[srini1785]

I frankly don't know what to make of it.

New labour codes have come into effect. Although effective from July 1 2022, states will have to notify the changes. The key points being:

1. Lower Take home salary but increased PF contribution. Basic to be at least 50% of gross.

2. 4 days a week if you work for 12 hours a day. Work hours limited to 48 hours per week.

3. Full and final settlement to be provided within 2 days of resignation/ termination.

4. No change in paid holidays. EL applicable from 180 days of service instead of 240 days. I.e 8 months into the new job.

Read it here :

https://www.indiatoday.in/informatio...072-2022-07-01

Request Mods to move this post to proper threads if already existing.

[KL01toKA03]

Originally Posted by srini1785

I frankly don't know what to make of it.

New labour codes have come into effect.

1. Lower Take home salary but increased PF contribution. Basic to be at least 50% of gross.

The increase in PF/basic pay is where I disagree with this. Frankly, the government should not force salaried people to save for retirement. Leaving that aside, less spending by the salaried class will definitely have an impact on the economy. I'm hoping that we do not enter another phase of recession.

[antz.bin]

Originally Posted by KL01toKA03

The increase in PF/basic pay is where I disagree with this. Frankly, the government should not force salaried people to save for retirement.

Govt is not forcing the salaried class to save for retirement. They need the money and they will forcibly make EPFO invest in govt. bonds to get that money.

As usual, the mute salaried class is left holding the short straw.

Any way to protest this change and get it taken back? Like they did with restaurant service charges (which was also in the govt.'s own interest since the service charge part was not included for GST calculation leading to reduction in collections)?

[Dieseltuned]

Any idea what is the new timeline for this implementation ? Till date i have read that only 23 states have created a draft for these new changes.

I do agree that reducing the "take home" component of the salaried class will definetly have cascading effect on other sectors and overall on the economy as well. Less money in the pocket will directly result in less spendings and overall the whole economy will be impacted.

Regards
Diesel

[KL01toKA03]

Originally Posted by antz.bin

Govt is not forcing the salaried class to save for retirement. They need the money and they will forcibly make EPFO invest in govt. bonds to get that money.

Would you be happy if they invested in shares of private companies instead? My concern is not what they do with the money. Instead, I question the need for EPF.

[bhppower]

Originally Posted by srini1785

I frankly don't know what to make of it.

New labour codes have come into effect. Although effective from July 1 2022, states will have to notify the changes. The key points being:

Is this really effective from 1st of July? Looks like many states are not ready and central government has not notified it yet. Just like other cases there is confusion.

[antz.bin]

Originally Posted by KL01toKA03

Would you be happy if they invested in shares of private companies instead?

Maybe? I would have done that since the investment horizon is so long. Wouldn't that give a better ROI?

Or maybe I will use it to fund a small business in my neighborhood to hedge my salary income and start a new income stream.

Or maybe I want to use it to spend on my international holiday.

Its my money, and I would like to use it whatever way I want. I have already paid my taxes, what gives the government the right to withhold my wages without my explicit consent?

Originally Posted by KL01toKA03

My concern is not what they do with the money. Instead, I question the need for EPF.

Totally agree with your concern. I share the same.

[thanixravindran]

Originally Posted by KL01toKA03

Would you be happy if they invested in shares of private companies instead? My concern is not what they do with the money. Instead, I question the need for EPF.

I was once told that EPF itself is optional for employees who have Rs.15000 or more as basic salary but majority of employees have to agree in a company for it.

Most large IT companies don't offer that even though their majority workforce is above the threshold because even if few people opt for it, they have to mandatorily set up EPF registration and pay the establishment and maintanence fee each year. With more employees, I guess this expense spreads out.

Also, I was told there is unofficial diktat to bring in PF money to keep the cash flow and scheme running. Not sure how much of this is true.

[Turbanator]

PF is not mandatory if salary is higher over 15,000 per month. But Gratuity calculations are done on Basic pay and usually in most private companies package is decided as CTC.

Due to the higher basic, the gratuity amount will increase. Will be interesting to see how companies change the take home portion. But existing employees will be beneficial as on gratuity calculations, last basic pay is considered. This is per my understanding. So most of employees should be happy.

[deehunk]

The unofficial still did not become official, it is minimum 60 working hours in any kind of company. There will be resistance to 4 working days option, it can also be withdrawn. The government should have rather reduced the reitrement age to 52 or 55 years, 60 years is too high for a country with the highest youth population.

[Bhargav7]

Some of my views here -

1. Basic salary to be 50% of Gross is a good decision. There was an earlier Supreme court judgment that says that PF has to be deducted on the entire salary and not just basic. With this guideline, Organisations do not have the risk and uncertainty on the quantum of PF deduction. Today, most organizations are sitting with a serious risk if the PF department asks to pay the historical dues based on the supreme court judgment.

2. While I appreciate that the contribution to PF should be made optional, I prefer the present way. Most of the employees are not financially literate and are not capable of planning a good corpus for retirement. In many cases, PF balance can be the only difference between a retired employee being homeless or being able to pay rent. In the interest of the employees, PF/NPS contribution should always be mandatory - just my view and it need not be right

3. For the folks who do not want a fixed return, or who want the money to be invested in public companies - they can opt for NPS instead and choose the aggressive investment option.

4. Exclusion from PF for employees with a salary above 15k - This is applicable even today and no one can force an employee to opt-in for PF when they have an option. Yes, they need to really push it with their HR teams to make it happen. Also, a point to be noted is that once you are registered in PF, you cannot opt-out even when the salary crosses 15k.

5. The 12-hour workday should not become a practice, hopefully. There is no way someone can consistently work 12 hours a day without being stressed out, even with 3 day weekend. Now, a counter-argument may be made that most of the corporate employees are already working 12-hour days - ask them, they are already stressed out. The solution here is to reduce the daily working hours; not making the increased work hours a norm.

[.sushilkumar]

Originally Posted by antz.bin

Govt is not forcing the salaried class to save for retirement. They need the money and they will forcibly make EPFO invest in govt. bonds to get that money.

This is the crux of this decision. Govt wants more taxes and Salaried class is only one which pays it before getting their own earnings in hand, so chances of slippage are NIL.

If one sees this decision in context of recent 2.5 Lakh limit on PF Contributions, It becomes clear that govt wants more taxes. With Basic capped at min 50%, majority in private sector will easily cross this 2.5 Lakh limit. In the end, It means more easy money for govt.

Another aspect tied to Basic salary is HRA. Govt knows that it is hard to find actual paid rent vs claimed HRA as per basic salary. IT Dep't have already started crediting claimed HRA to actual PAN numbers. It basically means govt gets more money via landlords as taxes or if employee claims less than actual HRA than remaining income gets added to Salaried person's taxable income. There is no more hiding on HRA too.

On a lighter note, It becomes clear that in a democracy only Herds are heard. Time to make "Tax Payers Association" and start projecting ourselves as a "Vote bank"

[Bhargav7]

Originally Posted by .sushilkumar

This is the crux of this decision. Govt wants more taxes and Salaried class is only one which pays it before getting their own earnings in hand, so chances of slippage are NIL.

If one sees this decision in context of recent 2.5 Lakh limit on PF Contributions, It becomes clear that govt wants more taxes. With Basic capped at min 50%, majority in private sector will easily cross this 2.5 Lakh limit. In the end, It means more easy money for govt.

Wouldn't impact the tax revenue much. In fact, for quite a lot of employees, the Government will lose tax revenue because of higher PF contributions. Relating to the 2.5 Lakh limit on PF, this impacts only those employees whose salaries are well in excess of 40 Lakhs per year. We have a total of around 3 Lakh people whose income is in excess of 50 Lakhs (including business people, professionals etc). Compare that with the 25 crore odd PF accounts we presently have in India. We are for a very minute percentage.

Originally Posted by .sushilkumar

Another aspect tied to Basic salary is HRA. Govt knows that it is hard to find actual paid rent vs claimed HRA as per basic salary. IT Dep't have already started crediting claimed HRA to actual PAN numbers. It basically means govt gets more money via landlords as taxes or if employee claims less than actual HRA than remaining income gets added to Salaried person's taxable income. There is no more hiding on HRA too.

Don't you think this is a good decision? All those landlords who were evading tax so far will come into the tax bracket - this will reduce the government's dependence on salaried class taxes to some extent. Why should the salaried class always be the scape goat?

Originally Posted by .sushilkumar

On a lighter note, It becomes clear that in a democracy only Herds are heard. Time to make "Tax Payers Association" and start projecting ourselves as a "Vote bank"

I can assure you that the "taxpayers" are such a minority in India, pretty much whoever depends on them for votes, will end up losing deposits in any elections they contest.

[Fx14]

Originally Posted by Bhargav7

Also, a point to be noted is that once you are registered in PF, you cannot opt-out even when the salary crosses 15k.

When an employee resigns and does not take up a new job within 2 months, there is an option to withdraw the EPF amount in total.

However, the EPS accumulation is not available for withdrawal but is retained and is eligible for pension only after the person attains the age of 58.

If this person then takes up a job after receiving the EPF amount, does he have to again join the EPF scheme since the EPS is still pending?

[thanixravindran]

I can understand we will look at this labor code from IT/ITeS industry perspective as we are majorly from the industry and are knowledge workers. However the organized labor market is quite large and comprises of all types of employees from unionized factory floor worker to garment worker or tea estate worker or shop floor employees and even services sector workers. There is a huge variation in the 'salary' definition and only because of tight labor regulation, it has a semblance of smooth running in this country. The regulation includes even when the wages have to be credited to the employee, else it is very common to defer the wages by 7 days to 15 days in several sectors. For us in IT sector, it is a given and we may laugh at these regulations.

Turbanator has hit the nail on the gratuity payment. In addition, the Basic + DA is mostly kept low in Indian companies to reduce the Gratuity, PF, Leave encashment outgo as many sectors don't have CTC concept. As an example, in the garment workers category in textile industry, it was very common to get the employee out of payroll just before the gratuity period (56 months) eligibility to avoid payment and will be reinstated after few months if needed or accommodated in other companies. This was the dark underbelly of a non unionized predominantly female industry whose employment levels are already low in the formal sector. I hope many remember the flash protests in Bangalore Bommanahalli by garment workers during the PF withdrawal rule change (employers contribution locked till retirement) that shook the city and nation and forced to cancel the rule that came from the powers in Delhi.

I strongly believe the productivity or output of knowledge workers cannot be measured simply only by time compared to production workers who are measured for the output in the strict timing. So any Over Time wages given to them will correspond to a direct measurable increase in productivity whereas that concept does not have any meaning in IT. Given the large IT/ITes industry that now exists in India, I guess it is time to enact a 'Knowledge worksman' act to deal with the different set of challenges like layoffs, forced resignations as well give reasonable safeguards for smooth operation of both industry and labor force.