One in four organizations plan to make variable a part of the wages

• Around 25% of the organizations are planning to include variable pay in the wage definition.
• One out of three organizations in India are also likely to increase the basic pay, as per WTW report.
• 40% of organizations are expecting to have a significant impact on their profit and loss statement due to gratuity.

Companies in India are still adapting to the new Labour Code, which will be implemented from July 1 this year. However, a majority of organizations are reviewing retirement or long-term benefits and looking for new ways to package them.

In fact, 25% of the organizations are planning to include variable pay in the wage definition. But, a similar percentage of them are also unsure about what to do, reveals a new WTW report on ‘State of Retirement benefits in India’.

Variable pay is also known as performance pay and is given to an employee based on the results of their performance. It is usually offered in addition to the employee's fixed salary on completion of certain targets.

One out of three organizations in India are also likely to increase the basic pay as a part of the new wage code.

The four new labour codes approved by the President of India are — Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.

These four codes will replace the existing 29 labour laws in India.

Code on Wages will ensure timely payment of salaries and wages both in organized and unorganized sectors. Industrial Relations Code expands the definition of worker to be included under — skilled, unskilled, manual, technical, clerical and operational workers.

Code on Social Security is about social security schemes like EPF, EPS, ESI — which are beneficial to the employees and workers.

Gratuity pay would rise

According to the report, 40% of organizations are expecting the code to have a significant impact on their profits; and are considering options to update their gratuity policy to mitigate the impact. While 28% say that they will not change their gratuity policy and are not expecting any change in their P&L.

Gratuity benefits are projected to have the largest impact in the new definition of wages. It is paid to employees who exit their companies after working for over five years.

In the new code, the gratuity is expected to increase significantly, particularly for organizations where the basic pay to gross pay ratio has been quite low previously.

No change in PF contributions

The report further suggests that over 46% of the organizations would continue to contribute 12% of basic salary as per prevailing regulation in the provident fund. However, 8% say that they will restrict the PF upto ₹15,000 per month.

As many as 32% of the organizations are unsure about what to do with the provident funds for its employees, says the report.

During COVID-19 pandemic, a lot of companies had provided extra sick leaves to their employees as the infection required proper isolation and rest. This has led three out 10 organizations to restructure their leave policies, the report says.

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