Govt seeks views of employers on defining wages
The government may consider tweaking the definition of basic pay and allowances in the draft rules for Code on Wages, taking into account the concerns raised by industry and employers that the new definition is likely to result in lower take-home salaries for employees according to a report published in The Indian Express.
The Labour Ministry has asked some companies to formally communicate the issue in response to the draft rules which were put out earlier for public feedback. “Some companies have approached the ministry on this matter. We have asked them to formally respond to the draft rules. So during the rulemaking itself, we’ll take the concerns into consideration because the rules are yet to be finalised,” a senior Labour Ministry official told The Indian Express.
In the Code on Wages, the government has come out with a new definition of wages, putting a cap on allowances at 50 per cent of total compensation, implying basic pay will have to be 50 per cent or more. Usually, companies structure salaries with a higher proportion of allowances than basic pay.
The new definition of wages is expected to result in higher gratuity and provident fund (PF) deductions as they are linked to the level of basic pay, which in turn, is expected to result in lower take-home salaries.
The official said that whatever change happens, will be prospective. “It won’t affect previous salaries. Once we do it for next year, employers will automatically adjust their salary structure accordingly. Then the companies will adjust their compensation structure accordingly taking into account higher gratuity. But, we’ll be taking note of their concerns,” the official added. The government had floated draft rules for Code on Wages in July. The four new labour codes are likely to come into effect from April 1.