04-06-26 New wage blog

NEW WAGE CODE IN INDIA: Impact on Salary and Compliance explained.

by with No Comment BusinessLabour ActNews & Updates
Introduction

Labour Laws refer to the legal framework that regulates and controls the relationship between employers and employees.  These laws govern various aspects of employment such as wages, working hours, leave policies, health and safety measures, social security, and Industrial relations.

Independent India has a highly complex framework of Labour Laws.  The first major Act to be introduced was the Factories Act of 1948. This Act regulates the working conditions in factories and includes safety and health measures, working hours, and leave policies.  Other Key labour laws include the Industrial Disputes Act, the Payment of Wages Act, the Minimum Wages Act, the Employees state Insurance Act, and the Employees’ Provident Fund and Miscellaneous Provisions Act.

Over the years, successive governments have continued to introduce new Labour Laws and amendments to update existing ones to be in consonance with existing economic and social conditions.

The 2nd National Commission on Labour (2002) had recommended that the existing Labour Laws should be broadly grouped into 4 Labour Codes.  Based on these recommendations, the Ministry of Labour and Employment, Government of India, had introduced 4 Bills in 2019 to provide a simpler and more coherent system to regulate and control the relationship between the employers and employees.

The Bill consolidates 29 existing labour laws into 4 Labour Codes, and these are:

  1.  The Code on Wages, 2019
  2.  The Code on Social Security, 2020
  3.  The Industrial Relations Code, 2020
  4.  The Occupational Safety, Health and Working Conditions Code, 2020.

Through the enactment of the 4 Labour Codes, 1228 sections were amalgamated into 480 sections, and 1436 rules were reduced to 351.  31 multiple Returns have been replaced by a single electronic return and the number of forms have reduced from 181 to 73, and the Registers to be maintained by the employers have reduced from 84 to just 8.

In this article, we explain the features of the Code on Wages, 2019, and highlight its impact on salary and compliance.

The Code on Wages, 2019

The Code of Wages is a well formulated effort to regulate wages and bonus payments in all forms of employments be it any industry, trade, business, or manufacturing industry.  The Code on Wages, 2019 amalgamates 4 existing Acts, namely, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act,  1965, and the Equal Remuneration Act, 1976.

The main focus of the Code is to balance the rights of employees and facilitate ease of compliance for employers.  It safeguards the interests of employees through universal minimum wages, ensuring dignity and timely payment of wages.  The Code supports women employees through equal pay and representation, thus fostering inclusive participation.  These measures will generate greater employment and promote workplace equity, and give a boost to productivity and labour welfare, thus strengthening economic growth, generate employment and promote workplace equity.

Minimum Wages and National Floor Wage

One of the most important changes is the universalization of Minimum Wages and the introduction of the National Floor Wage.  As per the Code, all employees have a statutory right to Minimum wages.  The Central Government will fix the National Floor Wage based on the minimum living standards, and the State Governments can set the Minimum Wages.  However, no state government can set a minimum wage that is below the National Floor Wage.

Floor Wage and Compliance

The National Floor Wage not only stabilizes labour costs by creating a universal wage baseline for organizations across multiple states, but also ensures simplified compliance.  By ensuring that no state can set its Minimum Wage below the floor level, it reduces regional wage disparity and compliance risks of tracking multiple fragmented state laws.  These changes allow companies to standardise their national payroll structures and HRMS Logic, thus simplifying administrative tasks and providing a clear and strong foundation for financial planning and cost projections across multiple locations.

Equal Pay for Equal Work

One of the important features of the Code is its support for women workers by ensuring equal pay for equal work. This will ensure that there is discrimination among employees on the basis of gender (including Transgender identity) in matters relating to wages for the same work or work of a similar nature.  This obligation has been extended to all genders in respect of conveyance allowance, house rent allowance, and any remuneration payable under an award or settlement.

The Code not only promotes workplace quality, but also mandates that overtime work must be compensated at a rate of at least twice the normal rate of wages, thus providing a uniform standard for all workers.

The Mandatory 50% Rule

One of the most important provisions in the Code on Wages is the mandatory 50% rule.  The Code stipulates that the core statutory components of pay, i.e., Basic Pay, Dearness Allowance, and Retaining Allowances, must constitute 50% or more of the total Cost to Company (CTC).  This means that the excluded components of remuneration, such as House Rent Allowance (HRA), Conveyance Allowance, Overtime Allowance, retirement benefits including PF & NPS, and other Tax-friendly Allowances, must not exceed 50% of the employees’ total remuneration (CTC).

The 50% rule is a mandatory provision that restructures the salary by ensuring that the core salary component (Basic Pay, DA etc) are at least half of more of the total take home salary (CTC).  The effect is two-sided.  On the one hand, the monthly take-home salary is likely to decrease marginally because statutory deductions like PF increases as they are calculated on a higher basic pay.  On the other hand, the employees’ future savings and security shows significant increase as the higher basic Pay boosts mandatory PF contributions, thus generating a substantially higher Gratuity payout on retirement, resignation, or termination.

Payment of Wages – Timeline

The employer is mandated to pay wages to all employees within the timeline fixed for each period.  This will enable all employees to receive their wages on time, thus providing wage protection.  The wage payments have to be digitized through a Bank account & Electronic mode. The employer is required to issue wage slips to the employees as per the time fixed for each wage period.  The same is tabulated below:

Wage Period Payment Schedule
Daily wage basis At the end of the shift
Weekly wage basis On the last working day
Monthly wage basis Less than 1,000 employees Before the expiry of the 7th day of the succeeding month

1,000 or more employees Before the expiry of the 10th day of the succeeding month

The responsibility of paying all dues rests with the employer, and in case of a claim relating to non-payment, the onus is on the employer to produce the proof.

In case of resignation or retrenchment, termination, or becoming unemployed due to the closure of the unit, wages shall be paid within 2 working days.

Payment of Wages

The employer cannot make any arbitrary deductions from the wages of employees except those that are specifically authorised by the Code.  Under the Code, an employee’s wages can be deducted on the following grounds:

  1.  Fines imposed.
  2.  Absence from duty.
  3.  Towards accommodation provided by the employer.
  4.  Towards recovery of Advances/Loans given to the employee.
  5.  Towards Income-tax or other statutory levy.

The total amount of deductions shall not exceed 50% of the employee’s total wage in any wage period. In case the authorized deductions exceed 50%, it cannot be deducted in full in that wage period; instead the excess amount must be recovered in the subsequent pay periods as prescribed by law.

Compliance

The Code incentivizes organizations by reducing compliance burden and transaction costs.  Terms like “Wages”,  “Worker”, “Employees”,  “Employers”,  “Establishments”,  “Appropriate Government”, etc have been given a uniform and common definition.

Some important Definitions
  •  Wages:  All remuneration by way of salaries, allowances or otherwise that is payable to a person by the employer in respect of his/her employment, subject to all terms of employment being fulfilled.
  •  Establishment:  A place where any industry, business, trade, manufacture or occupation is carried on and includes Government Establishments.
  •  Workers:  Any person (except an Apprentice) employed in any industry to do any manual, skilled, unskilled, operational, technical, clerical, or supervisory work for hire or reward.  The term also includes working journalists and sales promotion employees.
  •  Employee:   Any person employed on wages by any establishment to perform any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical pr clerical work for hire pr reward.
  •  Employer: A person who employs others directly or through any other person, or on his behalf or on behalf of any person, one or more employees in his establishment, and where the establishment is carried on by any department of the Central or the State Government or Local Authorities, the head of department, the chief executive of the local authority.
  •  Appropriate Government:  Refers to an establishment carried on by or under the authority of the Central Government, and includes railway, mines, oil fields, major ports, air transport, telecommunications centre, banking and insurance company, or a corporation or other authority established by a Central Act or CPSU’s/Autonomous bodies established by the Central Government.

The Code incentivizes businesses by reducing compliance burden and transaction costs.

  • By bringing uniformity in the common definition of frequently used terms, it has reduced complexity in compliance.
  • The number of authorities in the tripartite boards has been reduced, and this will be implemented only through 1 Rule instead of 8 different rules that exist at present.
  • The options for filing and maintenance of registers, returns, and forms electronically and prescribing one template for the registers, returns, and forms instead of multiple ones at present make compliance hassle-free.

The Code brings cultural changes in the Inspection system to reduce corruption & arbitrariness and infuse transparency.

  • The Inspector-cum-Facilitator is not only entrusted with the job of inspecting and imposing fines, but is also tasked to provide information and advice to the employers.
  • The introduction of web-based inspection schemes enables calling for information under the Code electronically for inspection and conferment of jurisdiction of inspector-cum-facilitator based on randomized selection of inspection.
  • The Code mandates Inspector-cum Facilitator to provide prior opportunity to the employer to rectify and comply with the provisions of the Code by way of a written direction before initiating prosecution. On compliance, the Code stops initiation of prosecution proceedings against the employer. This provision is meant to assist employers who have committed an offence under the Code for the first time and is not applicable to repeat offences.
Bonus Determination
  • Employers are mandated to pay Bonus to every employee who draws wages up to a limit set by the appropriate government and has worked for at least 30 days in the accounting year, i.e., the year commencing on the 1st day of April.
  • The annual minimum Bonus will be at least 8.33% and maximum up to 20% of the wage earned by the employee.
  • The Wage Code has not prescribed any threshold for the applicability of statutory bonus provisions, and appropriate governments are empowered to prescribe such thresholds. For an organization with multiple branches in more than one state, this may create compliance issues as each state may prescribe different thresholds. However, employers are to maintain the status quo and continue with the statutory bonus coverage as is existing till a new threshold is announced.
  • Termination of service on the ground of sexual harassment is now identified as an additional ground for disqualification from the statutory bonus.
Cognizance of Offences
  • The Appropriate Court shall take cognizance of any offence punishable under this code only on a complaint made by..
      • Authority/Official of the appropriate government or
      • By any employee or
      • A registered Trade Union or
      • An Inspector-cum-Facilitator
  • No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try the offences under the Code.
Penalties – Power to impose Penalties
  • The appropriate Government will appoint officers not below the rank of Under Secretary, who will impose penalties for the offences.
  • The Officer is authorised to hold an enquiry and to summon and enforce the attendance of any person acquainted with the case to give evidence or to produce any documents.
  • If on such enquiry, the Officer is satisfied that the person has committed an offence, then he may impose such penalty as he deems fit.
Standardized Penalty Provision

The Code has standardized penalty provisions, introduced the concept of “graded penalty,” and has enhanced penalty provisions, especially the fine amount manifold. This is done to act as a strong deterrent and is expected to improve compliance and the effective application of the provisions.

S.No Type of Offence Penalties
1 First offence:  Pay the employee lesser that the amount due under the Code Punishable with fine which my extend up to ₹ 50,000/-
2 Repeat offence:  Similar to 1 above within 5 years from date of the commission of the first significant offence Punishable with imprisonment for a term which may extend to 3 months or with fine which may extend to ₹ 1,00,000/-
3 First Offence: Contravenes any other provisions of the Code or any rule made or order passed or issued there under Punishable with fine which may extend to ₹ 20,000/-
4 Repeat Offence:  Similar to 3 above within 5 years from the date of the commission of the first or subsequent offence Punishable with imprisonment for a term which may extend to 1 month or with fine which may extend to ₹ 40,000/-
5 Offences on non-maintenance or improper maintenance of records in the establishment Punishable with fine which may extend to ₹10,000/-
Maintenance of Records, Returns and Notices
  • The Code mandates that every employer of an establishment shall maintain a register of persons employed, muster roll, wages, and other provisions as prescribed in the Code.
  • Every employer shall display in a prominent place on the Notice Board an abstract of the Code on Wages, category-wise wage rates, wage period, day or date, and time of payment of wages, and name and address of the Inspector-cum-Felicitator.
  • Every employer is mandated to issue wage slips to all employees.
Conclusion

The Code on Wages is a well-intentioned piece of legislation that has been widely accepted by the industry.  The Code aims to balance the interests of the employers and employees.  India’s economic growth and development are inextricably tied to the productivity and well-being of its workforce.

As the nation continues its economic march upwards, the importance of progressive labour laws that safeguard the workers’ rights while fostering a conducive business environment cannot be overstated.   The Code on wages is a decent attempt to replace the obsolete provisions of the earlier laws.  The Code will help in removing the multiplicity of definitions and authorities.  Compliance is maintenance of records and registers, filing of returns, and display of notices will be substantially reduced through this legislation.  The cost of compliance is expected to reduce, and it is hoped that it will eliminate any litigation based on a complex definition of wage, worker, employee etc.

The provisions of the Code inspire confidence in the business community and for all workers, as it will help in bringing all workers under the ambit of the law.  There will be a lot of challenges in the coming days as the respective state government has to address the issues and bring their own laws in consonance with the Code of Wages.  Implementation may pose challenges, but the fact remains that the Code on Wages is a piece of legislation in the right direction and in accordance with the changing times.

We at Getify are fully geared to assist all our clients in implementing the new Code on Wages. As a highly tried and trusted Payroll Processing & HR Management service provider, we can streamline your entire payroll process to be in alignment with the new rules and regulations.

PMVBRY

PMVBRY – Guidelines for calculating incentives under the Scheme.

by with No Comment BusinessNews & Updates
Introduction

The grand vision of “Viksit Bharat @ 2047” is hoped to be achieved by the Employee Linked Incentive (ELI) Scheme under the name.  The “Pradhan Mantri Viksit Bharat Rosgar Yogana” announced by the Government of India in the Union Budget 2024-25. As you are aware, this scheme will complement the National Manufacturing Mission announced in the Union Budget 2025-26 by providing a boost to the ‘Make in India’ initiative.  The main objective of this scheme is to increase the contribution of the manufacturing sector to India’s GDP from 16% to 25% by 2025.

In this article we will dwell on the eligibility, benefits and the guidelines for calculating the incentives under the scheme.

 1.  Part A of the Scheme  – Eligibility of Employee under Part A:

All First timers are eligible to receive the benefits under the scheme subject to the establishment being covered under the EPF & MP Act, 1952. All First timers drawing gross wages up to ₹ 1,00,000/- at the time of joining the establishment registered with the EPFO will be eligible to receive the incentives under Part A of the scheme, subject to filing of ECRs with contribution for 6 continuous months.

First Timers employed in establishments which are part of the seasonal industry as defined under the EPF & MP Act, 1952 can be considered as eligible if the ECRs are filed over 6 months during a period of 12 months irrespective of continuity, and if the First timer is employed in the same establishment for the entire period.

Exempted establishments should provide details of all employees, including the First timers for whom the contributions are being deposited in their PF Trust, along with the filing of ECRs without contributions to EPFO.

The First timer in an Establishment is eligible to receive the 2nd instalment of the incentive under Part A of the scheme when all the 12-month ECRs have been filed within a period of 18 months from date of joining the establishment.

2. Calculation of Incentives:

Under Part A, the First timer can receive an incentive that is equivalent to one completed month EPF wage, subject to a maximum of ₹ 15,000/-.

The incentives will be paid in two instalments.  The first instalment will be half of the average EPF wage for 6 continuous months subject to a maximum of ₹ 7,500/-.  This instalment will be paid after filing of six completed months’ ECR’s along with the contributions.  The second instalment will be invested in an appropriate saving instrument/deposit account for a period to be specified by M/o L & E in due course.   The First timer will be eligible to receive this part of the incentive only after completion of the Financial Literacy program and filing of 12 completed months’ ECR’s along with contribution by the establishment.

Part B of the Scheme:

The benefits under Part B will be paid to the employers in respect of the First timers and Re-joinees subject to fulfilling the threshold criterion.

Incentive Amount and Periodicity

The incentives to employers under Part B will be paid for 4 years for manufacturing industry and 2 years for others at the following rates in respect of employment generated over and above the baseline fulfilling the threshold level. Where the baseline is less than 50, at least 2 additional employments are required for eligibility, and where the baseline is 50 & above, at least 5 additional employments are required for eligibility.

The incentives to employers will be as under:
EPF Wage slabs of Additional employees Benefit to the Employers in ₹.  (Per additional employment per month as per prescribed criteria)
<= ₹ 10,000* Up to ₹ 1,000
₹20, 000 to ₹ 1,00,000** ₹3,000
  • * Where the employees get EPF wages less than ₹ 10,000, the incentive at the rate of 10% of EPF wage will be provided.
  • *Incentives will be paid to new employees with EPF wages up to ₹ 1,00,000/- at the time of joining the establishment.

These incentives will be paid to all eligible establishments in lump-sum payments every six months, after filing for six completed months ‘ECR’s based on eligibility of the employer and employees.  Further, these benefits will be provided in respect of those first-timers and Re-joinees who complete 6 months of employment with the same employer.

In case the employer is not eligible as per the threshold criteria, the benefits will not be provided, and there will not be any extension to the incentive period.

Eligibility of Establishment under Part B

The eligibility of the establishment will be determined based on the threshold criteria as detailed below:

During the first 6 months of joining the scheme, the average number of employees in the establishment as per the ECRs filed for that period should be more than or equal to the Baseline plus the threshold limit.

Between the 7th and 12th month, the average number of employees in the establishment as per the ECRs filed from the 1st month up to the last month should be more than or equal to the Baseline plus the threshold limit.

From the 13th month onwards the average number of employees in the establishment should be more than or equal to the Baseline plus the threshold limit as per the ECRs filed from 1st month up to that month.

If any establishment registered with the EPF & MP Act, 1952 has pending inquiries under Section 7A/7B/7C of the Act and Para 26-B of EPF scheme; the incentives under Part B will be with held.  Also establishments against whom a FIR has been filed by EPFO for fraudulent practices or where inquiries relating to irregularities under the ABRY Scheme or any other scheme are pending or has been decided against the establishment, then the incentive will be with held.

Discontinuation of the Incentives

The Payment of Incentives under the scheme will be discontinued under certain conditions:

  1.  In case the First timer leaves the employment on his own volition or otherwise.
  2.  In case of any eventuality, like death, etc, of the beneficiary.
  3.  If the establishment winds up.
  4.  In the event of any misrepresentation or fraud.
Mode of Payment

  1.  The incentives will be disbursed within 45 days, once the ECRs are filed and contributions paid as per the periodicity as defined under the respective Part of the scheme.

  2. The incentives to the establishments shall be disbursed as Direct Benefit Transfer to the PAN-linked Bank Accounts of the Establishment.  In case a group of establishment under the same PAN are eligible for the incentives, then payment will be made to a single PAN-linked Bank account nominated by the group.

  3. The incentives to the employees shall be paid through (Aadhaar Bridge Payment System) Direct Benefit Transfer to their Aadhaar-seeded Bank accounts.

In case the employees’ bank account is pending for Aadhaar seeding, then the payment shall remain suspended. However, the incentive would continue to accrue during this period and, once the bank account is Aadhaar-seeded, the payment, including arrears, would be released as per the scheme guidelines.

Other features of the Scheme

  1.  Rounding Off:  All calculation to arrive at the Baseline, threshold, and average strength of employment may be rounded off to the nearest integer.

  2.  Penalty for fraudulent activities:  Legal action may be initiated against establishments found indulging in fraudulent activities or availing incentives based on fictitious data or documents or otherwise.  The Ministry of Labour and Employment will issue a comprehensive Penalty clause to this effect.

  3.  Communication strategy & Advocacy: A nation-wide multimedia outreach strategy using social media, traditional media, webinars, workshops etc., will be adopted to give wide coverage to the scheme.  For better advocacy of the scheme, the outreach will be done in multiple languages.
Monitoring and Evaluation
Monitoring

For purpose of monitoring the scheme, an inter-ministerial Steering Committee will be constituted by the Ministry of Labour and Employment.  The Steering Committee would provide recommendation on wide ranging functions of the scheme.  The Steering committee is scheduled to meet at least once every quarter or as decided by the Chairperson.

An Executive Committee under the Chairpersonship of CPFC will also be constituted by the Ministry of Labour and Employment.  To ensure proper implementation of the scheme, the Executive Committee will meet every month.

Evaluation

Based on the recommendations of the Steering Committee, a third party mid-term evaluation of the Scheme shall be undertaken for necessary course correction after one year of the start of the scheme.

A third-party end-term evaluation of the scheme shall be conducted three months prior to the closure of the scheme to assess the outcome of the Scheme.  The incidental costs of this evaluation will be met from the Administrative charges allocated for the Scheme.

 Administration and Grievance Redressal of the Scheme

The scheme shall be administered by the EPFO under the overall supervision of the Ministry of Labour and Employment.  EPFO shall provide an online facility to stakeholders to lodge grievances related to the scheme.  A Call Centre for PMVBRY will also be set up to assist stakeholders.

Financial Outlay of the Scheme

The Government has earmarked ₹ 99,446 Crores for the scheme, and this includes Administrative charges of ₹ 248 crores. EPFO aims to create 3.5 crore jobs during a 2 year period through this scheme.

Taxation

The incentives received under the scheme are taxed as they are subject to the provisions of the Income Tax Act, 1961.

Audit

The CAG will conduct a statutory audit of the Scheme, whereas, the Internal Audit Wing (IAW), M/o. L & E will conduct a non-statutory Audit.  Concurrently, an internal Audit will be conducted by EPFO.

Conclusion

The “Pradhan Mantri Viksit Bharat Rosgar Yogana” is the Employee Linked Incentive (ELI) Scheme announced by the Government of India in the Union Budget 2024-25.  The PMVBRY scheme not only incentivises both the employers and employees, but is a measure that focuses on creating a more inclusive and dynamic job market. The scheme hopes to significantly enhance the financial relief to employers especially SMEs, thus providing the right impetus for them to grow and hire, and will also support workforce expansion and formalization.

Getify, is fully equipped to provide all stakeholders of our continued support in fully utilising these initiatives to foster growth and job creation, and to ensure a thriving and sustainable business in the long term.  As one of the leading Payroll processing and HR management companies in the region we can assure all our clients of our professional support in benefitting from this scheme.

 

Salary Hike

How to Calculate Salary Hike Percentage Accurately? Formula and Example

by with No Comment BusinessNews & Updates

An employee is a vital cog in the wheel of business, and their commitment and dedication is crucial for the success of the venture. Employee retention is, therefore, crucial, and to this end, the employer has to pay their employees fairly to gain their loyalty and commitment. One important activity that keeps the employees satisfied and committed is regular salary hikes announced by the company.

What is a Salary Hike?

A salary hike is an upward adjustment of the employee’s salary package and this is usually given by the employer based on factors like employee performance, experience, inflation, or fluctuation in the job market. For an employee, a salary hike is an important achievement in his or her career and recognition of the contribution to the company’s growth.

A pay hike provides them with the opportunity for professional growth and increased financial stability. The cost of living increases consistently every year due to inflation and a salary hike is one way of ensuring that employees can maintain their purchasing power and way of life through rising prices.

How to calculate Salary Hike Percentage?

The Salary Hike Percentage Formula is a simple and straightforward arithmetic calculation to arrive at the Salary Hike percentage. The following simple steps will guide you through this process.

Step 1 Determine the salary you are currently offering.

The current salary is the salary that you pay before the hike.

Step 2 Note down the new salary after the hike.

This is the salary that you will pay after the announced salary hike.

Step 3 The Current Salary has to be subtracted from the New Salary

When you subtract the Old Salary from the New salary you get the increase in Salary amount after the hike.

Step 4 Calculate the Salary hike percentage

Divide the figure obtained in Step 3 by the current salary and then multiply the result by 100 to get the hike percentage.

The salary hike formula is relatively simple and follows basic arithmetic operations. The formula is:

Salary Hike Percentage = New Salary – Current Salary/Current Salary x 100

The New Salary is the amount that the employee receives after the hike.

The Current Salary is the amount that the employee is currently receiving.

This Annual salary hike formula enables employers to quantify the percentage increase in salary and gain insight into the impact of the hike on the overall compensation. This will help them to evaluate job offers, negotiate salary adjustments or assess the effectiveness of performance reviews.

Example of Salary Hike Percentage Calculation

Let’s now look at an example:

Suppose the employee’s current salary is Rs:65,000, and is offered a New salary of Rs:71,500 after a performance review.

The formula is:

Salary Hike Percentage = Announced New Salary amount– Current Salary/Current Salary x 100

= 71500 – 65000/65000 x 100

= 6500/65000 x 100 = 10

The Salary Hike is 10 %

Let us now calculate Salary Hike Percentage from the CTC (Cost to Company).

CTC include heads like Basic Salary, DA, benefits, bonuses, and other perks. If the employer hikes the salary based on CTC, the same formula can be used to arrive at a hike percentage.

Example : Old CTC = 7,80,000

New CTC = 8,58,000

Hike amount = New CTC – Old CTC = 8,58,000 – 7,80,000 = 78,000

As per Formula: 78000/780000 x 100 = 10 %

How to calculate Salary Hike on Hourly Wages?

If the employees are being paid on an hourly basis, you can calculate the percentage of wage hikes using the same formula.

Old hourly wage = Rs: 200

New hourly wage = Rs:230

Wage Hike Percentage = New hourly wage – Old hourly wage/Old hourly wage x 100

230 – 200/200 x 100 = 15%

However, this will be useful for organizations that employ freelancers, contract workers, and other employees with hourly wages.

You can also calculate salary increments and their percentages using a salary hike calculator that comes bundled with certain payroll packages.

Why do employers hike salaries?
  1. To motivate

A salary hike helps to foster a positive workplace culture and ensures job satisfaction. It motivates employees to continue to work and contribute positively to company growth. These increments are one of the ways of informing the employees that the company appreciates their contribution to the company. Companies that offer reasonable salary hikes and other financial incentives have lower attrition rates and can retain their employees for a longer period.

  1. To recognize and reward the performers

Consistent performers are recognized and rewarded for their contribution to company growth. A salary hike is one form of this reward that acknowledges their hard work, dedication, and valuable contribution, and encourages them to maintain high level of performance.

  1. Supports the rising cost of living due to inflation

Inflation pushes up the cost of living periodically. To offset this, companies offer salary hikes to employees to enable them to maintain their purchasing power and enhance their way of life.

  1. Encourages career growth

A salary hike indicates that the employee is moving up the career ladder and is performing better. This, therefore, encourages career growth.

  1. Assists in Financial Planning

With a higher salary, it becomes easier for the employee to plan for the future and save money. This will encourage him to be more loyal to the organization.

What factors help employers to decide on a salary hike?

This is a question that is on the minds of employers or HRs all across the industry.  The decisions that the employers or HRs take is vital to how they interact with the employees and get their work done.  The following factors are taken into consideration to decide on salary hikes:

  1. Budget of the Company

The budget of the company plays a major role in deciding on salary hikes. If the company has a funds crunch, it can opt to pay increments to a limited number of employees. This means only those who have performed well will receive a salary hike.

  1. The Experience Level of the Employees

Experience is a vital factor in deciding on paying a salary hike. The priority of most employers is to give raise to experienced employees, especially those who take effort to guide their colleagues or help recruits with training.

  1. Qualification and Expertise

The qualification and expertise of an employee plays a crucial role in receiving a salary hike. An employee with the required qualifications and expertise for the job is the ideal choice for a salary hike.

  1. Maintaining Average Pay Standards

Employers may research the average salary standard in similar roles in the industry to consider given yearly salary hikes. Most companies try to match current trends by paying their employees well.

  1. Employee Performance

This is one of the most important criteria for salary increments. Most organizations value their high performers and recognize their efforts through rewards in the form of salary hikes or incentives. Performance tracking solutions are used to track employee performance throughout the employment career.

Conclusion

Salary hikes are not just a numerical increase in the take-home salary of an employee; they symbolize an organization’s acknowledgment of an employee’s contribution and are, therefore, a strategic tool for boosting morale and productivity. While the decision-making process is influenced by various factors, performance remains a vital factor in any salary hike.

Employees can greatly appreciate the salary hikes by understanding the factors that have influenced the employer in giving such hikes. This will help them to plan their future course of action accordingly. A pay hike is just a stepping stone towards career growth and financial stability. Employees should balance immediate gratification with long-term career goals.

GetifyHR, a tried and trusted Payroll Processing and HR Management service provider, can streamline your entire payroll process and empower your workforce. Where you require a more streamlined approach to managing your salary details, you can consider using GetifyHR’s comprehensive HRMS solutions.

Employee Linked Incentive (ELI) Scheme – Benefits, Eligibility & Impact

Employee Linked Incentive (ELI) Scheme – Benefits, Eligibility & Impact

by with No Comment Labour ActNews & Updates
Introduction:

The Employee Linked Incentive (ELI) Scheme is a major initiative launched by the Union Government in the Union Budget 2024-25, to address the country’s growing unemployment challenges. India is currently facing high levels of unemployment among the youth, underemployment, and a mismatch between the skills and industry demand. The ELI scheme is proposed to stimulate the private sector to participate in job creation and workforce development. The scheme seeks to incentivize and motivate employers to hire more youth, especially freshers while encouraging skill development and enhancing job retention.

The ELI Scheme is a package of 5 schemes to create more job opportunities and improve the livelihood of people across the country. The scheme envisages providing employment, skilling, and other opportunities for 4.1 crore youth over five years with a total central outlay of ₹ 2 lakh crore. Out of this, 1.07 crore is allocated to implement Plan A, B, and C, ₹63,000 crore for Plan D to provide an Internship programme for skilling 1 crore youth in 5 years, and ₹30,000 crore for Plan E for upgrading of Industrial Training Institutes (ITI’s) across the country.

The package highlights the government’s strong commitment to tackling unemployment and boosting economic recovery, especially after the challenges posed by COVID – 19 pandemic.

The Objectives:

The ELI Scheme hopes to address the country’s growing unemployment by incentivizing the private sector for job creation, skill development, and retention.

The main objectives are:

  1. Promote the employment of youth: The scheme primarily aims to reduce unemployment among the youth by encouraging organizations to recruit youngsters especially those joining the workforce for the first time.
  2. Encourage job retention: The ELI scheme has features to encourage job retention by offering incentives to employers who maintain higher workforce levels over a period of time, especially those who recruit beyond a specified threshold.
  3. Encourage Skill Development: Skilling has been the Government’s objective, and this initiative aligns with this aim. This is achieved by encouraging skill development among the youth, by motivating employers to invest in training and skill development of their workforce.
  4. Enhance Formal Employment: Historically, industries have depended on informal labour. This scheme aims to formalize employment by incentivizing employers who transition workers into the formal economy by providing social security such as Provident Fund (PF) coverage.
  5. Boost employment in the Manufacturing Sector: The Scheme has features that target the Manufacturing Industry to boost job opportunities by promoting the recruitment of first-time-employees.
  6. Reduce Economic Disparity: the Scheme aims at reducing economic disparity and improve social mobility by prioritizing on job creation and skill enhancement for youth especially those from the underprivileged backgrounds.
  7. Assist Employers in recruitment: The programme aims to lower the expenses of employers and motivate them to increase their employment levels by providing financial assistance such as reimbursing employers for their PF contributions towards new hires.
The Schemes

The Employment Linked Incentive Schemes encompass 5 programs aimed at employment generation, retention, workforce formalization, skill development, and enhancing full compliance with all statutory rules and regulations.

The total outlay for the entire scheme is ₹2 lakh crores for 5 years. Out of this, ₹1.07 lakh crore is allocated for Scheme A, B, and C to generate employment for 3.1 crore new employees, ₹ 63,000 crore is allocated for Internship Programme for skilling 1 crore youth in 5 years, and ₹30,000 crore for upgrading of Industrial Training Institutes (ITI’s)

Scheme A: First-time Employees Support Scheme

This scheme is designed for youth who are entering the formal workforce for the very first time. All newly joined employees in the formal sector will receive one month’s salary up to ₹15,000 to be disbursed through direct transfer in 3 installments. The first-time employment scheme is expected to benefit around 210 lakh youth over 2 years. The Central outlay for the scheme is ₹23,000 crores. Enrolment is open for 2 years and the expenditure coverage extends to 3 years. The subsidy paid under this scheme supports employees and boosts the hiring of first-time employees by employers.

The salient features of the scheme are briefed below:

  1. Applicable to all newly joined employees in the formal sector.
  2. Applicable to newly joined employees enrolled in EPFO and drawing a wage or salary of less than ₹ 1 lakh per month.
  3. Eligible employees will receive a subsidy of up to ₹ 15,000 directly in 3 installments.
  4. The eligible employee has to mandatorily undergo a financial literacy course to receive the second installment.
  5. The employer has to refund the subsidy to the employee if the employment ends within 12 months of recruitment.
  6. The scheme will be applicable for 2 years after enrolment with EPFO.
Scheme B: Incentives for Job creation in the Manufacturing Sector

This scheme is designed to enhance employment in the manufacturing sector. The scheme rewards both employers and first-time employees who contribute towards EPFO. The incentive will be paid at a specified scale to both the employee and employer directly based on the EPFO contributions made in the first 4 years of employment. The incentives will be paid partly to both the employees and employers for 4 years as detailed below:

Year Percentage
First year 24% shared equally between employee and employer
Second year 24% shared equally between employee and employer
Third year 16% shared equally between employee and employer
Fourth year 8% shared equally between employee and employer

This scheme is aimed at incentivizing employment in the manufacturing sector and is expected to benefit 30 lakh youth and their employers. ₹52,000 crore has been earmarked for this scheme. The program has a 2 year enrolment plan with the expenditure phase spanning 6 years. This will allow sustained support that will boost long term employment in the manufacturing sector.

The salient features of the scheme are briefed below:

  1. The scheme applies to first-time employees in the manufacturing sector.
  2. All corporate and non-corporate employers who have a 3-year track record with EPFO contributions will be eligible.
  3. Employees who contribute towards EPFO and who earn a wage or salary of up to ₹1 lakh per month will be eligible for this scheme.
  4. The employees must be directly employed by the organization that pays the salary.
  5. Where the salary of the employees exceeds ₹25,000 per month, the incentive will be calculated at the capped amount of ₹25,000 per month.
  6. If the employment ends within 12 months of recruitment, then the employer will refund the subsidy to the employee.
  7. The scheme requires the employer with a 3-year EPFO contribution to hire either 50 new employees or 25% of their workforce, whichever is lower to qualify for the incentive.
  8. Employers should maintain the enhanced level of employment throughout, failing which they will not receive the subsidy.
  9. The incentive will be paid over 4 years, shared equally between the employee and the employer as per the table given above.
  10. The scheme will apply to an employee for 2 years after enrolment with EPFO.
Scheme C: Support to Employers for EPFO contributions

The third scheme under the Employment Linked Incentive Scheme is to support employers who contribute towards EPFO. This is a fully employer focussed scheme that covers every additional employment within a salary of ₹1 lakh per month within all sectors.

The salient features of the scheme are briefed below:

  1. The scheme incentivizes employers who increase their workforce above the baseline (the previous year’s number of EPFO employees) by at least 2 employees for companies with less than 50 employees or 5 employees for companies with 50 or more employees and maintain this level.
  2. The scheme applies to employees earning up to ₹1 lakh per month.
  3. New employees need not be newly enrolled with EPFO.
  4. The EPFO will reimburse contributions paid by the applicable employer for the additional employees hired in the previous year up to ₹3,000 per month for 2 years.
  5. When the employer creates more than 1000 jobs, reimbursement will be done for every quarter.
  6. The subsidy will continue for the 3rd and 4th years on the same scale as employers benefit provided under job creation for manufacturing sector.
  7. The subsidy provided under this scheme is in addition to the subsidy provided under the first-time employment scheme.
  8. The scheme is applicable for 2 years after joining employment.

The Central outlay for this scheme is ₹32,000 crores and is expected to benefit 50 lakh youth. The program has 2 year enrolment duration and the expenditure duration is for 6 years.

Scheme D: Internship Scheme with Top Companies

The Internship Programme envisages skilling 1 crore youth aged between 21 to 24 years over 5 years in top 500 companies. The total outlay for the scheme is ₹63,000 crores.

The salient features of the scheme are briefed below:

  1. The duration of the Internship is 12 months with a monthly allowance of ₹5,000 and a one-time assistance of ₹6,000.
  2. Unemployed youth in the age group of 21-24 are eligible.
  3. The government will contribute significantly to the allowance costs, while the administrative and training expenses will be borne by the Company through CSR funding.
  4. Priority will be given to candidates with lower employability metrics.
  5. Actual skill training is mandatory with a focus on hands-on-work over classroom learning.
Scheme E: Skilling programme and upgradation of ITI’s

This is a scheme to skill youth with state and industry collaboration. This centrally sponsored scheme has a total outlay of ₹60,000 crores, where the Central Government spends ₹30,000 crores, the State Government spends ₹20,000 crores and the Industry ₹10,000 crores (this includes CSR funding).

The salient features of the scheme are briefed below:

  1. The objective is to skill 20 lakh youth so that industry standards can be met and employability enhanced.
  2. The programme envisages the upgradation and revamping of 1000 Industrial Training Institutes (ITIs), in a “hub and spoke” model with 200 hubs and 800 spokes nationwide with the cooperation of the industry.
  3. A complete Re-design and review of existing courses.
  4. Introduction of New courses with 1 and 2 year courses offered in all the 1000 ITI’s
  5. Offering specialized short-term courses in Hub ITI’s.
Key Takeaways of the Employment Linked Incentive Schemes

The ELI Scheme offers several key benefits and they are:

  1. Promoting Job Creation: the ELI scheme acts as stimulus to companies to hire more employees by offering incentives tied to EPFO Contributions. This will stimulate industrial growth and promote employment in various sectors.
  2. Supports fresh graduates and new entrants: The first-timers scheme helps to integrate fresh graduates and new entrants into the formal workplace. This scheme reduces the financial strain and ensures a smooth entry into the job market by providing a stable income at the start of a career.
  3. Strengthens financial security for employees: By incentivizing formal employment through EPFO contributions, the scheme ensures access to retirement benefits thus enhancing the long-term financial security of employees.
  4. Encourages workforce expansion for employe₹ The job creation in the Manufacturing sector scheme encourages employers to expand their workforce by linking incentives to EPFO contributions. This reduces the financial barrier for employers to hire more workers, helping the companies to meet the increasing demand and grow in the process.
  5. Reduces the financial burden of the employe₹ The Support to Employers scheme reimburses a portion of the EPFO contributions for newly hired employees. This specifically helps Small and Medium-sized Enterprises (SMEs) to reduce the cost of hiring, making it more viable for SMEs to expand their workforce.
  6. Boosts Economic growth: By creating more job opportunities and incentivizing businesses to hire, the ELI scheme ensures that the growth driven by other manufacturing incentives such as the PLI scheme, translates into actual long-term employment gains.
  7. Encourages the formalization of the workforce: Incentivizing the formal sector employment, this helps to transition workers from the informal sector to the formal sector, providing greater stability and access to social security benefits.
Conclusion

The Employment Linked Incentive (ELI) Scheme is a strategic approach by the Central Government to address the unemployment problem in the country and to drive economic growth. The incentives targeted at both employers and employees aim to create a more inclusive and dynamic job market. The initiatives under the ELI scheme will not only support workforce expansion and formalization but will also significantly enhance the financial relief to employers, especially SMEs, thus making it easier for them to grow and hire.

GetifyHR, with its vast experience in Payroll processing and HR Management, assures all stakeholders of our continued support in helping them to make use of these schemes to foster growth and job creation, and to ensure a thriving and sustainable business in the long term.

EPFO’s new flexible savings scheme

EPFO set for a Major Upgrade: Flexible Savings and Instant PF withdrawals through ATMs

by with No Comment Labour ActNews & Updates

The Employees’ Provident Fund Organization (EPFO) is poised to introduce ground-breaking upgrades through EPFO 3.0 slated for roll-out in June 2025. The upgrade will allow Provident Fund (PF) users to withdraw their savings using ATM cards thus bringing EPFO services closer to the banking experience. Other features include a revamped Mobile App, flexible pension options with enhanced digital security, faster claims, and better service. EPFO 3.0 represents a major leap that introduces a host of new features and reforms aimed at simplifying processes, reducing paperwork, and empowering employees to manage their PF accounts independently.

What is EPFO 3.0?

EPFO 3.0 is the upcoming phase of digital transformation introduced by the EPFO to make PF management more user-friendly, transparent, and efficient. Once these reforms are rolled out, employees can self-correct personal details such as name, date of birth, and marital status directly through the EPFO Portal. This will significantly reduce administrative time delays.

In addition to this, Provident Fund account transfers will no longer require verification by the employer due to the introduction of Aadhaar–based OTP authentication. Another rather interesting upgrade is the introduction of an EPFO ATM card that enables instant PF withdrawal through ATMs. The upcoming EPFO 3.0 Mobile app provides on-the-go account management, faster claim processing, and seamless access to retirement savings. Once rolled out, the system is expected to benefit millions of salaried employees who contribute to the EPF scheme.

Salient features of EPFO 3.0

EPFO 3.0 introduces a range of innovative features to streamline processes, enhance user convenience, and reduce administrative delays, thus empowering employees to manage their PF accounts.  This Employee Provident Fund Update is poised to change the way the funds are used and managed by the members.

  • User-Friendly Interface: The proposed revamp of the EPFO website will offer a robust, interactive, and user-friendly interface for seamless navigation and easier management of Accounts.

 

  • Self-correction of Personal Data: EPF members can now independently correct discrepancies or make changes in personal information like name, date of birth, gender, nationality, etc., directly through the EPFO Portal. This eliminates the need for employer approval or supporting documents in most cases.

 

  • ATM cards for instant EPF withdrawals: EPFO members will issue ATM Cards to members that function as debit cards. Members can directly withdraw their EPF savings from ATMs, offering Instant P.F withdrawal process in India, a first of its kind in the country. This will provide instant access to funds thus reducing the hassle of waiting for approval.

 

  • EPFO Mobile App: A new Mobile App is to be launched that will streamline the management of EPF Accounts. Through this Mobile App, members can check account balances, file claims, and access a wide variety of services. This is a one-stop solution for all EPFO-related tasks.

 

  • Reduction in PF Transfer time: Members can now file their PF transfer claims directly with EPFO using Aadhaar-based OTPs without employer intervention. This will significantly reduce the delays in transferring PF accounts when switching jobs.

 

  • Self Attestation features: EPFO proposes to introduce a self-attestation feature that will allow members to complete the Know Your Customer (KYC) process without the approval of the employer.

 

  • More Efficient Pension System: Employees are allowed to choose higher voluntary contribution towards Pension. The system also proposes support to the pension system that will make it more efficient with focus on addressing the delays in issuing pension payment orders.

 

  • Seamless User Experience: EPFO 3.0 aims to make all the processes starting from Account Management to filing of claims and transferring funds, more efficient, user-friendly and faster.

 

How do the EPFO 3.0 ATM Cards work?

EPFO ATM card is a revolutionary update being introduced in EPFO 3.0 that enables withdrawals from EPF accounts. As of now, members have to wait anywhere between 7 to 10 days for withdrawals from the EPF account. The process required either online or offline requests and employee attestation.

With the new features, members can access their PF accounts directly from designated ATMs for instant access of their funds without waiting for approval from employers. EPFO ATM withdrawal thus eliminates lengthy waiting time, and offers the much-needed convenience and instant access to their savings.

The EPFO ATM card functions like a regular Bank ATM card and allows members to withdraw up to 50% of their total savings in the PF accounts without lengthy approval processes. Similar to Bank ATM transactions, EPFO ATM transactions will require authentication via OTP, PIN, or Biometric verification for added security.

EPFO Mobile App

The proposed launch of the EPFO Mobile App through EPFO 3.0 is set to be a game-changer. The EPFO Mobile App will make it easier to manage your EPF account. It will allow you to quickly check your account balance, track contributions, and file claims from the convenience of your living room or when on the move through your Smartphone. The user-friendly interface is designed to save both time and effort, making it easier to have full control of your retirement savings and manage your account on the go. Regardless of whether you are at home or on the move, everything you need will be at your fingertips.

Flexibility in Pension Contributions

EPFO 3.0 proposes changes in Pension contributions by making it more flexible. Currently, EPF contributions are fixed at 12% of the Basic salary plus Dearness Allowance, split equally between the employee and employer. One part of the contribution goes into the Employees’ Pension Scheme (EPS). Under EPFO 3.0 the following changes are proposed.

  1. Employees are allowed to choose higher voluntary contributions towards Pension.
  2. They are given the flexibility to opt for different pension schemes.
  3. Enhancing benefits under EPS based on contribution levels.

This is EPFO’s new flexible savings scheme that aims to enhance retirement savings and provide employees with greater financial control and independence.

Self-Correction of Member Personal Details:

Currently, members have to depend on employers to correct discrepancies in the personal information on the EPFO Portal, resulting in undue delays and added Administrative pressure. However, with the EPFO’s new features, members can access their personal details and correct discrepancies without the requirement of supporting documents. The high volume of grievances is primarily related to member profiles and Know Your Customer (KYC) issues. This is nearly 27% of total complaints. These proposed changes aim to drastically reduce these grievances. For example, errors in details like father’s name, spouse name, etc., or nationality that hitherto required online requests and supporting documents, can now be quickly and efficiently updated, thus streamlining the entire process.

Eliminating delays in PF Transfers

For long, there has been a demand to reduce the delays in transferring PF Accounts when members switch jobs. Currently, employer verification is a key step often resulting in significant delay. On an average, the employers took 12 to 13 days to submit transfer claims to the EPFO. As per records, over the past 9 months nearly 20 lakh claims were held up with employers for more than 15 days.

EPFO 3.0 allows employees with fully compliant e-KYC EPF accounts to file transfer claims directly with the EPFO using Aadhaar-based OTPs, without requiring employer intervention. The proposed change is expected to significantly reduce transfer claim processing time by doing away with the bottleneck of employer verification.

EPFO 3.0 – Launch Timeline

Initial announcements revealing formal details about EPFO 3.0 began circulating in early 2023 highlighting the process of digitization and self-service enhancements. As a pilot phase which is still ongoing, certain features like online PF transfer and partial self-correction are already available like under EPFO 2.0.

According to official timelines, EPFO 3.0 is scheduled to be fully operational by June 2025 and will culminate in the complete roll-out of the new infrastructure that includes the EPFO ATM Card system, a revamped Mobile App, and flexible pension contributions.

Conclusion

EPFO 3.0 symbolizes an important step towards modernizing India’s Provident Fund Infrastructure. The aim is to deliver a hassle-free experience that benefits employees across the country, and this is emphasized in user autonomy, instant access to funds, digital security, and streamlining the entire workflow. Even though a few challenges remain, especially in implementing robust security measures and ensuring widespread digital literacy, the long-term prospects suggest a more robust, transparent, and member-friendly system.

In simple terms, EPFO 3.0, the latest updates on EPFO Reforms, is a comprehensive digital overhaul of the EPFO platform, that is designed to provide members greater control over their accounts, introduces ATM-enabled withdrawals and streamlines PF transfer with reduced paperwork.

GetifyHR is a highly reputed Payroll and Statutory Compliance Service Provider with years of experience in handling matters relating to Payroll and Statutory Compliance that includes Employees Provident Fund.  We are fully geared to handle all the proposed changes and will be able to fully support all our valued clients and the employees once these changes are notified. We are there to lend a shoulder to all these changes and all forthcoming changes in all aspects of Payroll Processing, HR Management and Statutory Compliance requirements.

Budget 2025 and the Effect on Salaried Employees

Budget 2025 and the Effect on Salaried Employees

by with No Comment News & Updates

The Hon. Finance Minister Smt. Nirmala Sitharaman presented her 8th Union Budget in Parliament on 1st  February 2025. This Budget has been widely welcomed by all sections of society and hailed for its forward-looking and growth-oriented proposals. A special highlight is the tax reliefs for Middle-class taxpayers, especially salaried employees.

In this article, we will analyze the benefits that salaried employees will get through the proposed changes.

Budget 2025 has increased the nil-tax threshold to ₹ 12.75 lakhs for salaried employees and individuals with a higher standard deduction of ₹ 75,000 in the New Regime made in Budget 2024 from the earlier ₹ 50,000.  However, for those who opt for the Old Regime the standard deduction remains at ₹ 50,000. The tax exemptions from the previous ₹ 7 lakhs to ₹ 12.75 lakhs is a major jump and has been hailed as the biggest jump in the past 4 decades. The budget also provides TDS relief to senior citizens and other depositors making fixed deposits more attractive.

Major changes in Income Tax slabs and rates in Budget 2025

Considering the Old Tax Regime and the New Tax Regime, no changes have been proposed in the latest budget proposal. Instead, the Finance Ministry has adjusted the slabs, rates, and rebates in the New Regime (25-26) to make income up to ₹ 12 lakhs tax-free, which was ₹ 7 lakhs in the FY 24-25.

Old Income tax regime: (Existing and applicable for FY 22-23)
Old Income tax slab Income tax rates
Income slab of 2.5 lakh Nil
Income slab of 2.5 to 5.0 lakh 5%
Income slab of 5.0 to 10.0 lakh 20%
Income slab of 10.0 lakh and above 30%

 

New Income tax regime (Existing and applicable for FY 22-23)
New Income tax slab ( Previous) Income tax rates
Income slab of 2.5 lakhs Nil
Income slab of 2.5 to 5.0 lakhs 5%
Income slab of 5.0 to 7.5 lakhs 10%
Income slab of 7.5 to 10.0 lakhs 15%
Income slab of 10.0 to 12.5 lakhs 20%
Income slab of 12.5 to 15.0 lakhs 25%
Income slab of 15.0 lakhs and above 30%

 

New Income tax regime (Revised in Budget 2023)(For FY 23-24)
New Income tax slab (Revised) Income tax rates
Income slab of 3.0 lakhs Nil
Income slab of 3.0 to 6.0 lakhs 5%
Income slab of 6.0 to 9.0 lakhs 10%
Income slab of 9.0 to 12.0 lakhs 15%
Income slab of 12.0 to 15.0 lakhs 20%
Income slab of 15.0 lakhs and above 30%

 

The IT slab under the New Regime (24-25) are detailed below:
New Income Tax Slabs Income Tax rates
Income slab of 3.0 lakhs Nil
Income slab of 3.0 to 7.0 lakhs 5%
Income slab of 7.0 to 10.0 lakhs 10%
Income slab of 10.0 to 12.0 lakhs 15%
Income slab of 12.0 to 15.0 lakhs 20%
Income slab of 15.0 lakhs and above 30%

 

The Revised slabs under the New Regime (25-26) are detailed below:
Total Income Income tax Rates
Up to ₹ 4,00,000 Nil
4,00,001 to 8,00,000 5%
8,00,001 to 12,00,000 10%
12,00,001 to 16,00,000 15%
16,00,001 to 20,00,000 20%
20,00,001 to 24,00,000 25%
Above 24,00,000 30%

The Income slabs proposed under the New Tax Regime in Budget 2025 are a great boon to salaried employees as it helps them to save Income tax up to a maximum of ₹1,14,000. These savings are based on the premise that an individual claims only the standard rebate of ₹ 75,000 under the new tax regime. However, a salaried employee can save more tax if he claims a deduction on his employer’s contribution towards the National Pension Scheme (NPS).

The savings under the proposed New Income tax regime are detailed below:
Total

Taxable

 Income

 Tax Payable

as per the current

Tax rates 2024-25

 Tax payable as per

the

New Tax rates

2025-26

 Income tax saved through

Budget 2025
12,75,000 83,200 0 83,200
15,00,000 1,30,000 97,500 32,500
16,00,000 1,54,000 1,13,100 40,300
20,00,000 2,78,200 1,92,400 85,800
24,75,000 4,26,400 3,12,000 1,14,000
25,00,000 4,34,200 3,19,800 1,14,000

 

Comparison of tax payable (New Regime) for the FY 24-25 (AY 25-26) and FY 25-26 (AY 26-27)
Tax  Payable FY 24-25 (AY 25-26) Tax Payable FY 25-26 (AY 26-27)
Total Taxable Income Tax Rates Tax Payable Total Taxable Income Tax Rates Tax Payable
Up to 3,00,000 0% ₹ 0 Up to 4,00,000 0 % ₹ 0
3,00,001 to 7,00,000 5% ₹ 20,000 4,00,001 to 8,00,000 5% ₹ 20,000
7,00,01 to 10,00,000 10% ₹ 30,000 8,00,001 to 12,00,000 10% ₹ 20,000
10,00,001 to 12,00,000 15% ₹ 30,000 12,00,001 to 16,00,000 15% ₹ 60,000
12,00,001 to 15,00,000 20% ₹ 60,000 16,00,001 to 20,00,000 20% ₹ 80,000
15,00,001 to 25,00,000 30% ₹ 1,50,000

 

The proposed amendments in Budget 2025 may significantly boost the number of taxpayers who opt for the new tax regime. The middle-class income groups stand to gain the most, with the tax-free limit now raised up to ₹ 12.75 lakhs for salaried individuals and individuals, and the revised slabs reducing the overall taxable liability. Statistics show that 72% of taxpayers had opted for the New Tax Regime (23-24) up from 66% in the previous year. This trend is likely to continue due to the benefits the proposed amendments provide. However, taxpayers who benefit from deductions such as HRA, Home loans, and investments may still prefer the Old Tax Regime.

The proposed changes in Income Tax rates and rebates would put more spendable income in the hands of taxpayers which would hopefully encourage tax filing compliance. The flip side is that it could possibly discourage investment in savings schemes.

Conclusion

The proposed amendments in the Union Budget 2025 will greatly benefit the middle-class taxpayer, especially the salaried employee, and leave more disposable income in the hands of individuals thus enabling higher spending and investments.

Experts believe that the much-needed tax relief was necessary for boosting consumer demand, especially as it allows more disposable income in the hands of middle-class taxpayers. The proposed changes are bound to empower the taxpayer and promote greater financial inclusivity. GetifyHR has been at the forefront of supporting the needs of our clients in fulfilling their Income Tax needs and is fully equipped to handle the proposed changes. We are there to assist all our clients in seamlessly handling the statutory compliance requirements and keep the company fully compliant.

Notice Period

Comprehensive Guide to Understanding Notice Period

by with No Comment News & Updates

In the ever-changing world of work, the notice period is essential to facilitating seamless job changes. It facilitates the transition from an employee’s leaving to their replacement’s onboarding, assisting in the preservation of operational continuity. This thorough study explores the technical aspects of notice periods, with special attention to regulations, employee transitions, and notice period significance in India.

Understanding Notice Periods

A notice period is a set amount of time that an employee has to work out before leaving an organization. It’s a contractual requirement meant to provide the employer enough time to find a successor and maintain uninterrupted business operations.

An employee must serve out a notice period following their resignation from their position in order to formally quit the company. It is a common provision in employment contracts and differs among businesses, sectors, and nations. Notice periods are intended to give both the employer and the employee the time to make the necessary preparations for a seamless transfer.

Notice Period in India

In India, labor laws, corporate policy, and employment contracts all regulate notice periods. Depending on the industry norms and the seniority of the role, the notice period in India may last anywhere from a few days to several months. Junior employees usually have a notice term of thirty days, whereas senior executives typically have a notice period of sixty to ninety days.

Legal Framework:

Notice periods are somewhat regulated by the Indian labor law system, which includes the Industrial Disputes Act, 1947, and the Shops and Establishments Act. For example, a workman (non-managerial employee) who has been hired by the recruiter for a minimum of one year is entitled to one month’s notice before termination under the Industrial Disputes Act, or pay in lieu of notice. Notice periods in India, however, are mostly dictated by the terms specified in the employment contract for managerial and executive responsibilities.

Notice Period Policies
Duration and Structure:
  • Fixed Notice Periods: The majority of Indian businesses have a set notice time, which is typically outlined in the employment contract. This could be the same at every level or different depending on jobs and seniority.
  • Probationary Periods: Since this stage is seen as a trial term, the notice time is often shorter during probation, ranging from immediate to one week.
  • Tailored Notice Periods: Organizations may occasionally bargain for a notice period that is determined by certain agreements with employees.
Buyout Option:

The buyout option pays the company for the portion of the notice period that is not used by employees who leave before it finishes. Usually, the compensation sum is equal to the wage for the unsettled notice period. With this option, workers can move on to new possibilities with flexibility and know that their employer will be paid for their abrupt resignation.

Garden Leave:

Some businesses offer “garden leave,” which allows workers to serve their notice term away from the office. This keeps outgoing staff members from gaining access to private data or stealing clients and coworkers. As per the notice period policies, employees continue to get their pay and benefits throughout this time.

Immediate Termination:

Employers are entitled to instantly terminate an employee’s employment without any notice in circumstances of gross misconduct or contract violations. To prevent legal issues, these acts must be justified and documented.

Employee Transitions
Handover Process:

To guarantee a seamless employee transition, a clearly established handover procedure is essential. It entails the leaving employee giving their expertise, duties, and continuing tasks to a new hiring or a selected coworker. Sessions for exchanging expertise and thorough documentation are crucial parts of this process.

Knowledge Transfer:

Transferring knowledge effectively is essential to reducing interruptions. Employees who are leaving should record their work procedures, important contacts, and any unresolved matters. Frequent encounters with the successor can help to impart implicit knowledge that might not be recorded..

Exit Interviews:

Exit interviews offers insightful information about the factors that led to an employee’s leaving. Organizations can use this input to pinpoint areas for development and make adjustments to promote staff retention.

Successor Training:

In the event that a successor has been chosen, giving them sufficient training during the notice period guarantees that they are equipped to assume the position. Both organizational culture and technical factors should be included in this training.

Effects of Notice Periods on Workers

Notice period in India has a big influence on a worker’s career change and job hunt. An employee’s capacity to quickly investigate other options may be hampered by a prolonged notice period. In the event that the departing employee cannot find employment quickly after quitting, it could potentially result in financial difficulties. Conversely, a shortened notice period could make it more difficult for the employer to maintain business continuity.

Instigation on Morale and Productivity of Employees

Reduced Morale: Workers who are keen to explore new prospects may experience a decline in morale as a result of prolonged notice period policies. Job satisfaction and productivity may suffer as a result.

Decreased Engagement: Workers with extended notice periods may become disengaged from their jobs and concentrate more on looking for new employment than on their existing duties.

Higher Turnover: Employees who feel trapped by lengthy notice periods are more inclined to quit suddenly and before using up the entire notice period, which raises the turnover rate.

Sway on Business Operations and Employers:

Trouble Finding New Employees: Extended notice periods may complicate the process for businesses in finding qualified replacements promptly, which could cause disruptions to business operations.

Increased Costs: During the notice period, employers may have to pay more for overtime, temporary workers, or outsourcing in order to fill open positions.

Intellectual Property Loss: Prolonged notice periods in India raise the possibility that departing employees will take important information or knowledge with them, which might be detrimental to the company.

Effect on the Job Market:

Whole Talent Acquisition Difficulties: Prolonged notice periods can impede the free flow of talent in the employment market, making it more challenging for businesses to quickly fill open positions.

Decreased Employee Mobility: Strict notice period regulations/ requirements may restrict an employee’s ability to move about, which may hinder their capacity to learn new skills and pursue new career prospects.

Economic Impact: By impeding the effective use of human resources, extended notice periods may be a factor in the economic downturn.

Conclusion

Understanding the intricacies of notice periods is essential for recruiters to manage employee transitions effectively. In India, notice periods are influenced by a combination of contractual agreements and labor laws. The best Compliance and Payroll Service Provider, GetifyHR, will provide the help you need if you require any clarification understanding notice periods. Our services provide error-free payroll processing, maintain compliance, and enhance employee satisfaction. By implementing well-defined notice period policies, facilitating smooth handovers, and maintaining clear communication, recruiters can ensure seamless transitions that benefit both the organization and the employees. As the employment landscape continues to evolve, GetifyHR ensures that its clients always stay informed about best practices and legal requirements surrounding the notice periods in India.

Budget Blog

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

by with No Comment News & Updates

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.

Blog EPF

EPFO – Standard Operating Procedure for Joint Declaration

by with No Comment Labour ActNews & Updates

The Employees Provident Fund Organization (EPFO) has brought about changes to the Standard Operating Procedure (SOP) for receiving Joint Declarations for correcting mistakes in members’ Universal Account Number (UAN) profile, and employers’ EPF Accounts, and the procedure to be followed by the Field Office.

The notification to amend the SOP was released by the EPFO vide No: SU/2022/Rationalisation of work areas/Joint Declaration/17 dated 11-04-2024.

Purpose of the Amendment

The purpose of the amendment is to describe accurately and in detail the procedures of receipt of Joint Declaration for corrections in UAN profiles by the members and employers and the procedure to be followed by the field office in making these corrections. The proposed changes to SOP will make it easier and simpler to minimize both incompleteness and mismatches.

The changes would also ease the difficulties encountered in claim settlement due to data mismatches, especially in parameters such as:

  1. Name
  2. Gender
  3. Date of Birth
  4. Father’s Name/Mother’s Name
  5. Relationship
  6. Marital status
  7. Date of Joining
  8. Reason for Leaving
  9. Date of Leaving
  10. Nationality and
  11. Aadhaar Number.

The SOP for Joint Declaration aims to streamline the process of rectifying discrepancies in member profiles, thereby reducing claim rejection and minimizing the risk of impersonation and fraud through the manipulation of UAN.

The process

The process entails a collaborative effort between the employees and the employers with due authentication by a process of Initiation, Verification, and Approval by the Field Office (FO).

1.  Initiation

As and when a member files a Joint Declaration, it gets authenticated by the Employer. The submitted documents are then verified for accuracy by the designated Verifier within the FO.

2.  Verification

The modification request and supporting documents are then cross-checked by the designated Verifier to ensure compliance with EPFO guidelines and regulations.

3.  Approval

Upon verification, the JD is forwarded to the designated Approver for approval. This could be the Regional Provident Fund Commissioners (RPFC), Additional Provident Fund Commissioners (APFC), or other authorised officers of the organization.

List of acceptable documents that can be submitted for the different parameters

Name and Gender
  1. Aadhaar (mandatory)
  2. Passport
  3. Death Certificate
  4. Birth Certificate
  5. Driving License
  6. Service photo identity card issued by Central, State, UT Govt./PSU/ Banks
  7. School Leaving Certificate (SLC) or School Transfer Certificate (TC) or SSC certificate or Mark Sheet issued by Board/ University containing name and photograph.
  8. Bank passbook having the name and Photograph cross-stamped by the Bank Official.
  9. PAN Card/e-PAN
  10. Ration/PDS Photo Card
  11. Voter ID/e-Voter ID
  12. Pensioner Photo Card/Freedom Fighter Photo Card
  13. CGHS/ECHS/Medi-Claim Card with Photo issued by State/Central Govt/PSUs/Rashtriya Swasthya Bima Yojana (RSBY) Card.
Date of Birth
  1. Birth Certificate issued by the Registrar of Births and Deaths.
  2. School Leaving Certificate (SLC) or School Transfer Certificate (TC) or SSC certificate containing Name and Date of Birth or Marksheet issued by any recognized Government Board or University.
  3. Service records certificate issued by the Central/State Government Organizations.
  4. Where proof of date of birth is not available, a Medical Certificate issued by a Civil Surgeon after medical examination of the member and supported with an affidavit on oath by the member duly authenticated by a Competent Court.
  5. Aadhaar
  6. Passport
  7. PAN Card
  8. Central/State Pension Payment order
  9. CGHS/ECHS/Medi-Claim Card issued by Central/State/UTs Govts./PSUs having Photo & Date of Birth.
  10. Domicile Certificate issued by the Government.
Father / Mother name, and Relationship
  1. Passport of Father/Mother
  2. Ration card/PDS Card
  3. CGHS or ECHS/ Medi-Claim Card with photo issued by Central/ State Govt./PSUs.
  4. Pension Card
  5. Birth Certificates issued by Municipal Corporation, and other notified local Government bodies like Taluk, Tehsil, etc.
  6. Marriage Certificate issued by the Government.
  7. Photo ID card issued for schemes like Bhamashah, Jan-Aadhaar, MGNREGA, ARMY Canteen Card, etc., by Central/ State Govt.
Marital Status
  1. Marriage Certificate issued by the government
  2. Aadhaar Card
  3. Divorce Decree
  4. Passport.
Date of Joining
  1. Employee register
  2. Attendance register
  3. Appointment letter or any other document as establishments maintain under any central or State Labour Act
  4. Letter of establishment on the letterhead duly signed by the Employer or the Authorized Signatory showing the date of joining, supported by ECR of the employee during the said period.
Reason for Leaving
  1. Resignation letter
  2. A letter from the organization on their letterhead clearly stating the reasons for leaving, supported by the ECR of the employee during the said period.
  3. Termination letter issued by the employer to the employee.
  4. Any document as the organization deems fit to establish the reason for exit of the employee duly signed by the Employer or the authorized signatory of the organization on their letterhead.
Date of Leaving
  1. Resignation letter/termination letter
  2. Experience certificate or any other document an organization maintains under any Central or State Labour Act
  3. Wage slip/salary slip/full and final letter
  4. Letter of organization on their letterhead clearly stating the date of joining and duly signed by Employer or the authorized signatory.
Nationality
  1. Copy of Passport
  2. Copy of Person of Indian Origin (PIO) card issued by the Govt. of India
  3. Long Term Visa (valid) along with a Foreign passport (valid or expired) of country of origin issued to minority communities of Pakistan, Afghanistan and Bangladesh, namely Hindus, Christians, Sikhs, Buddhists, Jains, and Parsis.
  4. Valid Visa issud to a Foreign National along with a valid Foreign Passport.
  5. Tibetan Refugee Card (supported by one more ID)
Aadhaar
  1. Member Aadhaar card or e-Aadhaar card with details of linked active mobile phone.
Submission of Documentary Proof

All changes to parameters have been classified into Minor and Major changes and these have been detailed in Table 2 of the SOP.

All requests for Minor or Major corrections will have to be supported by documentary proof as prescribed in Annexure 1.  For Minor corrections, at least 2 documents from the list of documents mentioned in Annexure 1 for that particular parameter are required to be submitted. For Major corrections, at least 3 documents from the list of documents mentioned in Annexure 1 for that particular parameter are required to be submitted.

Frequency of Corrections

The SOP has fixed the frequency at which corrections to various parameters can be made through the Joint Declaration Form. The same is tabulated hereunder:

Sl. No. Parameters No.of times changes can be made

1.

Member Name

1
2. Gender

1
3.

Date of Birth

1
4. Father/Mother Name

1
5. Relationship

1
6. Marital Status

2

7.

Date of Joining

1

8.

Date f Leaving

1

9.

Reason for Leaving

1

10.

Nationality

1

11.

Aadhaar

1

The Procedure

The EPFO has streamlined the process of updating profile parameters by embracing digital technology thus making it accessible through the online platform. The process is simple and both the employees and employers alike can leverage the power of digital technology to submit the JD online.

Firstly, log on to the EPFO website at https://www.epfindia.gov.in/.  Then log into the Employee login using the Universal Account Number (UAN) and the Password. Employers can use their EPF credentials to log in. After logging in, click on the “Online Services” option on the portal and look for the Update or Correct EPF details, and select the Joint Declaration Form (JDF). Once the Form opens, fill in the required details accurately and ensure that all the details called for are filled in. Depending on the parameter that you are updating or changing, upload the supporting documents.

Next, submit the Form after fully verifying that the details provided by you are correct. After submission, you can track the status of the Joint Declaration Form submission through the EPFO portal and ensure that the processing is taking place and the details are fully updated.

Once the changes are approved, the member’s photo which is retrieved by the EPFO interface with UIDAI Aadhaar data will become visible in the member profile on their portal and the IT interface of various authorities.

Conclusion

Through this highly efficient and structured process, EPFO not only aims to maintain the profile integrity of the member but also hopes to minimize claim rejections and reduce the risk of impersonation and fraud. By leveraging technology through the Unified Portal Application, EPFO endeavors to enhance transparency, streamline efficiency, and usher in greater accountability in its operations. EPFO’s commitment to providing the best of technology for the benefit of employees and employers alike demonstrates a step towards a brighter and more streamlined future on social security and the management of EPF Accounts.

GetifyHR has been fully supportive of the needs of the employees and employers in handling EPF, and we have always updated ourselves immediately on all the changes brought in by EPFO from time to time. We are fully geared to handle these changes and support our clients and through them the employees in all aspects of EPF.

HR Work culture

How Human Resource activities can boost Work Culture?

by with No Comment BusinessNews & Updates

The success of any organization wholly rests with the Human Resources Management team. Where the focus is to achieve the objectives of the organization, clear procedures have to be followed and this entails adopting and implementing rules and procedures that promote employee engagement and well-being. The HR team recruits and helps keep talent so that greater productivity is achieved by enabling a positive workplace culture.

The efficiency of the HR team fosters open communication and this not only helps in creating a positive work culture but also strengthens the bond between the Management and the Employees. In this article, we explore the strategies implemented by the HR team to boost workplace culture.

What is Work Culture?

Your work culture is the shared set of practices that guide your organization. These include your values, your beliefs, and your attitudes as reflected in the way you respond to your employees and customers. Work culture has a direct bearing on the types of candidates you attract for various open positions in your organization. A strong and positive work culture boosts productivity, reduces employee turnover, and improves employee engagement.

Work culture is a vital part of the organization’s core culture. It is prone to grow and change according to the circumstances and is, therefore, different from the organization’s core values which largely remain the same over time.

What is the Importance of Work Culture?

A positive work culture will strongly impact employee experience.  It will have an impact on individual and team morale, employee engagement, and job satisfaction. A positive workplace culture creates a loyal and strong team of employees. On the other hand, a negative work culture promotes a toxic workforce that can curtail the growth of the organization and make it difficult to hire talent and retain them. Surveys have shown that positive company values and culture rank as the top influence on whether a candidate decides to accept a job offer. On the contrary, poor company culture is the main reason for employees to leave their jobs.

Factors that help in developing work culture?

Several factors help in developing a positive work culture. Let’s look into some of these:

  1. A supportive leadership.
  2. A feeling of being respected.
  3. Whether the actions of leaders align with the core values.
  4. Proper benefits, perks, and amenities.
  5. Learning opportunities.
  6. Opportunity for professional development.
  7. Job security.
  8. Frequency and quality of reorganization.
What are the strategies needed by HR to create a positive work culture?
Exceptional Onboarding Experience:

Provide an exceptional onboarding experience to new hires. A well-designed onboarding process is crucial for integrating new hires into the organization’s culture. HR can streamline the transition by providing comprehensive orientation, introducing company values, and fostering smooth relationships with colleagues.

Competitive Compensation:

The best way to attract and retain the best of talent is by providing fair and competitive compensation packages. HR can develop and implement competitive compensation and benefit packages that encourage and retain the best of talent. They play a vital role in benchmarking salaries, assessing market trends, and ensuring that employees feel valued for their contributions.

Team Building Activities:

Encourage team-building activities in your organization. HR-initiated team-building activities promote camaraderie, collaboration, and trust among employees. In an organization that oversees a distributed team, the biggest challenge is to establish genuine connections. By organizing regular team building activities the HR can help bring that “human” touch back to your workplace. These activities can range from informal gatherings to structured workshops aimed at enhancing teamwork and communication.

Promote Recognition:

Recognizing and rewarding employees for outstanding results would boost morale and motivation. This would encourage employees to continue performing at impressive levels and make them feel valued within the organization. This will act as a motivation to their peers to improve their performance, thus enhancing work culture and fostering friendly competition that leads to better performance. HR can implement recognition schemes, including employee of the month awards, peer-to-peer recognition, and milestone celebrations.

Collecting Feedback:

Collecting employee feedback is one of the most effective engagement initiatives. Regular feedback mechanisms, such as surveys and suggestion boxes, enable HR to gauge employee sentiment and identify areas for improvement. Actively listening to employee feedback demonstrates a commitment to their well-being and fosters a culture of continuous improvement.

Prioritize Welfare Programs:

The priority is to create a healthy work-life balance and the HR team must maintain the mental and physical health of the employees for better retention. When individuals are tired, stressed, or on the verge of burnout, they cannot be expected to perform at their best. HR plays a vital role in prioritizing employee welfare by offering benefits such as health insurance, wellness programs, flexible work arrangements, and family-friendly policies. These initiatives enhance employee satisfaction and promote work-life balance.

Improve Communication:

A healthy work culture can be brought in only with effective communication. Clear and open communication is the key to the success of any team and this is especially true for HR teams. In most organizations, HR is the main point of communication between the top management and the employees. HR can facilitate transparent communication channels, provide regular updates on organizational changes, and encourage open dialogue between management and employees.

Training and Development:

Investing in employee development through training courses and professional development programs demonstrates a commitment to individual growth and skill enhancement. HR can give employees the chance to update their knowledge and skills through training and development programs. This will enable the employees to feel appreciated, improve job satisfaction, and inspire them to work to their maximum potential. HR can identify training needs, organize workshops, and provide resources to support ongoing learning.

Accept New Technology:

The workplace is ever-evolving and continues to change at great speeds. New processes disrupt proven ways of completing jobs and new-generation employees come with different expectations and behaviors. Every organization is prone to the effects of change, in both technology and process. Embracing technology innovations streamlines processes, enhances productivity, and fosters a culture of innovation. HR can champion the adoption of new tools and platforms that improve workflow efficiency and facilitate remote collaboration.

Employment Engagement Survey:

Employment Engagement is a concept that highlights how the employees feel towards an organization and how their feelings translate into actions and behaviors at work. An employee engagement strategy is, therefore, the steps you take to build positive engagement at work.

Conducting regular engagement surveys allows HR to assess employee satisfaction levels, identify areas of concern, and implement targeted interventions. These surveys serve as valuable tools for measuring the effectiveness of HR initiatives and fostering a culture of continuous feedback and improvement.

Conclusion

In conclusion, human resource activities play a pivotal role in shaping and enhancing work culture. By prioritizing elements such as onboarding experiences, competitive compensation, team building, recognition, feedback collection, welfare programs, communication improvement, training and development, technology adoption, and engagement surveys, HR can foster a positive and productive work environment conducive to organizational success. Investing in work culture isn’t just a choice – it’s a strategic imperative for businesses aiming to thrive in today’s competitive landscape.

At GetifyHR, we have invested our time and effort in enhancing the work culture at different client locations across the country, with the sincere support of the HR teams. We have been able to provide regular updates and ideas to streamline the process so that employees have access to the best practices and technology that not only improves the work culture but also enhances productivity.