Wednesday, October 14, 2009

WageRevisionLatestNews M-9426201999

Companies may choose 'flexible' wage model
By siliconindia news bureau
Wednesday,14 October 2009, 07:52 hrs Comment(4)PrintForward
Mumbai: At the time of slowdown, companies had cut the salaries and number of employees to manage the wage costs. Now, company may shift toward flexible employee benefits while restoring the compensation structure that had been changed as part of salary freezes.

Watson Wyatt, a consulting firm said, "While salary increments are beginning to be implemented as things look up, the sharp growth in benefit costs, mainly in double digits, could see more flexible benefit schemes where the costs are shared between the employer and employee."

Watson Wyatt, which recently conducted an employee benefits trends survey across 12 countries in the Asia-Pacific region, including India, found that there is an increasing in the trend to provide flexible benefit programmes for employees where they can choose the benefits they value the most. But the survey also found that China and India stand out as countries with the highest percentage of having corporate benefits strategy - 84 percent and 79 percent respectively.

"It is very much the case that employers are facing double digit increases in healthcare costs and premiums in India. Among companies we have interacted with and collated data, we frequently hear of premium increases of 10 percent to 20 percent," said Kulin Patel, Head of benefits practice in India, Watson Wyatt.

The Essar Group has diverse interests including steel, oil, power, shipping and BPO, but wages add up to only two percent of its total costs. It is also seen that companies design benefits programmes to attract and retain people. Private medical insurance and additional annual leave and pension schemes are some of the most popular schemes. Retirement schemes, medical screening, life insurance and company car feature are some of the benefits that companies could likely provide. While benefits like gratuity and provident fund are based on the basic salary element, overall value of benefits may be expressed as a percentage of the total cost-to-company.

The Watson survey said that as a percentage of payroll, 39 percent of the companies in India spend less than 10 percent of their payroll on benefits, while 35 percent spend over 20 percent of the payroll. "It means that there are more companies in India that provide less than 10 percent of payroll than in Asia Pacific. Despite this data, it was marked that employers felt that value of benefits were not undervalued as much as in other parts of Asia," said Patel.

1: As per the recent budget amendments Fringe benefit tax has been abolished effective from 1st Apr 2009. Flexi Benefit components (though not all) but certain attrack FBT, what happens when FBT is abolished, would employees still get benefit of tax exemption. There is no clear notification on the valuation.

2: A flip side of it is...getting less PF and gratuity.
PF is dependent on basic and IT companies always pay less basic.However they provide FBP like things,which can be reduced any point of time, but touching/reducing the basic would be difficult hence they used to keep basic salary low.
Posted by: Surya - 14 Oct, 2009
3: What is this "flexible" wage model, when several employees in Indian companies Cancel 4:Its a part of your salary. Salary is divided in to commonly three or more parts. Basic PLI Flexi variable. all together makes ur pay package (may vary from company to company). eg ur monthly pay is 50K. so flexi constitutes arnd 20 or 25 (depends). Now for this amount u can have full tax benefit (u dont have to pay tax for it ), when u show bills saying u have utilized that money for things like clothes, fuel /vehicle charges, books, communication and medical. But u have to claim under what category are u going to claim, if u r eligible as per ur company policies, during the start of the financial year. hence the name flexible . U will have the money and u have the flexibility to claim any of the category .(PS. U r claiming the tax benefit not the actual amount).

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