Companies in wait-and-see mode on the salary structure of the hybrid work model

With the looming formalization of labor codes and a verdict pending on the suitability of the hybrid working model post-pandemic, companies are in no rush to change employee pay structures to reflect remote working arrangements.

Companies had initiated discussions about the need to change pay structures as many people had moved to smaller towns and hometowns away from headquarters as remote work was expected to continue in one form or another in the hybrid working model. However, HR services firm Aon and prominent recruiter Randstad India said hybrid working has not triggered any real review of pay structures by companies.

Leading companies like Kotak Mahindra Bank, Axis Bank and Tata Consumer Products have also confirmed that they are not changing their compensation structure due to hybrid working. Even though hybrid and remote working were touted as the future of work at the height of the pandemic, employers shifted their focus more to calling employees back to the office once the health crisis began to abate.

“We’ll have to see by March 2022 how well the hybrid model takes off. Maybe WFH (work from home) is still an option, but most people are coming back to the office. If the hybrid format stays in some companies, it’s unclear if they’ll really put in the effort to create separate cost structures for hybrid work employees,” said Aon’s partner for human capital activities, Roopank Chaudhary.

Additionally, the long-delayed labor codes are also expected to be implemented in the coming year.

“Companies are thinking about the implementation of labor code and waiting for it to be formalized. It will prescribe how companies will calculate base salary and PF contribution for employees,” said Randstad India MD and CEO PS Viswanath.

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Against this backdrop, companies are unlikely to further complicate their pay structures, Chaudhary added.

The government has proposed four labor bills — Wages Code, Occupational Safety and Welfare, Social Security and Labor Relations — to streamline 44 central labor laws.

Some of its provisions include the legal minimum wage and the granting of a bonus based on the new definition of wages, which caps allowances at 50% of wages. The rules are expected to increase the cost burden for businesses, which are emerging from a financially taxing year and a half of pandemic.

The Department of Labor has finalized the rules under the four codes. However, the Center and the states must notify the rules under these codes to convert them into law because labor is a concurrent subject. The states are in various stages of progress on the codes.

Experts added, however, that the pandemic has certainly led to more companies including health and wellness insurance as part of employee benefits. There is also more emphasis on variable pay, they said.

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William M. Mayer