At least 64 percent of companies in India are expecting a visible impact on their profit and loss (P&L) as a result of the anticipated changes in the four labour codes, a new survey by global advisory firm Willis Towers Watson (WTW) said on June 22.
In light of the possible changes via the labour reforms and increasing cost of providing retirement benefits, WTW said 53 percent of organisations in India are considering or have planned to review their retirement or long-term benefits design in the next two years.
The survey that captured information from more than 70 companies underlined that employee experience (49 percent) is the top influencer of long-term employee benefits strategy, followed by regulatory complexity (45 percent), WTW said.
India has consolidated 29 central labour laws into four codes on wages, social security, occupational health, and industrial relations. While the parliament approved the Code on Wages in August 2019, the rest three were passed in September 2020. But none of them has been rolled out as yet.
The labour codes are expected to introduce far-reaching changes with implications for employers and workers. They will offer greater flexibility in rolling out short-term work contracts, make hiring and firing flexible, and make industrial strikes harder. A change in the definition of wages may impact the take-home amount but will increase retirement savings – something that some entrepreneurs and employers oppose because it could increase their employee cost in the short term.
On labour codes, the survey further said that at least 71 percent of companies have taken some action to assess implications. In contrast, 34 percent are unsure of making changes to their compensation structure in response to the new definition of wages, while 23 percent are planning to include variable pay in the wage definition.
“Organisations are gradually coming out of the pandemic survival mode and focusing on issues such as the long-term implications of retirement adequacy and employee benefits. Our study shows that the retirement benefit landscape in India is evolving, with organisations retaining superannuation as an option in addition to promoting NPS,” said Ritobrata Sarkar, Head of Retirement, WTW India.
“While both these avenues co-exist, it will be critical for organisations to consider the regulatory environment, flexibility for employees, cost-benefit analysis and most importantly, employee experience as they review their long-term employee benefits strategy and mix. That said, NPS continues to be a focus area with a large majority exploring strategies to increase employee participation rates,” Sarkar added.
On NPS, the study said 73 percent of the surveyed companies are currently providing or planning to implement corporate NPS, and amongst those that already provide, 61 percent are exploring strategies to increase the participation rate.
Even while talking about corporate NPS, the WTW survey said almost seven out of every 10 companies believe that the EPFO services have significantly improved with increased administration efficiency and digital enablement.