Petition urges employee choice in salary structure

Sindhu Hariharan, TNN | Jan 7, 2015, 01.21AM IST 

CHENNAI: Industry behemoths like WiproSaint-Gobain IndiaBharti AirtelAlstomBiocon, Tata Consultancy Services (TCS) and Future Retail are some of the companies who have signed a petition along with recruitment consultant TeamLease Services, urging the government to tweak its 'salary confiscation' regime and allow employees to choose how their salary is paid and contributions invested. 

Almost 500 employers have signed the petition which calls for a choice in deciding whether to make their 12% contribution to Provident Fund (PF) or opt out of it; whether the 12% employer contribution should go to Employee Pension Scheme (EPS) or to an individual account with the National Pension Scheme (NPS) (which can invest funds to yield more returns); and whether their Employees State Insurance (ESI) contribution should go to ESI Corporation or can be used in any IRDA regulated insurance product. 

"The government is requested to move away from the current benefits 'confiscation regime' because it harms the people it is trying to protect. Recognizing the cost-to-company model and revamping these labour laws would greatly benefit youth, increase formal employment and accelerate voluntary migration," Rituparna Chakraborty, convenor of the petition & co-founder of TeamLease said. 

India's labour laws mandate the highest salary deductions for low wage employees in the world which is almost 44.31% and ironically, this is only 5.32% for high wage employees since statutory obligations are either not applicable or there are provisions of exemption at higher salary levels. TeamLease said. 

Sunil Goel, director at GlobalHunt, an executive search firm, felt that with the ongoing talent war across industries, companies are increasingly taking steps to retain quality talent and the decision to appeal to the government is a step in this direction. He added that with increasing engagement between government and India Inc, it makes it easier to raise such requests. 

A statement by TeamLease also stated that low-wage employees do not have high savings rate and mandating savings higher than real saving may lead to high attrition and migration to informal employment. 

Currently, while employees in informal sector take home their entire salary, employees in the organized sector lose nearly 50% of their earnings to schemes like PF, ESI, Professional Tax, Employee Pension Scheme (EPS), statutory bonus and gratuity. 

"The 'salary in hand' is the clinching factor for any entry-level migratory worker and with almost one-third of the work force falling under this category, rationalizing statutory deductions becomes crucial for corporates to keep their expansion plans going," said Aditya Narayan Mishra, president of staffing at Randstad India.