| Consequently, thousands of workers are being added to the list of employees who are eligible for a statutory bonus since the earlier cut-off was Rs 6,000 per month. |
| The government had also raised the bonus calculation ceiling from Rs 2,500 to Rs 3,500. The impact is pronounced since the ordinance is effective retrospectively -- from April 1, 2006. |
| A major employer like Larsen & Toubro, for instance, has around 25,000 (of a total of 35,000) employees working in non-supervisory levels and other blue-collar jobs. |
| An executive from the company, who wished to remain anonymous, admitted that the wage bill would increase but did not give any figure. |
| Similar is the case with a public sector unit like ONGC which has around 33,000 employees, according to a company source, who will benefit from the raised limit. The additional payout will be around Rs 7-8 crore. |
| "It is a good move on the part of the government. However, it is sure to have an impact on the annual wage bills of labour-intensive sectors such as manufacturing. While we have not worked out the exact figures, our estimate is that it will benefit 40-50 per cent of the total workforce in the organised sector," says D L Sharma, CII Convener (Labour Law Panel). |
| Companies, however, are not amused. "Since the ordinance is with retrospective effect, it is an unplanned expense for us. We had already closed the books for the previous year. Now we have to account for this additional expense," says a BPO senior executive. |
| Moreover, for companies in the services sector which face high attrition rates, the problem gets compounded -- how do these firms get in touch to pay the extra bonus to people who have quit the organisation? |
| Indian IT and BPO firms, which are already being affected by a US slowdown and higher wage bills, are assessing the impact of the government ordinance. These firms are known to pay high salaries. |
| However, given that anywhere between 25 and 30 per cent of the IT-BPO workforce comprises of newcomers, the annual wage bills could shoot up by 5-7 per cent. IT-BPO firms, note analysts, generally pay an average cost-to-company (CTC) of around Rs 1.8-3 lakh. |
| However, a CTC is also made of variable and non-variable allowances which will bring most of these newcomers in the below Rs 10,000 (basic salary) bracket. |
| The effects are already showing in a few cases. Aztecsoft, for instance, suffered a 100 basis points (bps) dip in its margins due to extra bonuspayout for financial year 2007-08. |
| Samir Bodas, CEO, Aztecsoft, said: "This is a one-time payout for the fiscal. While it will surely benefit employees who come in this bracket, it did impact our margins and will do so for many other companies." |
| "Given that the amendment is new, Satyam is still in the process of studying it and evaluating the implications on the overall wage bill," said S V Krishnan, Global Head, Satyam HR. Wipro CFO, Suresh Senapathy, said "the impact would not be significant" for his company. |
| Hanuman Tripathi, Managing Director, Infrasoft Technologies, said: "This payout will indeed affect our wage bills. We are currently evaluating its impact." What is disconcerting, he rued, is that the payment is over and above the performance bonus and other variables. He explained that "newcomers are the ones most in need of training. An extra mandatory payout does not seem in order". |
| Meanwhile, analysts suggest that companies may find ways to work around the issue by adding the increased wage liability to the CTC in the next financial year. An L&T executive, for instance, said the company would tweak the variable component of the salary to accommodate the additional bonus payout. |
| While the additional liability for the government is still to be worked out, the government is estimated to have paid between Rs 300 crore and Rs 350 crore in 2006 on account of ad hoc bonus payment at a maximum Rs 2,467 per employee. |
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