Budget Blog

Budget 2024: New Employment-linked Incentives for Employees and Employers in new Budget

In the Union Budget presented on July 23, 2024 Ms. Nirmala Sitharaman stated, “As part of the Prime Minister’s package, our government will implement the following three schemes for employment-linked incentive: enrollment in the EPF, focus on recognition of first-time employees, and support to employees and employers’ scheme.”

First-time employees who enroll in the EPFO are expected to profit from these three employee-linked incentive schemes:

  • Scheme A (one month’s salary for freshers)
  • Scheme B (job creation in manufacturing)
  • Scheme C (assistance to employers)

Bird’s Eye View:

Scheme A: one month’s salary for freshers

Those who are First-time Employment will receive a subsidy of up to ₹15,000, or one month’s salaries, under this policy. It pertains to all industries and individuals who are just starting their career with organization registered under EPFO and make less than ₹1 lakh a month. Hon’ble FM Ms.Nirmala Sitharaman declared that the employee will receive the subsidy in three installments (Direct Benefit Transfer).

Before collecting the second installment, the employee must complete a required online course in financial literacy in order to be eligible for this. Employer reimbursement of the subsidy is required if the first-time employee’s job ends within a year of hiring. The duration of this program is two years.

Here is a detailed analysis of each scheme, including its main features and advantages.

Phenomenal Advantages:

Financial Assistance: New hires will be given a subsidy equal to one month’s salary, up to ₹15,000, which will be paid out in three installments as Direct Benefit Transfer.

Inclusivity: Relevant to new workers entering the workforce with organization registered under EPFO who make less than ₹1 lakh per month, across all industries.

Financial Literacy: To encourage financial understanding, employees must successfully finish a required online course in financial literacy before becoming eligible for the second installment.

Employment Retention Incentive: To encourage longer-term employment, employers are required to return the subsidy if the employment job ends within a year.

Breakthrough: Meant to make it easier for new hires to adjust to the workplace during their first few months.

Scheme B: Manufacturing Sector Job Creation

Employers-both corporate and non-corporate that have made EPFO contributions for the past three years are eligible. It can be used in the manufacturing industry for significant first-time employee hiring. The employer is required to hire a minimum of 50 or 25% of the baseline in prior non-EPFO enrolled workers.

Employer Incentive: Designed to encourage long-term EPFO membership, this incentive is applicable to companies that have contributed to the organization for three years.

Targeting significant recruiting in the manufacturing industry, the law requires firms to add at least fifty new employees, or 25% of their current workforce, whichever is higher.

Economic Growth: The program seeks to promote industrial growth and economic development by concentrating on the manufacturing sector.

Insight: Manufacturing employers who have contributed to the EPFO for at least three years will be qualified. Nonetheless, if the number of EPFO employees from the prior year is less than 50, the company must hire at least 25% of the baseline.

Employees having a monthly salary of up to Rs. 1 lakh who are EPFO-registered direct payroll (in-sourced) would be eligible.

The four-year subsidy will be split evenly between the company and the employee. It will be computed as follows: 24% of the wage or salary for the first and second years, 16% for the third, and 4% for the Fourth.

In addition to the subsidy specified under Scheme A, the employer will receive this one as well. However, should the employee’s employment end within a year, the company will be required to reimburse the subsidy amount.

Breakthrough: Scheme B is a focused strategy to support the manufacturing industry by providing incentives for large-scale labor growth.

Scheme C: Assistance to Employers in Boosting Employment

This program is applicable to employers who sustain the higher level of employment and add at least two employees (for companies with fewer than fifty employees) or five employees (for companies with fifty or more employees) above the baseline (the number of EPFO employees from the prior year). It also applies to employees whose monthly salary does not exceed ₹1,00,000.

New hires under this section do not necessarily have to be members of EPFO. Under this, the government would pay the company back for the additional employees hired the year before, up to ₹3,000 per month, for the EPFO employer contribution. This will last for two years. It does not apply to employees who are covered by Scheme B.

Baseline Increase: Encourages employers to hire more people than the baseline from the prior year.

Financial Compensation: The government would pay back the EPFO employer contribution for a maximum of ₹3,000 per month for two years for each new employee hired.

Wide Applicability: This program is available to a greater variety of workers because it does not require new employees to be EPFO members.

Suitable for Varying Business Sizes: Customized cutoff points for both big and small employers guarantee that companies of all sizes can profit.

Emphasis on High-Salary Jobs: Applied to workers earning up to ₹1 lakh per month, this initiative aims to improve workforce quality by focusing on higher-paying positions.

Insight:

Scheme C- will be eligible if they add at least two employees (for those with less than fifty employees) or five employees (for those with fifty or more employees) above the baseline.

The government will repay employer contributions to EPFO up to Rs. 3,000 per month for a period of two years. On the other hand, payment for the prior quarter will be made on a quarterly basis if a company creates more than 1000 jobs.

Employees who make less than Rs. 1 lakh per month, regardless of whether they are new to EPFO, will be eligible under this scheme.

Enhancement: The goal of Scheme C is to promote long-term job growth by giving financial assistance to companies that hire more people.

Conclusion:

Union Budget 2024 is known to be brimming with Employment-Linked Incentive Schemes altogether. If you are in need of any clarification in this regard, GetifyHR, the paramount Compliance and Payroll Service Provider will lend the needed assistance. Our services preserve compliance, improve employee happiness, and guarantee flawless payroll management.

HR Role

The Role of Human Resources in Corporate Structure in India

The process of improving the effectiveness and efficiency of an organization by synchronizing the people, processes, and culture with the goals and strategies is known as Organizational Development. The role of Human Resources in Organizational Development is focused on the people in the organization. This would include chalking out the policies and procedures for selecting, supporting, and developing manpower within the organization.

The key elements to achieve this task include needs assessment, recruitment and retaining talent, training and development, employee engagement, compensation and benefits, performance management, risk management, and compliance. The points shared in this article are HR policies in India that every organization has to follow.

1.  Needs assessment

Assessing the manpower needs of the organization is a vital task entrusted to the Human Resources team. This involves identifying the skills, knowledge, and capabilities required by employees to meet the activities of the organization. The HR is entrusted with the job of identifying gaps in the performance of the employees based on the analysis of the current state of the organization.

2.  Talent Acquisition

Talent acquisition is the prime function of any HR department. Identifying the workforce capabilities and analyzing whether the performance matches the goals of the organization is vital for the growth of the company. HR managers have to ensure that the employee levels match the demand and create strategies for employee retention.

The HR department has to perform the entire task of recruiting the right candidate for the job needs. Right from screening the applications and resumes to interviewing, and shortlisting the candidates, the HR team has to be on its toes to acquire the right talent. Performing background checks, onboarding the new employees, and explaining the compensation, and company policy is an important aspect of this task.

Importantly, HR is responsible for retaining talent which can happen only when there is mutual trust, respectful treatment, satisfactory compensation, job security and opportunities for growth. The HR is responsible for giving this assurance.

3.  Employee Engagement

In their eagerness to achieve growth, the management may fail to engage properly with the employees. The onus is on the HR team to set up two-way communication and engagement between employees and senior management. This is the only way to build trust and maintain a vibrant company culture that unites everyone around shared goals and values. The HR has to create a positive work environment, and for this, they have to encourage open communication, listen to employee concerns, and foster harmonious relationships between employees and the management.

The HR can build better rapport with the employees and create trust between the top management and the employees by engaging in the following activities:

  • Getting regular feedback and listening to the concerns of employees.
  • Recognizing individual or group achievements.
  • Sharing successes and failures.
  • Communicating new company policies, decisions, and strategic goals.
  • Mediating conflict and reducing tensions between employees.
  • Organizing company-wide get-togethers.
4.  Training and Development

Training and Development is a vital aspect to maintain healthy relationships between the management and employees. It is the process that helps in enhancing and enabling the capabilities of employees to build on their strengths and confidence for them to deliver more effectively. Training and Development offer ample opportunities for employees to learn new skills and further improve existing relent. This can have a positive effect on employee morale and enhance productivity, increase growth opportunities, and reduce turnover rates. When the employees feel that their organization is investing in their growth they are more likely to enhance their performance and adhere closely to the company culture.

5.  Compensation and Benefits

Designing, implementing and administering the organization’s Compensation and Benefits to the employees based on the nature of work is an important aspect that is handled by HR. The process includes determining the appropriate salary levels, calculating bonuses, designing incentive plans, and selecting and managing health insurance plans and other benefits for employees.

6.  Compliance Issues

Statutory Compliance is a vital aspect of any business, and being compliant with all these rules and regulations is a must if the organization has to grow. It is, therefore, important that these rules and regulations formulated by the government are strictly complied with by the company. The development and implementation of policies and procedures will depend on these rules and regulations, especially those related to labour and employment.

7.  Performance Management

Performance Management is a process undertaken by the HR to help employees grow and advance within the organization. They achieve this task through the use of assessment tools, coaching, and counseling, and by providing regular feedback on performance. The employees are set performance goals and their progress is tracked and evaluated. Performance management programs help to ensure that the employees are meeting the performance standards expected of them.

8.  Policy Development

Every organization should have a set of policies and procedures that govern employee behaviour and align it with the company culture. Policy development is the process through which such policies and procedures are planned and implemented. These could include policies related to areas such as human resources, workplace safety, data security, ethics, and compliance with applicable rules and regulations.

9.  Creating a Safe and Inclusive Work Environment.

Providing a safe and inclusive work environment to the employees is the responsibility of the HR. They have to plan and implement policies that promote diversity and inclusion and ensure that there is no discrimination on any grounds in the organization. They should also ensure full compliance with the health and safety regulations. The main purpose here is to foster a culture of respect and equality, where every employee feels valued and included. The onus is on the HR to improve workplace ethics.

10.  Succession Planning

As the name implies, this process involves identifying and developing the leaders of the future within the organization. Succession Planning involves implementing programs to groom employees with high potential for leadership roles to ensure that capable and qualified persons are posted to key positions. This process involves analyzing the current and future requirements of the organization and developing strategies to attract fresh talent and retain & develop existing talent.

11.  Strategic Planning

Achieving the goals and objectives of an organization depends on the strategic planning undertaken by the management. Strategic planning involves creating and implementing HR strategies that are in tune with the organization’s broader objectives. In the context of HR, activities such as recruitment, compensation and benefits, employee engagement and development, etc., are some of the areas included in the process.

12. Risk Management

HR’s role in Risk Management is limited to identifying and mitigating potential risks arising through a wide range of issues related to the workforce, namely employee turnover, performance, and compliance. The HR department has to be on its toes to identify higher employee turnover, slack in performance, and legal issues arising out of non-compliance. These potential risks could negatively impact the growth of the organization and, therefore, the role of the HR in identifying and taking corrective measures is high.

Conclusion

The Corporate structure in India provides opportunities for people to make their choice by the number of people involved in the business, the funds to be infused, the size of the business, plans for expansion, and whether they are looking for borrowings from financial institutions and the general public. Individuals or groups of people can opt for any of the structures to start their business. However, due to the complexity involved in starting and administering a business, it is advisable to consult a lawyer, an auditor, or a professional before making the choice. GetifyHR, one of the premier Payroll and HR Management Outsourcing companies in India is well qualified to assist people in making the right choice.

The Human Resources department has a huge role to play in the growth of an organization that has a large workforce. Companies with a very small number of employees normally make use of their managers to handle the employees as there is no need for a separate HR department. In companies that have a large workforce, HR’s role and importance cannot be gauged by just the points that we have raised in the earlier paragraphs. The HR’s role is invaluable and any attempt to downplay this importance may have a negative impact.

GetifyHR, an expert in the field of HR Management issues especially in handling Statutory Compliance requirements has been at the forefront in guiding clients to be fully compliant with all rules and regulations. Our expertise has been widely appreciated by our clients across India. We are fully equipped with a professional team of experts to guide prospective clients to make the right choice of corporate structure and to support their HR teams in handling the employees.

Corporate Structure in India

Corporate Structure in India

India today is the fifth largest economy and is poised to be the third largest economy in the next few years. This economic growth provides huge opportunities for entrepreneurs and businesses. This is a land that has a large number of highly skilled workforce with abundant resources and boasts of having the largest youth workforce in the world.

This is the best impetus to start a business, however, starting a business in India is a daunting ask, especially if you are unfamiliar with the various corporate structures available. Whatever the Corporate Structure one chooses, a well-defined code of conduct has to be chalked out if one desires to achieve success in this competitive business world. In this article, we will discuss the various corporate structures available in India and delve into the role of HR in this fast-paced growth phase where proper planning and execution is the key to success.

Corporate Structure in India

1.  Sole Proprietorship
  • The Sole Proprietorship is the simplest and most common business structure in India. This is a corporate structure where one single individual owns, manages and controls the organization.
  • In a Sole Proprietorship firm the single owner enjoys the entire profit and on the other hand, has to bear the risks or losses of the firm.
  • The sole proprietor invests the entire capital of the business and may raise additional funds through borrowings.
  • From the legal angle, the sole proprietor and the business are the same.
  • Sole proprietorship firms have fewer legal formalities.
  • This business structure is suitable for businesses that are involved in the manufacturing of goods that require manual skills like tailoring, jewellery making, etc.

This business structure is suitable for small businesses and localized in markets that are limited and where the customer gives importance to personal attention. The liability of the firm is borne entirely by the sole proprietor.

2.  Partnership Firm

A Partnership Firm is a business entered into by two or more individuals who are governed by a ‘Partnership Deed’ that outlines the rights and obligations of each partner. The Partnership is registered under the Partnership Act, of 1932.

  • To start a Partnership Firm, a minimum of 2 individuals are required.
  • The Partners share the profits in the ratio as agreed to in the Partnership Deed.
  • The Partners have unlimited liability.
  • The law considers the partners and the Firm as a single entity.
  • Raising funds for the firm is easier wxhen compared with sole proprietorship.

This type of corporate structure is suitable for businesses like retail and wholesale trade, manufacturing units, professional services, etc.

3.  Limited Liability Partnership (LLP)

Limited Liability Partnership (LLP) is a firm incorporated under the Limited Liability Partnership Act, of 2008. Unlike as in a Partnership firm, partners in a LLP are not subject to unlimited liabilities caused by the business. The responsibility of Partners towards losses or debts is limited to the investment made by each partner, and the partners are considered as separate legal entities. The individual partners are protected from the liabilities created by the misconduct of one of the partners.

  • There is no condition on the minimum amount of Capital Investment to start a LLP.
  • There is no limitation on the number of partners in a LLP. Normally there have to be 2 or more partners to start an LLP.
  • Starting an LLP is easier when compared to a private company as there are fewer legal requirements.
  • The cost of registering an LLP is very low when compared to that of a private company.
  • The compliance requirements of a LLP are much less. LLPs are required to submit any two statements, i.e., the Annual Return and Statement of Accounts.

The number of LLPs in India is on the rise and in the FY 2023-24 58,990 companies were incorporated compared to 36,249 incorporated in FY 2022-23.

4.  Private Limited Company

A Private Limited Company is a privately owned firm that may issue shares and have shareholders. The company is registered under the Companies Act, of 2013 and is not permitted to trade shares in public exchanges. The liability of the shareholder is limited to the number of shares held by each shareholder. A minimum of 2 shareholders are required to start a Private Limited company and there is a cap of 200 shareholders. 2 directors are required to administer such a company.

  • The Private Limited Company is a separate legal entity and has the right to sue and be sued under its name.
  • Private Limited Companies enjoy greater borrowing capacity than LLP firms as it has more options in taking on debts. Banks and other Financial Institutions prefer to lend to Private Limited companies rather than to LLP’s or Partnership concerns.
  • A Private Limited Company remains unaffected by the death or resignation of any member.
  • The Company has complete ownership of its properties and the shareholders cannot lay claim to ownership.
  • Any person can be associated with the Private Limited Company as a Director, Shareholder, or Employee at the same time.

The Private Limited Company is required to have and maintain paid-up capital of ₹ 1 lakh as prescribed by the Ministry of Company Affairs (MCA). This amount may vary as per the guidelines of the MCA.

5.  Public Limited Company

A Public Limited Company is a business entity registered under the provisions of the Companies Act, 2013, that can issue shares to the public and have unlimited shareholders. This type of corporate structure is best suited for entrepreneurs who are planning large-scale business operations.

A Public Limited Company enjoys all the privileges of a corporate entity with limited liability. It is mandatory for a Public Limited Company to get listed with the stock exchange to raise capital from the general public. This type of corporate structure has to comply with stricter legal restrictions than a Private Limited Company.

  • The liability of the shareholder is limited to the shares they own. As a separate legal entity, the Public Limited Company has the right to sue and be sued without involving any shareholder.
  • The stocks of the Company can be acquired by anyone either privately through an Initial Public Offering (IPO) or trading on the stock market.
  • The minimum Authorised Share Capital of a Public Limited Company is ₹5 Lakhs.
  • A minimum of 7 shareholders are required to incorporate a Public Limited Company.
  • A minimum of 3 Directors are required to start a Public Limited Company.
  • Proper Memorandum of Association (MOA) and Articles of Association (AOA) have to be submitted along with Form DIR-12.
  • The death of any member or shareholder does not affect the life span of the Public Limited Company.
  • A Public Limited Company can raise the required Capital through the stock market by using debentures and bonds.

Public Limited companies are subject to strict regulations and have to comply with various rules and regulations. They are required to publish their complete financial statement annually.

6.  One-Person Company

A One-Person Company is a corporate entity that has only one person as a member. This is a recent addition to the corporate structure with the view to facilitate individuals to own and manage companies alone. In this corporate structure, the shares of the company are owned by one person and it is mandatory to have a nominee for the sole person for registering this type of business.

  • Only the owner is responsible to make business decisions and administer the company. This is in variance to the long processes and measures that a few other companies adopt.
  • One-person company is eligible to receive all benefits under the Micro, Small, and Medium Enterprises Development Act, 2006.
  • One-person company is a small or medium business entity and any delay in payment; they are entitled to receive interest @ thrice the bank rate.
  • The corporate structure allows the owner to take higher business risks without any depletion n personal assets.

One-Person Company has to be registered under the Companies Act, 2013.

7.  Section 8 Company

Also called as a Non-profit Company, a Section 8 Company can be incorporated under the provision of the Companies Act, 2013 with the status of a Limited Company. The company cannot use the word Limited or Private Limited in its name.

The objective of the Section 8 Company is to promote commerce, arts and science, education, sports, religion, social welfare, research, charity, environment protection, or any other such objectives. The company shall utilize its profits or other income to promote the above objectives and is prohibited from paying any dividends to its members.

  • A Section 8 Company can be registered by an individual or by an association of individuals.
  • The objectives of the company should be to promote commerce, arts and science, education, sports, religion, social welfare, research, charity, environment protection, or any other such activities.
  • The company has to invest all the profits or any other income only in the objectives mentioned above.
  • The company is not allowed to pay dividends to its members.
  • Being considered a charitable institution, section 8 companies enjoy the benefits of 80G of the IT Act.
  • They are exempted from paying stamp Duty on the Memorandum of Articles and Articles of Association.
  • A Section 8 Company can be set up without the requirement of having minimum paid-up share capital as in other corporate structures incorporated under the Companies Act, 2013.
  • This type of company is registered with limited liability.
  • They possess a disinct legal status, therefore, its existence is independent of its members.
  • The continuity of a Section 8 Company is not affected by any change in its membership.
  • The Section 8 Company has better credibility than other types of corporate structures as they function under a flexible and transparent constitutional framework.

A Section 8 Company has to strictly follow the norms formulated by the Central Government and failure to do so may lead to closure of the company.

8.  Joint Venture Company

A Joint Venture is an agreement between two or more parties or companies to cooperate and administer business or achieve a commercial objective. Both parties contribute towards capital mutually and share the profits/losses based on the agreed ratio.

There are two types of Joint Venture companies in India.

1.  Equity-based Joint Venture

In this type, the parties agree to establish a new legal entity through a mutual consent agreement. Both parties share the profit/loss and take part in the management of the Venture.

2.  Contractual Joint Venture

In this type of Joint Venture, the parties agree to work jointly without creating a separate legal entity. Both parties work together to achieve common goals without creating a new entity. In this type of Joint Venture, neither of the parties will share ownership of the business at the same time may leverage some level of operational control. Both parties are bound by the governing agreement to share the profit/loss. In most cases, it is a foreign company that would get into such an agreement with an Indian Company.

  • A Joint Venture is formed by the contribution of 2 or more parties or companies to achieve an objective.
  • The parties sign an agreement to contribute mutually to accomplish a particular objective.
  • The Joint Venture does not require a particular name as they are shared by two or more parties or companies.
  • The Joint Venture agreement is temporary and ends when the project is completed and the desired goal is achieved.
  • The Profit or loss is shared in the ratio as agreed to and where no such ratio has been agreed they are shared equally.
  • The Co-venturers are free to continue their own business unless agreed otherwise during the life of the Joint venture.

A joint venture is a symbiotic business contract between two or more companies for enhancing marketing, positioning, and client acquisition. Joint Ventures have stood the test of time and have been used across sectors, particularly in high-technology, high capital or high-skill sectors. They are prevalent in sectors like oil and gas, insurance, banking, asset management, infrastructure, and more recently in the defense sector.

Joint Venture Companies are incorporated under the Companies Act, of 2013 and are also regulated by the Competition Act, of 2002, the Foreign Trade Act, of 1992, the Foreign Exchange Management Act, and also come under the purview of SEBI and RBI regulations.

9.  Non-Governmental Organizations (NGOs)

Non-Governmental Organizations (NGOs) are entities that are formed to pursue goals and aspirations that relate to the public, social, or political good of the nation or world. They are a not-for-profit organization that focuses on activities to relieve suffering, promote the interests of the poor, environmental protection, provide basic social resources, and undertake community development.

NGOs are registered under the Societies Registration Act of 1860 and have a legal status.  They do not form part of the government.

  • NGOs have a specific purpose or cause that they support.
  • They are voluntary groups created by like-minded people who wish to serve society.
  • NGOs are autonomous bodies and enjoy little or no governmental interference.
  • Private donations and
  • NGOs have a huge role in nation-building, providing aid, and philanthropy.

Funding for the NGOs is from contributions received from various sources and also includes membership dues to government grants. The organization works to influence public policy and advocacy.

The following Associations can sign up as a NGO in India.

  • A Trust can register as an NGO as per the Indian Trusts Act, of 1982 if it has one or more trustees.
  • A society of people can sign up as an NGO under the Societies Registration Act, of 1860, if its objective is to serve society.
  • Any company, club, or association run by professionals can sign up as an NGO by registering under the Companies Act, 2013.
  • Any Charitable Trust can sign up as an NGO under the Charitable Endowment Act, of 1920.
  • Any statutory body that gives membership to persons on their stature and standing in society.
  • Any group, association, or society that works for the upliftment of society.

We have given(GetifyHR) a brief overview of the different corporate structures available in India. Choosing the structure that is suitable for one’s line of business and expertise requires the advice of a qualified lawyer, auditor, or a professional.