Economy

Majority of companies expect labour code changes will impact profit and loss account: WTW study

K.R. Srivats | Updated on: Jun 22, 2022
Employee experience was found to be the top influencer of the long-term employee benefits strategy

Employee experience was found to be the top influencer of the long-term employee benefits strategy

53 per cent of companies surveyed plan to review their retirement benefits in two years

A majority of 64 per cent of companies in India expect the anticipated changes in the labour code to have a significant impact on their profit and loss account.

In light of regulatory changes, labour reforms and increasing cost of providing retirement benefits, 53 per cent of organisations in India are considering or  plan to review their retirement or long-term benefits design in the next two years. 

These are among the findings of the ‘State of Retirement Benefits’ study in India by the Nasdaq-listed WTW (Willis Towers Watson), a global advisory, broking and solutions company. The study covered the top 75 companies in India. 

The study also revealed that employee experience (49 per cent) is the top influencer of the long-term employee benefits strategy, followed by regulatory complexity (45 per cent). Digitalisation of benefits is also ranked amongst the top influencing factors, at 26 per cent.

Ritobrata Sarkar, Head of Retirement, WTW India, said: “Organisations are gradually coming out of the pandemic survival mode and focusing on issues such as the long-term implications of retirement adequacy and employee benefits. Our study shows that the retirement benefit landscape in India is evolving, with organisations retaining superannuation as an option, in addition to promoting NPS. 

While both these avenues co-exist, it will be critical for organisations to consider the regulatory environment, flexibility for employees, cost-benefit analysis and, most importantly, employee experience, as they review their long-term employee benefits strategy and mix. That said, NPS continues to be a focus area, with a large majority exploring strategies to increase employee participation rates.”

Labour Codes 

Considering the anticipated Labour Code related changes, 71 per cent of companies have taken some action to assess the implications. On the other hand, 34 per cent are unsure of making changes to their compensation structure in response to the new definition of wages, while 23 per cent are planning to include variable pay in the wage definition. 

In addition, 46 per cent of companies plan to continue to contribute 12 per cent of their basic salary towards provident fund in line with the prevailing regulations, while almost one-third (32 per cent) are unsure of their response. 

Employees’ Provident Fund 

According to the study, approximately 7 in 10 Employee’s Provident Funds are  managed by a regulator. An equal number of respondents believe that  EPFO services have significantly improved, with increased administration efficiency and digital enablement. A large number (73 per cent) also feel that market volatility and the current bond defaults or downgrades are a cause of concern for their self-managed provident fund. Half the surveyed companies report that regulatory compliance has become a significant burden, and a similar number said managing their own provident fund trust is not a sustainable option in the long-term. 

National Pension System 

The study found that 73 per cent of the surveyed companies currently provide or plan to implement Corporate NPS and amongst those that already provide it, 61 per cent are exploring strategies to increase the participation rate.

Further, 13 per cent have ported from the superannuation scheme to NPS, 25 per cent are in the process of or are considering to port, and 36 per cent offer or plan to offer both. 

On the other hand, 44 per cent of organisations plan to continue to offer legacy superannuation plans and almost half have retained or are planning to retain the scheme for new entrants. The study also found that 71 per cent are not considering winding up their superannuation scheme.

The companies rank complexity (56 per cent), employee communication (47 per cent) and securing employee consent as top barriers in porting from superannuation to NPS.

Published on June 22, 2022
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