Salary hikes this 12 months may not translate into larger cash-in-hand for workers if organisations select to pay extra in provident fund (PF) contributions as a result of new definition of wages proposed by the federal government, confirmed a examine.
While 88% of corporations mentioned they intend to extend pay in 2021, up from 75% final 12 months, the newest Salary Increase Survey in India by Aon, a worldwide skilled companies agency, projected a hike of seven.7% in comparison with 6.1% final 12 months. “We expect the increment dynamics for 2021 to play out over a longer period of time given the uncertainty and potential impact of forthcoming changes,” mentioned Nitin Sethi, accomplice and CEO of Aon’s efficiency and rewards enterprise in India.
“The proposed definition of wages under the new labour codes could lead to additional compensation budgeting in the form of higher provisioning for benefit plans like gratuity, leave encashment and PF. We expect organisations to review their compensation budgets in the second half of the year once the exact financial impact of the labour codes is known,” he mentioned.
Sethi, nonetheless, mentioned the influence of the codes may very well be minimal, as a lot of the giant corporations in India pay 35-40% of the CTC as primary pay.
“In those companies, such as old-world engineering companies, where the basic pay is around 25% of the total, the impact could be significantly higher,” Sethi added. But based on Aon, India continues to venture the very best salary will increase amongst BRIC nations.