POST THE DECLARATION OF THE UNION BUDGET, CHANGES IN COMPENSATORY TRENDS ARE INEVITABLE. SO DID YOUR MONTHLY CHEQUE JUST GET FATTER? VIREN NAIDU HAS THE ANSWER…

The workforce of India Inc. awaits the Union budget announcement with bated breath, for nothing affects them like a great budget or a not-so-great one. Madhu Bhojwani, CEO, EmmayHR says, “There will be no changes in structures of the salary, but due to the increase in the exemption limit and also the decrease in the tax structures, the actual salary rise will be less by 3–5 per cent than the expected figure.” Based on her personal analysis of the compensatory trends likely to impact various industries, post-budget, Bhojwani gives a gist of the salary trends most likely to catch up in the near future, “While employees in the IT industry can witness a salary hike of 7-10 per cent, the ITES sector, according to me, will witness no major change in the compensation packages due to certain market factors. The salary hikes in the hospitality industry depend on the bottomlines of individual companies but as a sector, an increase of 16–22 per cent is expected in employees’ pay packets. The pay packets of employees in the BFSI (Banking, Financial Services and Insurance) industry can expect a hike of 15-20 per cent. In the manufacturing industry however, a hike of 15–20 per cent for employees working for more than 10 years in the company and upto 30 per cent in the very senior level positions is predicted because of the boom in manufacturing of capital goods.” The budget has certainly impacted the salary and employment trends in different industries to different extents. Read on to find out as some industry experts share their opinions and thoughts on the budget.

IT

The budget has not addressed some of the key requirements of the IT industry, R Chandrasekaran, President and Managing Director, Cognizant specifies. Adds Chandrasekaran, “The extension of the STPI scheme (Software Technology Parks of India scheme that gives tax benefits to technology companies), for example, found no mention. If only the tax holiday under the STPI scheme were extended beyond March 31, 2009, it would have been a big shot in the arm for the industry, primarily because the IT industry has been consistently ploughing its earnings back into the business, resulting in higher investment and growth.” Chandrasekaran enlists his expectations from the next budget: 1) It is important that the small and medium sized companies invest aggressively in innovation and also take the industry to Tier-II cities ahead of the rest of the industry, and receive preferential treatment from the government since it is from this category that the next big top tier offshore player can emerge in the next five to ten years. 2) The government also needs to pursue education reforms much more aggressively in the coming years.While the industry has been bridging the gap in skill requirements by partnering with academic institutions, the government will have to consider innovative education reform measures, corporatise or privatise the education system to a strict timeline over the next few years and give autonomous status to more educational institutions and other constituents of the education sector.

HOSPITALITY

There have been tax holidays for two, three and four star hotels set up in World Heritage sites only. The new hotel projects may get some benefits from reduction in CST (central sales tax) from 3 per cent to 2 per cent. Overall, it has been neutral,” says Gurmeet Singh, Area Director of HR, India, Maldives and Pakistan, Marriott Int’l Inc. “I do not see a direct correlation between budgets and salary levels. However, there is scope to design the salary package so that one can take advantage of the tax laws thereby increasing the net take home of the employee,” adds Singh. Singh doesn’t expect anything specific from the next budget besides hoping that IT laws are made simpler so that there aren’t complications to pay tax.

MANUFACTURING AND ENGINEERING

Besides exercising the foremost duty of understanding the impact the budget will have on people processes and practices and also communicating the same to the people (read:employees) concerned, Harpreet Kaur, General Manager – HR, Godrej & Boyce Mfg. Co. Ltd emphasises that HR has to divert all its attention into working towards making appropriate changes in policy/systems to ensure statutory compliance as well as optimisation of the benefits available or introduced after the budget. Kaur says that this year’s budget has been good to the manufacturing industry but it certainly could have been better. “Apart from change in taxation slabs, removing of FBT on guest house expenses and allowing for a deduction of Rs. 15000 for mediclaim expenses for parents and reduction in CENVAT (Central Value Added Tax levied on manufacturers) from 16 per cent to 14 per cent, not many other benefits are given to our industry.” However, she also mentions that the focus on health and education should have a good impact in the long term on talent availability. “But, there are certain aspects of the budget that I am not satisfied with. The corporate rate of taxation could have been reduced looking at the buoyancy of tax collections. Secondly, more avenues for tax saving/ planning for salaried class could have been provided.” Experts say that they don’t foresee any major changes in compensation packages in light of the budget but they do expect salaries to grow at all levels.

BFSI

While the new FBT (fringe benefit tax) norms allow a little more scope to redesign some employee welfare schemes, there are no major change in issues that HR needs to address as an outcome of the budget, experts confirm. “It is friendly to employees in certain salary brackets but otherwise not much to debate on. From an employee perspective, the new tax structure would leave additional cash in hand for people to invest more wisely. Also, entry-level salaries in banking will still be high with shortage of skilled people in certain functions. The average hike in terms of cost-to-company (CTC) would trend similar to last year’s hike,” says Subhro Bhaduri, Executive VP–HR, Kotak Mahindra Bank. He also adds,“I would have preferred a re-look at FBT and doing away with the surcharge on personal income tax (10 Lakh + income bracket).”

BPO

The Union budget 2008-09 is a populist budget and has been entirely focused on the benefits of the common man, according to Pradeep Narayanan, President New Services & Global Chief Infrastructure/Risk Officer, 24/7 Customer. He adds, “With the dynamics of the global economy and rupee fluctuation, respite on the MAT (minimum alternative tax: the minimum tax to be paid by a company), extension of tax holiday, stability in transfer pricing would have been appreciated. From an industry perspective, we are disappointed as the industry was expecting an extension of 10 year tax holiday under Sec 10A and 10B, which is set to expire in March 2009. The BPO industry in India is still a young industry as compared to the IT industry and needs the support of the government till it reaches a phase of growth and maturity. This year, the industry was challenged by the rupee’s appreciation and the dynamics of the international market scenario. A Union budget that responded to the wishlist of the industry would have been deeply appreciated.” Experts say that this year, the budget has been more beneficial to the salaried people. The income tax benefit provided, will prove to be beneficial to both existing and potential employees. “The budget has by reduction in the personal income tax, ensured a higher take home salary,” says Narayanan. And experts also agree that it’s HR’s duty to interact with the employees on topics related to the implications of tax benefits provided in the budget and assist them to plan their income tax, accordingly. It’s certain that the 2008-09 Union budget has been more favourable to some industries and less favourable to some, while for the rest, it was strictly neutral. But overall, experts do say that it was a good balancing act. While it on one hand foresees employment generation opportunities in various industries, on the other, it does create various HR challenges. But there is always hope for there is always a next time. So, let’s keep our fingers crossed for Union budget 2009-10!

viren.naidu@timesgroup.com

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