This is an auto-transcribed version of the interview. You can watch all the protalks series here
Vipin Arora 0:00
Just started, he could be we should have our best of the people in this field who will help the company grow, then comes upon me, if I’m not best of the people, perhaps How do I attract? Or should I do something in terms of maybe paying maybe hired money or maybe giving them the right kind of benefits or something else? So that’s where it comes in the, I would say, in
Shantanu Saha 0:22
choosing where you want to take the company in terms of your media, like, are you in the you know, which area have any sort of benchmark? Where do you want your company to be? What are the philosophies in terms of benefits? Or probably you want to, you know, incorporating in, as you say, gender, probably all these factors together, seniority, merit, incentivize, be aggressive in terms of strategy that, you know, don’t not really bother so much about production, but take care of it, or you can probably bother about and change salaries just to retain someone, because some companies can say, okay, no, I will not increase salary for somebody leaving, because that’s a fair benchmark. So so all those decisions?
Vipin Arora 1:01
Absolutely. And I think, again, while I would, again, try to delink, some kind of actions with the strategy. So I will still try to maybe stay at a very high level at this stage for the strategy. So in that sense, we look at the culture. The second important point for us is actually what do we want to reward in the organization? Say that I’m, I want, let’s say, I want reserves poker to get the results. So I want to reward results. And other organization may say, for me, the team working is extremely important. So what type of behavior do I want to reward? So so so one part is definitely the business strategy. The second part is organization has it has a typical culture or maybe a kind of way the organization wants to operate? So what do I really want to avoid? The third part also, sometimes that that comes in the strategy is, what is actually your landscape of the talent? What kind of people do you have? Now? Because it will also change from the industry type, and maybe their demographics and multiple other things? What kind? What is the tenure? What are the things, so that will also become one of the pillars in deciding the strategy. And then comes another extremely important factor? On top of everything, that there’s a difference between what I wish to do and what I can do? So it’s important, the affordability of a company with all those good things, at the end of it, what is that that I can afford? And then
Shantanu Saha 2:32
retain or attract talent? Yeah. You have to increment budget? I mean, in that sense, so how does you know? How does not manage to do that?
Vipin Arora 2:44
Yeah, no, I think that’s a very, very good question and perhaps flows in the same line, because we are talking about affordability and all. So I would start more with saying that because most of the queries that I get mostly, and many times I have seen informal queries also, that people typically try to ask each other, what is the what is the increment you are giving this year? And also, the second thing they asked a lot, what is the inflation this year? If you really ask me, I always get these two questions, most of informal discussions, typically, people try to look at inflation, and maybe what is other company giving. Now, I’m not saying anything right or wrong, but what I’m trying to say is that there are more factors and that that is important, it’s not something which is cut and paste for my company, just because some other company is doing something. So let’s just take a step again, a little higher. So again, we will try to go every time 36,000 feet and then try to come down so that so that we get the right view. So, first thing is for any person who has worked in multinational company would would see that different countries have different budget projects. So that means same company can have different budget budgets. So there is something definitely which is external, in layman’s language. Second part, which is you may say, in the same country, different companies may have different budgets. So that means there is something internal also. So basically, it’s in a very, very simple thing, there are two big buckets in which the fractals come in for deciding the merit factors. One is external. Now external, while there is a lot of decision always on inflation, but I would typically say there are three big categories that come into picture. One is really the macroeconomic indicators, how is the growth of the country, let’s say India is growing at six 7% 9%. We can expect our industry to grow in the growth economy, I would want to keep a merit budget which is higher because I need to keep on moving fast versus a stagnant economy. So so that becomes a factor. One second is what is the really the market kind of hiring forecasts. See all those reports by many companies that let’s say one It company has decided they will hire 5000 people this year in the next three months in six months, what is going to be the hiring forecast? Because ultimately, that’s the pool I’m trying to attract. If forecast is very down very low, I may be able to afford a little bit lesser, but if firing forecast is very high, then I have to really look at it. The third part is the market data, like you rightly talked about market data, what are the companies doing? Where are the companies looking at their own budgets? Because ultimately, we are competing in the same industry, same sector? So we need this benchmarking is what? Absolutely. Now, so these are the three bigger buckets on the external side. Now, when we look at the internal factors, very important factors are in the affordability, business performance, are we growing year after year? Is this a stagnant business for you. And sometimes you may say we are conglomerates, they may have different budgets for different business units, sometimes they may or may not choose to. But some of you may also say that the second part is also in terms of where do I want to position myself in the market? Like we like we just pointed out before we started that, but that’s the part that comes from the study that do I want to pay myself at the market median? Do I want to put myself in the upper quartile? Do I want to keep a little lower quartile? So that also changes the dimension. And the third important area is also internally, what is the kind of attrition unseen. Let’s say I’m going through a phase of very high attrition, I may want to be more competitive in that particular year, because typically, we go for annual merit years. So I would say it’s a combination of multiple factors. Again, I try to, I hope, I try to simplify it into some points, but maybe two, three broad factors on the macro or external, and to three broad factors on the internal side, based on which you may end up creating some kind of number for your organization.
Gaurav Tripathi 6:58
So here is a very nice question. So I’ve been listening to you. But I sense the same question a lot of people will have, especially in startups. So when you say compensation, yes. You mentioned that, yes. Money is one part. But does that mean? So compensation is not only money, correct?
Vipin Arora 7:21
Yeah. So ideally, if companies have started using the term total rewards, so they have moved away from compensation, because typically people related compensation to salary part, or maximum salary plus bonus, but that’s where they have started moving to the new term, which is total rewards. So total rewards incorporates everything, which is your cash compensations, which is your maybe benefits, the kind of maybe helped you get before retires or wellness, or maybe even the working conditions. So that’s where and typically as an as an employee, and coming back to perhaps your point, as an employee, when I’m evaluating which organization will I join, I try to look at the bucket. I don’t look at only one part. All these things together helped me take a decision and you will see in the market, there are some companies may not be the best thing, but their ability to attract is more because their entire bouquet of rewards is better.
Gaurav Tripathi 8:21
So yeah, again, it’s so the difference between so if we if we take the rewards route, does it still mean that when I say CTC, because it is cost to company, does it include everything as it is equivalent to what when I say rewards, whether it be CTC or there is still a difference? In fact,
Vipin Arora 8:43
this is a very interesting topic. And for me, it’s a favorite topic, because it CTC is one thing that everybody is spot on to and glad you brought it up. I was thinking we were towards the end, there might be sorry, if I jumped in. I’m just saying that because sometimes see, CTC is a very our Indian concept. And CTC is not a statutory concept. So laws don’t define CDC. And there’s no standard definition of CTC. So every company uses CTC the way it wants. So some companies may say CTC includes cash around somebody may put even the bonus monthly amount in that somebody may put a value of insurance premiums or they’re paid also in CTC, so different parts. But the point here, what I’m trying to say is that for a moment, we should actually ideally we should move out of CTC concept, because CTC is only my internal calculation what is the cost I’m paying in terms of our cost I’m incurring for having an employee on board right or or working in the company. However, if you really look at it from the concept of the total rewards, there are certain things you may be doing which you may not include here. For example, you may have a wellness program You may say I have in my organization annual health check up. Now, you may not want to add 200 rupees split our every month in the CTC. So I think somewhere the the typical end is somewhere maybe I’m taking a leap forward slightly, but somewhere I think we should start coming in our excess of compensation, the total rewards kind of maybe presentation to employees, parents, we will be much, much better positioned to attract the employees, rather than putting that Excel sheet with all those components and say, Okay, this is what we are offering.
Gaurav Tripathi 10:36
already. I already love it weapon, because you and I have been thinking is like what matters to team members to employees? why should anybody bother about Really? What is the cost to company? I’m not here to I’m interested in what am I getting, really even the nomenclature with the terminology, I think it makes a lot of sense. And it gives a very, very positive spin. Definitely.
Vipin Arora 11:02
So I think that’s a good point I, I know, because when I get a letter, as an employee, and then once again, maybe we are just talking a little more idealistic or whatever, I don’t want to see it as a cost myself as a cost. Show me what rewards but don’t say, my cost to company, my cost is say, some 1000 rupees, not a very nice term, I would put it that way. Also,
Shantanu Saha 11:31
I think variable pay within if you in fact put it rather than putting a number. Or you can even in illustration saying that if you do achieve this match, and this is the kind of variable pay that you make, and a lot of companies even don’t even have a limit on it. And I remember the company where both of us work together, we had the junior most people earning lakhs in terms of incentives. So that is the kind of thing which we can, you know, showcase in a booklet which can go with the calculator saying these are the benefits, this is the you know, kind of opportunities that you have in organization in terms of compensation, rewards, benefits, plus all the other things which are there in and of course, Barb’s point to the equity also. So you know, as a startup, eco city becomes a major chunk of it. Now, a lot of people don’t value it, probably Junior people don’t even understand it. That’s the mold dimension of it. And what I think when the time when I got equity, I also didn’t do it before shifting companies and I lost money. So that’s something which is very, probably some a elaboration or explanation should also go along with the thing.
Vipin Arora 12:33
Now you’re running very equity also, like you said, See, the point here is, again, that’s where the strategy is important. It may not be one size fits all kind of situation. So if and if what you’re saying is, right, I know, many times I’ve seen that. Again, maybe that discussion, where candidate says, okay, Cody, I understand, forget about it, but tell me cash that’s inherent, I know, I can compare that. Even if I get three times I don’t know whether I will get three times or zero, but this is in hand, I am just comparing that. So is it really adding value, if it is adding value, great, if it’s not adding value, we may need to rethink about the strategy where to offer how to offer.
Shantanu Saha 13:16
So, coming to that the benefit strategy compensation was one part of it and then the rewards function you have benefits and compensation both so what should be the benefit strategy again that draws from the values and you know, if you want to elaborate on that.
Vipin Arora 13:32
So, yeah, I think philosophy really it will be very similar in terms of like, you have to look at what is the organization Coronavirus? What is the HR strategy and everything there are certain things which are slightly different in benefits versus compensation, right. So, one of the key part is benefits typically are more inflexible. Because see, it’s a compensation I can change and I can offer different to the people benefits, I may have to see how much of differentiation I can do maybe person to person. So one definitely the flexibility issue. flexibility to modify or withdraw is also very less because the that pinches so so you may say I am offering medical insurance today and maybe three months down the line medical insurance is withdrawn. It’s not going to be easy at all. Now, you may still be able to play around a little bit with compensation that this year we are we couldn’t afford a lot of stuff. So maybe we are giving 5% increase instead of the 6% that we gave last year people do understand you have reasonably well reasonably good flexibility. The other part of benefits is that you administration administration is not easy, you may not be able to get the right kind of course while current administration may need technology, multiple things so so there are certain differences. I think the biggest challenge for benefits is the sustainance. Now see, and startups, again, maybe go up again, coming back to your area startups, I think one of the big challenges in the initial years, there are many times you because there is a little bit of cash or funding or something, you may introduce something, but as the organization starts going up, the cost of benefits may increase so much and then being inflexible, something which you cannot withdraw easily, that sometimes creates a lot of weight and burden on the company itself. So I think benefits strategy is extremely, extremely important. And, again, I’m not getting repeating how it needs to go maybe again, from the listening, but what I’m trying to
Shantanu Saha 15:43
say yeah, sorry, I couldn’t hear you within larger organization like say a Tata or Mahindra, somebody can you know, have a large benefits and be known as, you know, I mean, as you know, probably could be used as a differentiator, right. So, these organizations are known that okay, probably compensation by then not be the best, but they’re like the benefit strategy is a benchmark in the market, for example, most of the labor laws, precursor to that was one of the policies of benefits was introduced by Tatas. So, you know, in India, that is something what you have to say on that within?
Vipin Arora 16:21
No, absolutely what you’re saying is right, and again, benefits can be differentiators. And not only bigger, smaller companies can also differentiate on benefits. I think the point that I wanted to highlight in the previous part of the discussion was that benefits need to be designed with more care than compensation. And that’s my personal view. Because of the inflexibility because of bigger damage, it can cause by more frequent modifications, right? So so so so that’s where that’s the part that I would say, I think, how can we differentiate, there are two three things where where the companies can play with it, one is not need to look at the what benefits have a high perceived value, because benefits, there’s a difference between actual value and perceived value. See, rupees is in terms of compensation. But but a factor means benefits perceived value is different for different people. So what is what are the benefits without with higher perceived value? Second is the it also is a reflection of company’s philosophy, let’s say some companies talk a lot about the employee care that they do. So So center is also reflection. So it’s not only that particular benefit, but some benefits also reflect that there is a philosophy and if you are a company, which talks a lot about philosophy, but your benefits are not aligned to that somewhere, we will say that it is only a talk, maybe for magazines or show, but it doesn’t reflect. So. So I think those are the things which are important. And I would say maybe one or two more points there one, if possible, see more how much flexibility can be there across the demographic population. Now, that is more possible, obviously, for a bigger group, for a very small company, you may not be able to do it. But for a bigger group, yes. And that’s where some of the differentiators can be done. And again, some companies have started creating flexible benefits also, where you may say there is a bouquet of benefits, you can choose. Three out of five, which are very similar costs are no benefits. But let’s say a person who is not married, just straight out of the college has joined may not need value, same medical insurance for the entire family and everything, but maybe willing to maybe pick up something else in terms of the manifests versus maybe a person who has who is closer to retirement and maybe many other things. But I’m just giving an example. So if we can create some bit of flexibility while maintaining cost and ease of administration, because that’s that’s going to be a key challenge, then I think it can work very well as a differentiator as well.
Shantanu Saha 18:58
In fact, now I’ve started seeing some startups which are in the Benefits Administration in the sense for example, you have crashes, and you have these apps through which you know, people based closest location they decide, okay, attached to this company, kind of the thing and you know, I recently saw one startup doing that. And so we’re going to be seeing the latest trends that are happening in benefits any especially for startup any new ideas, what could be benefits, which may be interested which could be you know, perceived as a higher value benefits, as you mentioned, can you give us some examples of that which are being followed your friends are there in the market?
Vipin Arora 19:32
So, okay, let me try. Let me try to put it this way. Definitely one thing that you mentioned, the automation technology itself in a big way, technology has helped me in a big way and again, you may see, like, crashes you talked about there are other areas also where technology as well. Now, you may see some companies trying to promote health and in that they have tied up with let’s say one of those. Again, I won’t take names for it. But I will say what some of those even I would say health apps like say for step counters and maybe things like that and organize a contest and make it more gamified approach. But also, the fact is there is a technology, then there is a flexibility and ease of administration because now there are a lot of consultants or partners who have come up with those unique methods. And especially, it’s so so the organization is in a way relieved of the administration burden to really handle it, and you can do it easily and people can work on it, I think one of the big big trend, and that that’s where I think things can be good differentiator has been on wellness, if you really see off late and wellness initially started with physical wellness. So if I talk about some time back, it was primarily physical wellness, health. So go a step forward, maybe introduced, let’s say, Pregnancy care programs, maybe certain other programs, but all was related to physical wellness. I think as a next step, some organizations move towards mental that they also started those employee assistance program, maybe counseling, somebody is not feeling well, and they started recognizing it, but if you really look at it, now, the wellness, the new dimensions that are coming in terms of maybe again, some companies again introduced financial wellness, so we will conduct certain kinds of programs, so that people become financially well off also in terms of non spiritual environmental, this is a multiple dimensions are have got added over a period while
Shantanu Saha 21:34
doing the program, so which means they are terminating them for organization and other clients. And so they are going to take over the entire mentor mentee. So every new person who joins would be a mentee, seniors can be part of the mentorship program, it could be cross organizational. That’s so so so
Vipin Arora 21:50
those are, yeah, that those are definitely the good ones. And those are also the trends that we can find. And and I think benefits is one area. Actually, if you ask me, you can be much more creative in benefits area. Personally, I feel that because there’s no end to it. So just our ability to be creative and use now in today’s world, use the new technology new use a new kind of maybe gamification approaches and other stuff, whatever. And try to get into that. And then people Yeah, sure.
Gaurav Tripathi 22:22
Well, so you’re talking about causes the full benefits AI, I want to know, what’s the shift that you have seen? due to COVID? Yeah, the benefits strategy, pre COVID. And now during COVID. That’s, that’s, there are limitations. And, of course, everybody is supposed to be still majority is still working from home, then how do you how do you bring up something where the at least the perception is there that yes, the company is still providing me that benefits,
Vipin Arora 22:55
I think, do three things I would put and because, see, COVID has been a very exceptional kind of scenario. And it has impacted different companies in different ways. So so so what happens, and typically all of us, and I’ve also seen many times in the discussions, we tend to concentrate a lot more on office staff. But that’s a very small fraction. So if you really look at it, the overall workforce, there’s a huge workforce in the field in sales, there is a huge workforce in factories, manufacturing, and maybe many other essential services and areas, plus the office stuff. I think for that matter, I would personally say my view is office staff are the least hit in a way. Because it was too easy. You were working in office, you’re still working at home. And then but but the issues have been more in terms of the areas which have been manufacturing organizations and all. And that’s where I think the first reaction that I saw most of the companies and we’re in HR teams, almost everybody called to relook at the medical insurance, that are there certain things that are covered or not covered. COVID inclusion has been one of the things that almost every company has gone into it. The good part is insurance companies have also been very swift in incorporating that kind of art, and come back to corporate and all. So that’s the real part which was more in terms of just giving assurance, that yes, in case something happens at least there is something to take care of, in case you get impacted. I think the other part which got which started it definitely has helped been much better working conditions and environments in factories. And now I’m talking about small medium enterprises, see bigger companies and multinationals Indian conglomerates, they have always been very, very careful in terms of the sanitation and many other things. So, the working conditions also have improved there as well. So, but the other part where people have better see and these companies are also faced the challenge that they opened the office in 15 days again there is one COVID situation they had to shut down then again bring then again shut down. So so definitely they have done a lot of work in terms of making Ensure that the working conditions improve and people get the right kind of maybe assurance and comfort to do it. Now coming back to the office stuff, I have heard, actually both sides, there are companies which have said that now the staff is working from home, should we give some kind of thing like say reimbursement for internet? Now, you may not you may call it it’s not a core benefit. It’s just a business expense. But let’s just try to broad base the definition a little bit for a moment, because we are talking about how they tackled this, right. So they started giving, let’s say, internet, or maybe some kind of reimbursement at all. I’ve also heard few companies, we said that now that employees at home, there is let’s say, no expense on convenience, should we be giving conveyance allowance, right? So for example, so so I think how companies have reacted, but that may be a small fraction. I have also heard companies which have even sent their furniture to homes. Yes, there are some some companies which did that, that that, that if somebody is sitting at home nine hours, maybe they don’t even have the right kind of furniture at home to be able to do it. So they said they’re whatever, ergonomically designed all chairs that were in office. And I think it was a smart move in a way, because in any case, for six months in offices were locked, they just sent it across and then said, Okay, why did you do it. But again, I would say different companies have approached in different way. But the bare minimum that every company that has at least tried is in, look at the insurance covers immediately, and try to give assurance to people that this new ailment is covered under that, and immediately changes, sanitation related all kinds of those things, which perhaps sometimes were overlooked as well, initially,
Shantanu Saha 26:49
probably, again, in terms of benefits the whole Flexi time. And all that also comes as a part of the benefit structure, right? So if you never defined, in fact, probably how you evaluate performance, that will also change. Because when you work from home post COVID, that whole thing would have also undergone a change, which means how do you evaluate a person when you don’t see them nine hours in your desk, but they are probably doing a certain switch means you have to come completely probably measure outputs, even for staff functions, you have to you know, try and have matrices for everything. Right. So is that something which you see now?
Vipin Arora 27:24
Yeah, in fact, I would say, I don’t think that things have evolved completely. But as we have gone through return, it’s a because nobody was prepared very well. Yeah. And again, not only for the staff function, actually, it was more difficult for functions, which were directly for number oriented, let’s say sales oriented, it was an immediate challenge, how to reward sales incentive for people when they’re suddenly there’s a collapse in the market. Now, what do you do, and sometimes in those areas, the variable component has been a very big chunk of the overall compensation. So so so so those have been actually there have been more trauma at that side initially, when this entire thing started, to some extent functions, like HR, it finance and certain other functions, which were not so number oriented. To that extent, initially, there was not as much of a challenge, but the more they started creating the new way of measuring and it is more in terms of ultimately it has started moving more towards output for the companies where it was not so much output. However, I would say that it has really reset, because I am heard informally, most of the times that people are saying they’re actually working more number of hours, rather than earlier, because now, everybody assumes that if you are at home, you are available every time. So whether it has really helped in that part of work life balance, which if I put it at the total rewards, or not has come to a separate is a completely separate discussion,
Shantanu Saha 28:54
that you’re saving time on transportation. So you know, that time pretty often belongs to the organization now. Same way apart from this within this whole recognition thing. So you know, you can also have stuff which is not monetary, and which could be part of this whole to reward structure. So you have an awesome thing called r&r, which is rewards recognition. And that as a strategy could also be a big thing, because it will save an organization money, but it will also keep employees motivated.
Vipin Arora 29:23
Yeah, I think what you’re saying is absolutely right. I think the challenge with recognition is it’s a software apart also. And when I say software apart, yes, there is a money attached to it, but still it is it is also a presentation part in a way, right. So non monetary completely. It could be non monetary completely. And so so that’s a little bit of challenge because it is, it’s a lot about how do you do it, versus what you have given so it’s not about 100 is given it’s about how that 100 rupees is given right So that recognition is a slightly more softer part. And that’s where I think, when we were talking about the constant recognition also has to form part of that kind of thing that how do we want to recognize? And what do we want to recognize? Now, do we want to recognize the same thing that is in the performance appraisal, like you ever achieved a particular target? Or do we want to recognize, let’s say, values that you have displayed in your organization, or behaviors or something else, or have gone an extra mile or something. So I think that’s the part because recognition, it starts showing the culture to new employees, because they start seeing what is getting rewarded. And recognition plays that by now what you talked about in terms of non monetary Yes, that’s very important. And that’s but again, the same thing is that whether it is monetary, which is maybe low value, or high value, or non monetary, the presentation is important. And, and and I would not only say presentation, there are other things which are important, which is the timeliness. So if you really look at our own old days movie, there used to be quarterly Town Hall and people will come there will be a big renovation, gala, kind of maybe event, and then maybe annual event and all I’m not saying that doesn’t happen even today, that happens. But a lot more has started with a lesser
Shantanu Saha 31:20
kind of, we all used to have those, you know, all star kind of a thing where somebody would write something and give it to that person or somebody every person could give that. But is there any change in new trends which are coming nowadays in that condition?
Vipin Arora 31:33
Now, I would put it that way. Okay. Let me just talk about that part. More than even today, if you really look at those annual and quarterly events are there but still, I think, lesser frequency kind of thing, which is a faster kind of thing is more important. And what you talked about, let’s say when we used to give that, let’s say different kinds of maybe peer to peer modified to, I think that has gained more prominence. And it’s also more important,
Shantanu Saha 32:02
because they get on the remote stations and you know, show that okay, how popular like we had one guy in our team who was so popular, it was full, I mean, his desk was full, so everybody would already feed Oh my God, he’s getting so many.
Vipin Arora 32:14
The other thing is a sport about can we try to have some kind of sport awards. Now sport awards won’t be very expensive. But But the good part is see the person you catch a person when the person is doing something bold and give us because it’s easy to catch a person when making mistake. But But catch a person when somebody is doing something good. And sport awards also work very well. The new thing that has got added over the years, one of the key thing is again, the technology technology is really yeah, so so epilate. And you see these days, you go to the LinkedIn and all these areas, companies are advertising their award winners on LinkedIn. Yeah, social group. So it’s not only say for example, if I get recognized in my company, maybe 50 people know about it, let’s say it’s a small company. But the moment I get recognized outside my company, maybe with the people with whom I did the college and the people who know me otherwise in various forums, maybe my partners, maybe maybe even my vendors, suppliers, but so that people know. So it adds a lot more beyond what is the social show social media is a big thing. And for companies which are into multinational scenario, where there is a kind of matrix structure, vertical or horizontal, and all this kind of thing helps a lot. The second thing, it helps us, it also brings somewhere that people together related, and I will share a very basic thing, let’s say that a company is a multinational company, multiple locations, but there are teams which are working even across locations, and somebody gets rewarded. It is posted on some kind of social media within the company, let’s say intranet, there might be times when some people with whom you have been working earlier or maybe not working these days, they may again congratulate you. So you revive the ties and networking, working also. It has a lot more effectiveness. And this is one of the key things that is there. The other point is adding more of the exponential part in the report. So it’s not so exponential part when I say is some companies has tried it, let’s say can I give you something which is aspirational, but we wouldn’t have spent money on it. So for somebody who’s very junior level very just salary, maybe I give you a dinner voucher for five star because you yourself would not have spent it now it is a reward and mandatory because you have to spend it perhaps you experienced something Yeah. A good part of that experiences the whole family will keep on talking about for years. Our company had sent us there. This was a spiritual for me. So I think those are the things that are that can be utilized more.
Shantanu Saha 34:56
So, weapon now another thing which is very interesting. Right now, and which probably is the statutory changes that are happening in this area? So the code of wages, which is, I think, still to be notified, I know you will be able to tell the exact status narratives. What is this code of wages? What are the implications for an organization? How will it impact salary structures of people? If you could, you know, in brief talk about that?
Vipin Arora 35:22
No, it’s actually a very big topic. And we could go for hours and hours, but I will try to concise in few minutes, because I don’t want to get too technical, I think not. So, what what government has done is basically, it is introduced for an idea of bringing these four labor courses basically, to simplify. So, there are two things, if you look at, we always talk about the complexity of business in India, there is no ease of doing business. And again, we keep on talking about that. So, government has tried to bring in simplicity, simplified structure, it has tried to create a structure where technology can be used, it has tried to bring in where compliance is easy, monitoring is easy. And there is more equity among the various kinds of things because the fact remains that there are some companies which have also tried to play within those legalities and try to cut corners a little. So, so these are the four codes, one code is called on wages, and which has four acts under it. So, basically, it was notified in 2019 as an act, so it’s already there. It’s just set the second part of it, when we make it operational, there is a set of rules that come in. So those rules are awaited, but it should be there any time now. So my guesses, or maybe my guesses what everyone’s guesses, perhaps first of April is the date when it should be effective. Now, the code on wages has four area for 4x. into it Equal Remuneration at minimum wages, that payment of wages, and payment of bonuses. So these are the four apps that have got into it, I think I will just highlight one or two key bit things, because based upon construct and all, one big area is not in the codes, the definition of employees mean. So some people who were not perhaps covered under the definition of employee, now they get covered under that, that means certain provisions will get applicable to them. So that’s a big change, because see, the biggest change comes with applicability, the company. The second big change is the definition of wages. Now, what happens is, they would multiple acts, and they have different definition of wages. So gradually define the wages in a different way, we get fact defined in a different way, minimum wages are defined in a different way. And it was too complex. Now, what government has done done away with all these definitions, there is only one definition of phase. Now, obviously, when there is one versus maybe five, or five, or six, whatever, there is going to be a slight difference, which means one, if we, if we perhaps just continue the way we are, again, there’s no harm, because the definition of wages define whatever salary structures are there, there may be certain implications based on that there may be some financial part, some kind of other things. The second part is, if we think that there is a little bit of way to really start aligning more towards it, then that it will be better in terms of compliance. And maybe sometimes the financial implications may be a little lesser. So it may actually we start moving to a more easy structure which government is proposing.
Shantanu Saha 38:26
So we call basic, I mean, that kind of thing where your number of allowances reduced to less than 50%. I mean, that’s one major implication that pays right, because what happens?
Vipin Arora 38:36
Yeah, actually, the definition of wages is slightly tricky this time, because there are three parts to the definition. One is the sort of overall inclusion, then second is exclusion. And third is a rider to exclusion. So it plays with that. So so that’s why it needs to be understood more in detail. But what it means is that it brings one parity. So all across all the acts of Indian Government, again, I’m talking about the labor acts, there is only one definition. So your bonus eligibility is also on that your eligibility is also on the record is also on that. However, now let me add another caution. While we might try to be tempted to do something here and there in terms of the allowances and all and some companies may be tempted to that’s not right. The second part is Income Tax Act is different. So if you put too many things here and there, the implication on the taxes for an employee may change. So if you try to do too much of stuffing in there, and I suppose it increases the tax a lot for the employee, and when I say increase the tax more in terms of the ability to plan the tax. Again, nobody talks about evasion of the tax that’s not any corporate would want to do, but actually have an employee to plan the tax given the kind of things available in the ITF. So I think in terms of the salary structure, it is going to be a little complicated in the transition time. And that’s where every time there is a transition, there is a little bit of change that is required. But these are teething troubles. And then thereafter actually is good for everyone. And
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