (AIR 1986 SC 18) while interpreting the scope of Article 21 stated that-” something which makes life possible to live, must be deemed to be an integral component of the right to life. For if a person is deprived of his right to livelihood he shall be consequently deprived of his right to life”

But if data presented by the Centre for Monitoring Indian Economy (CMIE) is to be believed, the monthly salaried households are the ones who have suffered the most from to the lockdown due to the COVID-19 as the estimates of salaried jobs fell from 86.1 million in 2019-20 to 67.2 million in July 2020.

Further, categorising the data from CMIE presented from the Fiscal year 2019-20 to July 2020, the fall in salaried jobs was almost equally shared by the urban and rural areas of the country as job fall in the urban area was 22.2 per cent and 21.8 per cent in the rural area. But it was the urban area that suffered more severely here as the urban areas have a greater share in salaried jobs (58 per cent of the 86 million jobs in 2019-20).

Observing the situation from a view of age group distribution, the joint report by the International Labour Organization (ILO) and the Asian Development Bank (ADB) estimates job loss of 4.1 million youth in India with Construction and agriculture has witnessed the major job losses among seven Key sectors with youth (15-24 years old demographic) will face a higher long term risk of economic and social cost in comparison to adults (demographic of age 25 or older).

Also, the report states that in India, two-third (66.667%) of firm-level apprenticeships and three quarters (75%) of internships were completely interrupted during the COVID 19 pandemic.


As seen above, COVID-19 has had devastating effects on the economy of India especially in terms of unemployment loss and rise in poverty levels as the result of the same. However, the Government, since the pandemic entered the country has taken several initiatives to combat the situation and restore stability back into the economy as a whole. Some of these steps are mentioned below-

· Through its order dated 20th March 2020, The Ministry of Labour & Employment (MLE) has advised all the employers of Public / Private Establishments not to terminate their employees, particularly casual or contractual workers from the job, or reduce their wages.

· Also, through the above-mentioned order the ministry has directed the employers to make payments of wages to their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during lockdown to ensure security to these worker’s livelihood.

· To support unorganised construction workers, the MLE has issued the advisory, asked all the Chief Ministers/ Governors of all the States/Union Territories to transfer funds in the account of construction workers through direct benefit transfer mode from the cess fund collected under the Building and Other Construction Workers Welfare Cess Act, 1996.

· The Finance Minister in March 2020 notified that amount of collateral-free loans has been doubled to 20 lakhs to aid women working in self- help groups by the Government to boost up employment opportunities.

· In order to provide more disposal funds for the taxpayers who lost employment and the self-employed units facing losses, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments under section 194 of Income Tax Act, 1961 (ITA) made to residents and rates of Tax Collection at Source (TCS) for the specified receipts are reduced.

· Due date for filing all income-tax return for Financial Year (FY) 2019-20 (under section 139 of ITA) is extended to 30 November 2020 and Tax audit to 31 October 2020. Also, the rate of interest payable for the period of delay (under Sections 234A, 234B of ITA) shall not exceed 9 per cent per annum in order to save the citizens from unnecessary tax filling delays and interest liabilities in this time of financial crisis.

· The Ministry of Home Affairs (MOA) through its order dated 24th March 2020 issued guidelines clearly stating that barring few exceptions, all establishments may allow employees to work from home only. This safeguarded several salaried jobs.

· The Central Government through its notification dated 18 May 2020 (notified by MLE), exercised its powers under section 6 and made the changes under section 5 and Schedule II of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF act), resulting in a reduced rate of provident fund contribution for employer and employee for the months of May, June and July 2020; covering all classes of establishments covered under the EPF act barring central and state public sector enterprises or any other establishment owned or controlled by or under control of the Central or State Government. This move is intended to allow employees to have a higher take-home pay and reduce employer’s liability.

· The Central Government through its notification dated 15th May 2020 also provided relief to establishments and factories covered under EPF Act from levy of penal damages for delay in deposits of dues under section 14B of the EPF Act, aiding the establishment suffering from work halt and financial crisis.

· The Government has notified amendment in EPF scheme rules regarding withdrawal of funds from EPF accounts According to the amended rules; a member can withdraw an amount equal to three months of basic salary and Dearness Allowance (DA) or 75 per cent of the credit balance in the account, whichever is lower for them. This step was taken to provide needy households with cash to meet their daily requirements.

· In the wake of COVID-19, the Government is planning to reduce the service tenure under the Payment of Gratuity Act, 1972 from five to one year. This will ensure quick and easy availability of gratuity to families in need.

· Given the condition of rural unemployment, the monetary compensation provided under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme was increased to Rs. 202 from Rs.182 by the Ministry of Finance (notified via press release).

Through the above-stated steps, the Government ensured that people will be provided with either employment opportunities or enough monetary remuneration to both urban and rural household in order to survive the period of lockdown.


Many appreciate the government to take proactive decisions to deal with the economic hardships created by the pandemic. The government had been lauded for many of its policies ensuring food, money and jobs for the survival of the middle and lower class households, but unfortunately, many of such decisions in the current scenario seem short-sighted and are showing adverse effects. Elaborating on the same are a few of the points, given below:

· The MLE through its notification (dated 20th March 2020) aimed to ensure job security for workers, however, the policy restricted the employers to control their overhead expenses and had to tap into their reserves to continue with no means to fresh funds or business. This, not only affects the survival of the employers but also, in long term threatens the jobs of the same workers MLE tried to safeguard.

· The government through the above stated multiple relief packages, reduction in delay interest under ITA, financial aid, and loans with no collaterals aimed to ensure the survival of current businesses and steady employment generation through new ventures, has opted for expensive short term solutions as, by way of such schemes, the government is exhausting its funds. There is a bleak scope of effective fund flow or tax revenues in the immediate financial quarter. To deal with this government, will have to borrow at higher interest rates and will ultimately be forced to untimely withdraw the relief provided presently.

· By providing higher withdrawal permission on provident fund accounts under the EPF Act (via order dated March 29 2020), the government has put the banking sector under duress in a market which is already facing liquidity crisis presently and will continue to do so in the future.

· The tax authorities will be facing inevitable additional administrative costs owing to the filing relaxations and exemptions provided (coupled with revisions under section 139(5) of ITA for the FY 2019-2020), given there is likely to be a clash between the work undertaken by the tax authorities for FY 2019-2020 and FY 2020-2021. This situation could also cause inefficient and disruptive assessments, creating confusion for the business houses and individual taxpayers and affecting them adversely.

· Several employers are misusing the concept of work from home provided by the MOA (in its order dated 24th March 2020), by making their employees work overtime without any additional compensation. Also, currently due to lack of any statutory provision regulating work from home setup, controlling the situation is getting harder for the government resulting in employee manipulation and harassment with low or no compensation.


In the case of State of Uttar Pradesh v. Charan Singh, the Supreme Court observed that “keeping a person out of job for years was arbitrary and unreasonable”, reiterating the ruling of Olga Tellis case where the court held right to work to be a fundamental right. The Government’s resolve to fulfil its duties in the above-stated judgement is being greatly tested in this time of global economic created by the COVID-19 pandemic. With the country having the youngest population in the world, the Indian Government has an even bigger responsibility to ensure steady employment for its citizens but, with work on hold due to the nation-wide lockdown the task is become harder to perform. Even as time passes and the economy is slowly reopening, still the employment opportunity is facing heavy shortage with India seeing its worst economic performance in the past few decades. The above-mentioned aids provided by the Government do provide some good, but is still not enough. India is currently under a crisis from both the COVID -19 pandemic and the economic aftershock it has brought. With both the Government and the people having their duties chalked out, the only way out of this crisis right now is to do what we can and is still in our control.


* The author is a 3-year law student at Amity Law School, Lucknow.



    bottom of page