TeamLease, India’s temporary staffing major, views that the pharmaceutical industry is now hoping that the ‘salary confiscation’ regime in the country is transformed and employees are given three individual choices in deciding how they are paid their salary. India has one of the highest salary confiscation regimes globally.
TeamLease with 500 companies including the pharmaceutical sector approached the Ministry of Labour recently and submitted a petition urging the government to re-look at the laws governing salary payment of low wage employees. It called for a system to allow employees choose how their salary is paid and contributions invested.
The three choices expressed by employees across sectors including pharmaceuticals is the 12 per cent PF contribution to be made optional. The employees should be given the right to choose whether 12 per cent employer contribution should go to Employees Pension Scheme, (EPS) or National Pension Scheme (NPS). Further, they should also be given the option whether to pay their ESI contribution to the ESI corporation or purchase insurance from any IRDA regulated insurance company. These choices, according to TeamLease would impact take home pay and reduce informal employment.
There is no proposal to make the employer Provident Fund voluntary since it must be mandatory and the status quo of employee paying their Employee Provident Fund to EPFO should be available. If the government decides to give the go ahead to abolish the salary confiscation, it would reduce informal employment and bring down attrition levels.
India’s labour laws mandate the highest salary deductions for low wage employees in the world. TeamLease noted that in a cost-to-company model it would account to 44.31 per cent salary deduction for low wage employees.
“Currently in a cost to-company model informal employees can take home their entire salary while employees in the organised sector lose nearly 50 per cent of their earnings to schemes like PF, Employees State Insurance (ESI), Professional Tax, EPS, statutory bonus and gratuity forcing them to live on half their salary which they can’t . Hence most choose informal employment where gross and net salaries are the same. Therefore the government is requested to move away from the salary confiscation regime because it harms the people it is trying to protect. Recognising the cost-to-company model and revamping these labour laws would greatly benefit youth, increase formal employment and accelerate voluntary migration, said Rituparna Chakraborty, Convenor of the Petition & Co-Founder, TeamLease.
Nearly 100 per cent of the net job creation in the informal sector and we have 90 per cent informal employment overall. Both these numbers need to change significantly if India has to become an economic powerhouse, she added.
By recognising and offering employees the right to choose their take home pay will increase the share of our formal labour force. The right to invest in EPS or NPS will also bring about a healthy competition between organisations, helping serve the beneficiaries better noted the TeamLease co-founder.