Expecting hike? Do not expect more in hand

Average salary increments are expected to be better for this year. But the in-hand salary of employees may not rise. In view of the new wage’s definition proposed by the government, as per a new annual increase survey.

Companies or organisations are required to contribute more towards EPF under the proposed labour code. So, companies do have plans of increasing the salary by as much as 7.7% on an average in comparison to just 6.1 percent last year. As per latest salary increase survey conducted by AON, which is a global professional services firm, 88% of the companies are willing to increase the pay. In case of e-commerce, it could be as high as 10.1% and the IT sector is the next highest salary hike sector by 9.7%. ITes, FMCG and Life Sciences too are among the sectors to witness the highest salary hike. The adversely affected sectors like retail, hospitality and real estate are projecting a 5-6 percent healthy rise. Again, according to AON, India is going to project the highest salary hike among the BRIC nations.

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But this does not mean that the employees will have more in-hand salary.

As per experts, organisations need to review their compensation budgets in the second half of the year once the exact effects of labour codes are known. Because the proposed definition of wages under the new labour codes means higher provisioning for benefits like PF, leave encashment and gratuity. Keeping in mind the uncertainties and impacts of future changes, we should expect the increment dynamics for the current year to play out over a longer period.

It is believed that the newly laid down wage code will have minimal impact on employee’s pay out as nearly 35-40% of employee’s CTC is paid out as basic pay.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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