500 firms approach Labour Ministry for employee salary choice

As many as 500 companies have approached the Ministry of Labour to consider revamping of the laws governing salary payment and granting employees a choice in how they are paid their salary.
A coalition of 500 employers recently submitted a petition and urged the government to re-look at the laws governing salary payment of low-wage employees by allowing employees to choose how their salary is paid and contributions invested, HR consultancy firm TeamLease, which is part of the coalition, said.
The petition asks the government to give employees the choice to decide on three issues.
Firstly, whether to make their 12 per cent employee contribution to Provident Fund or opt out of it; secondly whether to pay 12 per cent employer contribution to the Employee Pension Scheme or to an individual account opened with the National Pension Scheme.

And thirdly, whether to pay their ESI contribution to the ESI corporation or purchase insurance from any IRDA regulated insurance company.
According to HR consultancy firm TeamLease, India has one of the highest 'salary confiscation' regimes in the world and giving employees the choice to decide how their salaries are paid is by far the most important reform that can be undertaken in Budget 2015.

"The government is requested to move away from the current benefits 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," Rituparna Chakraborty, Convenor of the Petition & Co-Founder of TeamLease, said.

Currently in a cost to-company model informal employees can take home their entire salary while employees in the organised sector "lose" a part of their earnings to schemes like PF, Employees State Insurance (ESI), Professional Tax, Employees Pension Scheme, statutory bonus and gratuity, TeamLease said.
Hence most choose informal employment where gross and net salaries are the same.
According to TeamLease, India's labour laws mandate the highest salary deductions for low wage employees in the world; in a cost-to-company world this can mean an almost 44.31 per cent salary deduction for low wage employees, while it is only 5.32 per cent for high wage employees.

Nearly 100 per cent of the net job creation over the last two decades has taken place in the informal sector and we have 90 per cent informal employment overall, the report said adding that by recognising and offering employees the right to choose their take home pay will increase the share of our formal labour force.