There may be a decrease in the HI of the employees in the coming days. Especially those employees who choose to work from home permanently. Because, the Ministry of Labor may soon allow employers to make changes in the salary structure of existing employees. According to the Economic Times news, a top government official told that the Labor Ministry may issue a standing order to redefine the service conditions.
The official said there is a need to redefine service conditions to ensure that employee compensation is structured taking into account the expenses incurred due to work from home. Employees have to bear certain infrastructure costs like electricity and WiFi and these need to be part of the compensation structure. From an employer’s point of view, the lower cost of living for an employee due to relocating to their hometown, in some cases Tier-2 and Tier-3 cities, needs to be reflected in the compensation package. “The government is looking at all options and something concrete is likely to happen soon,” the official said.
BC Prabhakar, president of BCP Associates and advocate and labor law expert, believes that the law should be avoided as work from home is an emerging concept in India. “Let the wage structure be determined on the basis of demand and supply of labor in the Indian market. Management and employee should be allowed to negotiate the service terms, as any interference by the government will cause great damage,” he said.
Prashant Singh, Head and Vice President, TeamLease Compliance & Payroll Outsourcing Business, said that there will be a change in the salary of employees working from home, such as HRA and professional tax.
Impact on HRA
The most significant impact of changes in HRA can be on tax. If an employee moves to his home town under WFH. Under the current rules, there are at least three tax exemptions for HRA
- First: Actual HRA received from the employer
- Second: 50% of Basic Pay + Dearness Allowance for those residing in metro cities and 40% for non-residents
- Third: Actual rent paid minus Basic Pay + 10% of DA.
If HRA is reduced and not replaced by something for which tax exemption is available, the employee’s tax liability may increase. “Any employee moving from a metro city to a non-metro city will have reduced take-home pay if the HRA is low,” said TeamLease’s Singh. Change in HRA will have a direct impact on income tax payment of the employee, while reduction in HRA will lead to increase in additional EPF along with tax outgo.
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
