Code on Wages and Salary Structuring

April 2021 is around the corner and there are a lot of buzz about the four new labour laws which are going to be in effect from Apr 1, 2021. One of them is Code on Wages and that’s effectively a revised version of Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of […]

April 2021 is around the corner and there are a lot of buzz about the four new labour laws which are going to be in effect from Apr 1, 2021. One of them is Code on Wages and that’s effectively a revised version of Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965 and Equal Remuneration Act, 1976.

One of the major questions that HRs are facing these days is how the definitions are changing and how it’s going to affect the salary structures. It is their Y2K problem. Employees—who are not in the HR community—are worried as to how this is going to impact their take home salary, as depicted by some of the news outlets in the country.

Before we begin

Please make sure that you read my previous article on how salary structuring works (keep in mind that it was pre-Apr 2021). That article will help you understand various jargons in the Comp and Ben sector and make sure that you get the difference, inter alia, between Gross Pay, CTC, Employer Contributions, Employee Deductions, etc. Let’s call that article a prerequisite for this one.

Introduction

Code on Wages, along with the other three new labour laws, comes into effect from Apr 1, 2021; however, rules for all the four are not yet finalised and notified, but we hope that would happen soon so that they are in effect from the aforementioned date.

This article discusses some major impact these acts bring in to the Compensation and Benefits regime. I will focus more on the payroll structuring per se, rather than other major changes therein. Let’s dive in:
Structuring your salaries in the right way is crucial to make sure that both employees and employers benefit.

Definition of Wages

Definition of wages seemed to be one of the complicated definitions in the labour realm in India for many years. EPF Act defined wages differently than the ESI Act, and every other act in the country had its own definitions of Wages. With the new set of four consolidated labour laws in place, this confusion is removed. All the laws now provide a single definition of wages, as given below:

As per the Code on Wages:

“wages” means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—

  1. basic pay
  2. dearness allowance and
  3. retaining allowance

Further, the Code excludes the following components from the definition of wages: bonus payments;

  1. any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
  2. the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
  3. any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
  4. any conveyance allowance or the value of any travelling concession;
  5. any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
  6. house rent allowance;
  7. remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
  8. any overtime allowance;
  9. any commission payable to the employee;
  10. any gratuity payable on the termination of employment;
  11. any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment

Excerpts from Code on Wages, 2019

Additional Clauses on Calculation of Wages

The goes on to state the following, which forms the crucial part while structuring salaries:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (A) to (I) exceeds one-half, or such other per cent as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause.

Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.

Explanation.––Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee.

Reading the Clauses in the Act in Detail

  1. It is evident that the Basic Pay is part of Wages.
  2. DA, if it is part of the pay structure, it is included in Wages.
  3. Retaining Allowance is also part of the Wages. It is to note that Retaining Allowance ≠ Special Allowance. You need to specifically provide this component and with the specific purposes thereof to make it Retaining Allowance, in the Offer Letter/Appointment Letters.
  4. Gratuity, Statutory Bonus, HRA, ER EPF, ER ESI, OT, Commissions, and retrenchment compensation are excluded in the calculation of Wages.
  5. Payment in kind such as payment for house accommodation (some companies provide free house accommodation for their employees for the initial few days or for a longer term) shall be excluded from Wages
  6. Payment for special purposes shall be excluded from Wages
  7. Dispute Settlements are excluded from Wages
  8. Conveyance allowance is excluded from Wages.
  9. The exclusion components should not be more than 50% (of the gross pay). If it is more than 50%, then the 50% of the gross pay shall be deemed to be the Wages.

HR and Finance need to work together to tackle this ‘Y2K problem for HRs’

Can the Inclusion Components (Wages) be more than 50%?

Yes. The act only says that the exclusion components should not be more than 50%. That clearly means that the inclusion components should be at least 50%. This also means that the Wages should be at least 50% of the gross pay. It can very well be above the 50% limit; and it can also be 100% of the salary. Provide the entire Gross Pay as Basic Pay, and no one will question you (though this is not ideal for both the employee and the employer).

Should Basic Pay be 50% of Gross Pay (or 50% of CTC)?

There are some articles that say the Basic Pay should be 50% of the CTC, which is wrong. The act only says that the exclusion components should not be more than 50% (= inclusion components should be at least 50%). That does NOT mean that the Basic pay should be 50% of Gross Pay.

Further, no acts in India talks about the CTC. It’s a term that our companies and accounting officers coined. When an act refers to the word salary, it, generally, means the gross pay.

Are all allowances excluded from Wages?

Just because a component has the word ‘allowance’ it is not excluded as such. You may want to revise how the definition of Wages begins: “wages” means all remuneration whether by way of salaries, allowances or otherwise. It essentially says that the word ‘allowance’ simply does not exclude it from Wages.

Is Special Allowance Excluded from Wages?

This is a hot and debated topic over the last few months. Indian companies use Special Allowance as a bucket to fill in to reach the CTC. That is, when the CTC is split into different components such as Basic Pay, HRA, etc. the remaining amount  goes to Special Allowance so that they all add up to CTC. As long as your offer letter and/or the appointment letter does not have any specific definition (vide Exclusion List# E) related to Special Allowance, it is INCLUDED in the Wages. Here’s a presentation from Deloitte if you would like to have a look.

If you disagree with the above reading, please let me know in the comments and why.

Is HRA excluded from Wages?

Yes, HRA is excluded from the Wages Calculation.

Is Variable Pay included in Wages?

Performance-based variable pay will be an inclusion component in Wages, since that does not appear on the exclusion list.

So, what’s the big deal now?

The big deal is to make sure that your salary components are in line with the Code and that the Wages components is at least 50% of the Gross Pay. If your components are already in line with this math, you do not have to worry about restructuring at all. Peace!

Wait, can you tell me what all components can be there in a Salary Structure?

It would be unwise for an outsider to comment on how your components should be. However, below are some ordinarily paid salary structure components that one may find in the IT industry. I am trying to give you a comparison of those components with respect to the act.

Component Included in Wages? Taxable
Basic Pay Yes Yes
Dearness Allowance Yes Yes
HRA No Yes/No, subject to limits
Special Allowance Yes Yes
Conveyance Allowance Yes Yes
Telephone & Internet Expenses No Yes/No, subject to limits
Books & Periodical Expenses No Yes/No, subject to limits
Fuel and Vehicle Maintenance No Yes/No, subject to limits
Annual Gift Coupons No Yes/No, subject to limits
Monthly Food Coupons No Yes/No, subject to limits
Medical Allowance No Yes
Uniform Allowance No Yes/No, subject to limits
School Fee Allowance No Yes/No, subject to limits

My recommendation would be to choose the excluded components that may be relevant to job families and job roles in your organisation. If you have certain such components to defray special expenses already in your organisation, you won’t have to remove them and may not have to make much changes. The catch is that these components will help reduce your Wages (yet keeping at the minimum requirements) and help employees save some income tax (flexi benefits—more on that later).
One needs to design the inclusion and exclusion components in the salary structure in such a way that it is both compliant and comfortable.

Hey, what if the Wage goes high? Is there a Problem?

Well, as I mentioned before, the definition of Wages is now standardised. All the acts say that the benchmark on which retiral benefits and other such employee benefits are calculated will be based on Wages. Hence, from a financial point of view, it would be a good idea to look at where you need to keep the balance.

Some companies still continue to pay EPF on the Basic Pay (which may still be over and above the statutory limit of 1800). Such calculations of EPF, ESI, etc. will now be on the Wages component. Some companies may take a hit unless they restructure the salaries since a hike in Wages may imply a hike in employer contributions as well. Likewise, the Gratuity is currently based on Basic Pay, which may change from Apr 1, 2021, subject to final terms in the rules yet to be finalised. Similar is the case with Statutory Bonus as well, whose details are still not finalised. You may read the act for more information on these provisions; I am skipping the details since it may derail the purpose of this act.

Can you give me a sample salary structure?

Yes, I will. Let’s consider the IT industry in Kerala for example.

Component Included in Wages? Calculation Amount (INR, Monthly)
Basic Pay (BP) Yes 41.67% of Gross Pay 15,000
HRA No 40% of B. Pay 6,000
Conveyance Allowance No 2,000
Books & Periodical No 2,500
Fuel & Vehicle Maintenance No 2,400
Internet & Telephone No 2,500
Monthly Food Coupons No 2,500
Special Allowance (SA) Yes 3,100
Gross Pay 36,000
Employer EPF No 12%*(BP+SA) 2,172
Employer ESI No 3.25%*(BP+SA) 588
Employer LWF No 20
CTC 38,780
CTC (Annual) 4,65,360

In the above example, the Included Components (=Wages) sum as: 15,000 + 3100 = 18,100/- which is 50.3% of the Gross Pay.

Hey, you talked about Flexi Benefits. What’s it?

Flexi benefits is a way for providing income tax exemption benefits for your employees. There are certain salary components that the Government of India allows employees to save taxes on. The idea is to allow, at the start of the financial year, employees to choose these benefits if they want them. Employer may then exclude those components from TDS and at the end of the financial year, the employees shall submit the proofs to the employer who may then re-calculate the taxes based on the quantum of proofs. Some such components are:

  1. HRA: HRA up to 40% of the Basic pay in non-metro cities and 50% of basic pay in metro-cities is exempt from income tax (subject to certain other conditions therein)
  2. Food Coupons: Differs for industry and days of work, but in general Rs. 2500/- per month is exempted when provided as food coupons/food cards (not as cash).
  3. Annual Gift Coupons: A sum up to Rs. 5000/- per year if provided as a gift coupon is exempted from income tax.
  4. Telephone and Internet: The cost of internet and telephone, against bill submissions, are exempted from income tax. You may keep a logical limit as Rs. 2500/- per month for the same.
  5. Books & Periodical: same as Telephone and Internet.
  6. Fuel and Vehicle Maintenance: Rs. 1800 to Rs. 2400/- per month depending on the CC of the engine, and only available for Cars. Usually provided to senior leaders or those who may undertake travels on behalf the company.

It may also be noted that if the company otherwise reimburses any of the above components, the same shall not be duplicated as a salary component.

In the interest of controlling the Wages, you may want to revisit if you should be offering all of these flexi benefit components at your organisation. If some employees do not opt for these, their Special Allowance may increase and hence the Wages. Have a look and decide for yourself!

Can we restrict the EPF to Rs. 1800/- per month?

Rs. 1800/-, which is the 12% of the statutory limit of Rs. 15,000/- per month is the mandatory (upper cap) payment to EPF. Any amount above this is voluntary. If the organisation decides to cap the EPF at Rs. 1800/- per month, they are at their will to do so. But if the organisation has provided a higher figure in the offer letter/appointment letter, they will not be able to take a one-sided decision of reducing this component. Maybe, you want to revisit your offer letter/appointment letter templates for future issues 🙂

Can’t HRA be more than 40% of Basic Pay?

HRA can. 40% of Basic Pay is the limit for income tax exemptions. Don’t confuse yourself between income taxability and definition of Wages.

How’s it going to affect my take home salary?

If your organisation has included Gratuity as a component in the CTC, then if the Gratuity component goes up and CTC remains the same, it will effectively reduce your take home salary. Similarly, if the CTC is fixed and the employer redesigns the salary structure in such a way that the EPF/ESI component goes up, that will also affect your take home salary. It all depends on how your current salary structure is defined and how it is going to be in Apr 2021. Non-HR readers: you may want to consult your HR team soon!

Disclaimer

This article is written in my personal capacity and advisory in nature. The figures or components mentioned herein have no relationship with my employer or employer’s decisions. Neither my employer nor does my professional role endorses the content in this article. I shall not be liable to any action that you conduct or pursue upon the reading provided by me above.

This article is also published on PeopleFirst, LinkedIn and Medium.

Content retrieved from: https://peoplefirst.in/code-on-wages-and-salary-structuring/.

Salary Structuring: A Primer

Well, let’s admit it. At some point in our HR Career, we have all wondered: should we include DA mandatorily in the structure, should we keep the Basic Pay at 30%-40%, or Should CTC include Gratuity? Certainly, I did, especially as I come from an Engineering background with no formal education in HR. The beauty […]

Well, let’s admit it. At some point in our HR Career, we have all wondered: should we include DA mandatorily in the structure, should we keep the Basic Pay at 30%-40%, or Should CTC include Gratuity? Certainly, I did, especially as I come from an Engineering background with no formal education in HR. The beauty of lack of HR knowledge was that I had to find each of these stuff from scratch for which the web and my fellow HR colleagues from and around Kochi helped. Special thanks to the connections I received through NIPM (one of my imminent blogs is on why HRs should network; catch you there soon!).

In this article, I intend to give a primer—a very basic understanding—of how we can structure the salary in India. I would speak of the structure as of 2021, to the best of my understanding, belief and practice.

Wait, tell me about the parlance!

Before we begin, let’s make sure that we get the terms right. During my tenure as an engineer, I never cared about the terms such as Gross Pay and what mattered was the CTC and Cash in Hand. But as an HR professional, there’s more to it and I believe all folks across all departments should get an idea about the payroll parlance. Here’s the gist:
A high-level overview of components of CTC

  1. Cost-to-Company (CTC): This is an accounting term with no legal definition whatsoever. You cannot find this term in any of our labour acts. You use it for your convenience, or for accounting purposes. No one else cares (except probably the job applicants).
  2. Employee/Employer Contributions: There are some mandatory contributions that employee and employer have to make periodically. While employee contributes Employee EPF, Employee ESI, TDS, Professional Tax, Employee Labour Welfare Fund contributions, etc., the employer also needs to make contributions such as Employer EPF, Employer ESI, Employer Labour Welfare Fund contributions. Employee contributions are deducted from the Gross Pay, while Employer contributions are outside the Gross Pay. More on those terms below. Please note that EPF and ESI are mandatory only if your organisation falls into the respective requirements.
  3. Gross Pay: Before I define Gross Pay, we must understand that the CTC is the sum of all payroll expenses an employer incurs on an employee. Basically, CTC includes the salary and other expenses the employer incurs (more on that later). Now, let’s split the CTC as (What Employee Deserves + Extra Expense for the Employer). Here, the “what employee deserves” component is the Gross Pay. Look at the Venn chart above.
  4. Net Pay: An employee has to pay statutory (or even non-statutory) contributions such as EPF, ESI, TDS, etc. These contributions of the employee are deducted from the Gross Pay. In effect, the Net Pay = Gross Pay — Employee Contributions.

Well, we got it covered; pretty much!
It’s important to have the right mixture of components for a tasty meal.

What all are in the CTC?

Elementary, my dear Watson! CTC = Gross Pay + Employer Contributions.

Oh wait, I got your question. You’re basically asking, what all can be there in the ‘Employer Contribution’, correct? Well, the answer is ANYTHING. You can include the mandatory employer contributions as detailed above, plus some other stuff. Some companies include valuation of ESOP in the CTC, some include the amount that the company pays for insurances for the employee/family, etc. As a standard measure, let’s keep the statutory contributions such as ER EPF, ER ESI, ER LWF and the like in the CTC. The best practice, in my opinion, would be NOT to include benefits and other rewards in the CTC with the purpose of inflating it to look attractive. Variables are welcome to be included in the CTC, but we need to mention that they are variables.

How do I structure the Employee Salary?

We’ve finally come to the million-dollar question. How do we compartmentalise the salary? I am trying to explain this in the form of a FAQ compilation below:

What are basically the components of Gross Pay?

Broadly, let’s say, Gross Pay contains the Basic Pay, DA, HRA, and other allowances.

Why have you mentioned HRA separately, even when it is an allowance?

HRA has some exemptions with respect to definitions of wages (e.g: EPF calculation where HRA is exempted from consideration).

Okay, understood. Now, tell me whether that DA is mandatory?

As long as you are paying above the minimum wages (read my other article on Minimum Wages to understand how DA is calculated), you can subsume DA in the Gross Pay, without having to show it separately. There are certain occasions (e.g: in the case of those who are using the Wage Protection System in Kerala) some organisations are forced to show DA separately, which I would have no objections against.

How about Basic Pay? Is it 30% or 40%?

Basic Pay used to be defined as any percentage of the Gross Pay by organisations at their will. But as per the proposed Code on Wages, 2019, to be effective from Apr 1, 2021, the (Basic Pay+DA) component should be at least 50% of the Gross Pay (legal nerds, please do not raise your eyebrows; I have used the term ‘should’ as in suggestive parlance and in a practical sense). Assuming that you are not showing DA component in the salary structure, let’s then fix Basic Pay as 50% of the Gross Pay.

Remember, if you are following 30% or 40% of Gross Pay as Basic Pay, you are recommended to revise the same to 50% wef Apr 1, 2021. This will, also, have impact on your financials such as Earned Leave Encashment, Gratuity, etc.
Earmarking the right amounts of the CTC under various heads is not only mandatory but the right thing to do.

Aha, I see. So Basic is Fixed. How about HRA?

HRA is NOT a mandatory allowance. But it is a general practice to provide HRA for the employees to meet their accommodation expenses. Further, HRA is exempt from income tax, while Basic Pay, DA and allowances such as Special Allowance are fully taxable. HRA has an income tax exemption rule, which is three-tiered, details of which I am omitting for now. For metro cities, a maximum of 50% of Basic Pay can be non-taxable, while in non-metro cities, it is 40%. I would then suggest that we go with HRA = 40% of Basic Pay if you are in Kerala.

We’re getting close. Now tell me about ‘Other Allowances’?

Code on Wages mentions about Retaining Allowance, which is an allowance provided to the employee for the retention purposes (this should be part of the offer letter if you are providing it, and you should call it ‘Retaining Allowance’ itself). Generally, new-age companies, usually do not include this in their structure and provide the rest of the salary as “Special Allowance”.

So, in short and in a crude form:

Gross Pay = Basic Pay + HRA + Special (Other) Allowance.

Can you explain it as a salary structure?

Well, that’s my job to explain. Here it goes:

Component Amount
A. Basic Pay 50% of Gross Pay
B. HRA 40% of Basic Pay
C. Special Allowance Remaining amount to reach the Gross Pay
D. Gross Pay Sum of (A), (B) and (C)
E. Employee Deductions TDS, EE EPF, EE ESI, PT, EE LWF, etc.
F. Net Pay (D) — (E)
G. Employer Contributions ER EPF, ER ESI, EDLI, ER LWF, etc.
H. CTC Sum of (D) and (G)

Table 1: Sample Salary Structure

You can find the PDF of the above structure with an example here.

Wait, where is the Conveyance Allowance?

Conveyance allowance is a thing of the past. HRs usually included it in the salary structure since that component, up to an extent, along with Medical Reimbursement used to provide some tax benefits to the employee. Not any longer. It stopped two years ago when the concept of standard deduction was introduced in the union budget and there is no point of mentioning Conveyance Allowance in the pay structure unless you want to have one more column for your Finance team to manage.

(But wait, the Conveyance Allowance may sound well for salary structures when Code on Wages comes into force on Apr 1, 2021. That’s a different subject to talk about; but for starters, look at the exemptions from the definition of ‘wages’)

No, it can’t be this simple. I do not see any other allowance—such as LTA, Books and Periodicals, etc. Where are they?

Now we are on the right track! Well, these allowances are non-mandatory allowances, but at times provide great relief for the employees from a portion of their income tax. Such allowances are in fact reimbursements against actual bills, though some of them are paid in advance under the expectation that the employee would submit the bills to the employer by the end of the financial year.

Now to answer the question, yes there can be some such allowances as part of the salary structure. But they are simply the babies of the ‘Special Allowance’. Special Allowance (even this one is not a mandatory allowance; we use it as a filler bucket to make sure that the components add up to Gross Pay) is fully taxable. One can split the Special Allowance into smaller allowances/reimbursements so that a part of it becomes supposedly non-taxable. That’s a story for another discussion, which you can see in my next blog—Flexi Benefits as part of Salary Structure.

Okay, but you didn’t tell us about the statutory calculations yet.

Fine. Here’s the snapshot. Tables speak better.

Component Per Month Contribution Observation
EE EPF 12% of (Basic Pay+DA+Other allowances excluding HRA) Go with 12% (Basic + DA + Special Allowance)*Some orgs have been exempted and some have 10% contributing rate
ER EPF 12% of (Basic Pay+DA+Other allowances excluding HRA) Go with 12% (Basic + DA + Special Allowance)*
EE ESI 0.75% of ESI Wages ESI wages include all components including Basic Pay, HRA, Special allowance, OT, etc., but excludes components like Annual bonus, Retrenchment compensation, and Encashment of leave and gratuity
ER ESI 3.25% of ESI Wages Same as above –
PT Depends on your state and salary range. This will help you
EE LWF Rs. 20/- for S&CE LWF in Kerala. Differs based on the nature of establishment
ER LWF Rs. 20/- for S&CE LWF in Kerala. Differs based on the nature of establishment
TDS On the Employee’s Earnings. Depends on the existing Income Tax rates
EDLI and admin charges Details here One may or may not include this as part of Employer Contributions

Table 2: Statutory Deductions on Salary
* Assumption: No other ordinarily paid allowances (other than those like OT, Performance-based incentive, etc).
Legal deductions are the savings for the retirement of your employees. Help them plan right!

So far so good. But I have read that there is a cap for EPF contributions. What is that and how is it incorporated in the salary structure?

Yes, EPF up to 12% of Rs. 15,000/-, i.e. up to Rs. 1800/- per month by Employee and Employer each is mandatory. If the (Basic + DA + Other allowances except OT, Bonus, HRA, etc.) is less than 15,000/- per month, then the EPF contribution will be less than Rs. 1800/-, which is fine. Suppose the above amount is Rs. 25,000/-. Then the 12% of 25,000 = Rs. 3000/-. The employee is not liable to pay this entire amount to EPF and can decide to cap it as Rs. 1800/-. This would mean that the employee’s EPF deduction will be Rs. 1800/- instead of Rs. 3000/-, meaning the net salary might increase since the deduction is lesser.

Another catch here is, the employer is liable to pay the equal contribution as the employee makes. So if the employee decides to cap it at Rs. 1800/-, the employer can also do the same, which may be a loss to the employee in the long term as a hole on the savings. But modern-day organisations tend to transfer the benefit of this capping to the employee, by fixing the CTC and increasing the Gross Pay to match the difference, still, all of them totalling to CTC. This would mean that the employee might get a higher net salary even if s/he caps the EPF contribution, but the transfer of benefit depends on the employer and is at their will.

The post is getting longer by the minute. Would you like to conclude?

So, in short, our intention is to add up the component to Gross Pay and then add employer contributions to reach the CTC. When an offer is made (or a salary revision is recommended), companies usually look at the total cost that it would incur. The rest is on HR to design the structure in the most favorable manner.

More fun on the way

The calculation to sum up earnings, employer contributions, etc. to reach the CTC is pretty straightforward with simple arithmetic calculations. But it can become slightly complex when you are given a CTC and asked to bifurcate it to various components especially when there is a cyclic dependency is involved (e.g: ESI contribution depends on the components of the salary structure, while those components depend on the ESI contribution).

This is not rocket science and can be solved with a system of first-degree multi-variable equations. As long as we have HRMS in place, this won’t be a headache, but don’t you think it would be fun to go back to high school math and see how that helps in the above HR situations? Post your responses in the comment below and let’s see who gets it right first! Let me blog on the math later.
Salary Structuring may be an operational aspect of Human Resources, but it definitely is an important piece of the job.
This article is also published on PeopleFirst, LinkedIn and Medium.

Content retrieved from: https://peoplefirst.in/salary-structuring-a-primer.

Software Engineer and Getting Paid below 17,742/- per month? Well, something’s wrong! Let’s look at the Minimum Wages!

I am sure your you were curious as to why the number 17,742/- for a Software Engineer when you clicked on the link to land this article. Let’s see in detail. By the way, if you are a software engineer in Kerala getting paid below this figure, it’s probably the time to send this article […]

I am sure your you were curious as to why the number 17,742/- for a Software Engineer when you clicked on the link to land this article. Let’s see in detail. By the way, if you are a software engineer in Kerala getting paid below this figure, it’s probably the time to send this article to your HR Manager 😉

Context

Recently, on Dec 24, 2020 to be exact, Government of Kerala announced the revised Minimum Wages for the Software industry in the state, after long 10 years of the earlier revision. Numbers have soared up. This article discusses the concept of minimum wages, with examples pertaining to Kerala state; however, the concept should be the same throughout the country.

What’s this “minimum wages”?

As the name implies, the minimum wages is the minimum wage per month to be given to an employee of a particular sector in a state. There is a national minimum wage declared by the central government, and various state-level minimum wages. The idea is to keep the state-level minimum wages equal to or above the national minimum wages. The concept of minimum wages will ensure access to equitable and justifiable pay, thereby eliminating the chances of exploitation by the management.

When is it decided?

Minimum wages are revised periodically. Minimum wages are defined for each sector separately. For example, the minimum wages for Software sector differs from that for the Oil Mills sector. There are roughly 80 such sectors identified for the State of Kerala; and similar numbers for other states as well. Governments revises the minimum wages when it deems that there is, inter alia, a significant increase in the cost of living over a period of time which is not manageable by a mere increase in Dearness Allowance (DA).

How is minimum wages calculated?

Minimum wage calculation for a role is easy. For example, look at the latest Software industry minimum wages notification for the State of Kerala available here.

If you look at the notification, in the Software sector, roles of jobs are categorised into different grades. For instance, an HR Executive is a Group F employee in the industry, while a Software Engineer is a Group E employee. An organisation needs to categorise all their employees into one of these grades (and, if not already done by any means whatsoever before, it would be advisable to communicate the same through an HR letter/notice, through internal HR portals, payslips, etc. to the employee so that they are aware of the same) Let’s take the example of Group E: Software Engineer for illustration purpose.

Demystifying the Minimum Wages Calculation: An Example

If you look at the Group E: Software Engineer, 16520-250-17770-300-19270 is the salary range shown for this role. What does that mean, let’s have a look!

The minimum wage for an employee who is a Software Engineer in an organisation is Rs. 16520. This amount is exclusive of another factor called Dearness Allowance (DA), which we will see about later.

Now, look at the number 250 in the wage structure. What does it signify? The notification says:
For every five years of completed or to be completed service in an establishment or under an employer, an annual increment at the rate next to the pay scale fixed in the new scale of pay shall be paid as service weightage to the employee concerned.
So, if an employee continues to be a Software Engineer under the same organisation/employer, then for every such service year, a minimum pay hike of Rs. 250/-pm should be paid as service weightage. That is, for someone with salary 16520/- as per month salary, and completed one year of service, s/he should get a minimum wage of Rs. 16520 + Rs. 250 = Rs. 16770/- pm during the second year of service. Every year, this figure per month will increase by Rs. 250/- for the first five years. Hence, s/he will have a wage of Rs. 17770/- pm during the fifth year of service. That’s the third number appearing in the pay structure.

Now, one can see a 300 next to 17770 in the pay structure. That means, we’re now done with the first five years and reached Rs. 17770/- pm as minimum wage for this employee. Hence for the next set of 5 years, the minimum wages should be increased for every service year by, not the old 250 but, Rs. 300/-. Hence, on the sixth year of service, the employee should have a minimum wage of Rs. 17770 + Rs. 300 = Rs. 18070/-. This will continue for the second block of 5 years. Hence, at the end of the 10th year (i.e. the fifth year of the second block), the employee should be getting a minimum of Rs. 19270/- pm as the salary. After the 10th year, the mandatory pay hike stops. If the employee gets promoted to a higher Grade, that’s a different story, in which case the minimum wages for that role will be applicable.

Image Courtesy: Investopedia

What if one gets more salary hike?

Good for them. The minimum wages talks about the minimum wages to be given, and the minimum pay hike to be given for every service years. If your pay is already above this level, then the employer is NOT obliged to give you the 250 or 300 pay hike.

Now, tell me about DA calculation?

Dearness Allowance is calculated based on an index called Consumer Price Index (CPI). I will skip the economy part and would encapsulate that it is a statistical number published by Dept of Economics and Statistics for various cities in the state, and it depicts the fluctuating cost of living. They publish it here.

DA is a mechanism provided to adjust the salaries for change in CPIs. If you look at the Minimum Wages notification, it says:
In addition to the basic rate of wages, all the employees shall be eligible for Dearness Allowance calculated on the basis of the Consumer Price Index published for the concerned District Head Quarters of the Department of Economics and Statistics at the rate of ₹ 26 (Rupees Twenty Six only) for monthly waged employees and ₹1 (Rupee One only) for daily waged employees respectively, for every point in excess of 300 points of the latest Consumer Price Index Number in the series 1998-99=100.
There are five parts to it:

  1. DA varies for each city (read district HQ)
  2. The rate of DA is Rs. 26/- for monthly waged employees
  3. DA is calculated for every point in excess of 300 points
  4. CPI is published periodically
  5. DA for this sector is calculated basis the CPI in the Series: 1998-99=100.

With these reading in mind, let’s calculate the DA for an employee posted in Trivandrum. Look at the CPI page on the EcoStat website and choose the latest month for which CPI is available. As I write this, it is Nov 2020. If you look at the Trivandrum’s CPI value under the column Estimated Indices for Base : 2011-12 = 100 Base : 1998-99 = 100 for Nov 2020, it is 369. That’s our little guy.

Now, we need to find out the DA from this 369. As per the #3 above, DA is calculated on the CPI-300 value. Here, it is 369-300 = 69.

We need to pay Rs. 26/- per month for every point in this 69. That means, the DA per month for an employee posted in Trivandrum is Rs. 26 * 69 = Rs. 1794/-

DA is paid over and top of the above minimum wage. DA may change when CPI changes.

Tip: An organisation need NOT provide DA as a pay structure component. They can subsume DA component in the gross pay and make sure that the gross pay is above the (minimum wages + DA) figure. But it would sound problematic for organisations who use the Wage Protection System, which mandates the DA component as such, in which case one may decide to keep that little guy in the pay structure.

Are we talking about Gross Salary or Basic+DA?

With the introduction of Code on Wages, 2019 (to be in force from Apr 1, 2021), all confusions with respect to the definition of wage will vanish. You may consider the Basic + DA + Other ordinarily paid allowances (other than OT, commissions, performance-based incentive, etc.) as the wage for this purpose, meaning we’re talking about the Gross Pay. Confused about Gross Pay, CTC, etc.? I’ll write about it in my next article 😉
Compliance is a Culture.

When is this to be effective from?

This notification is to be effective from Dec 18, 2020. Even if December 2020 and/or January 2021 salaries are already paid out by the employer, they are to abide by these changes. If there are revisions to be made as per this notification, then employers have to comply and give arrears wef Dec 18, 2020.

For the existing employees, if the salaries are to be revised to comply with this notification, then the employer must take care of the service weightage as well.

Where can I see minimum wages for other sectors?

Govt of Kerala published minimum wages notifications on this page. This is the old notification for the Software Industry.

An exercise

Well, now find out the minimum wages to be paid to a Senior Software Engineer with 3.2 years of experience in the current organisation in that grade, and posted at Calicut. Post your answers in the comment box and let’s see how many of you get it right 😉

This article is originally published on PeopleFirst blog, LinkedIn and Medium.

Content retrieved from: https://peoplefirst.in/software-engineer-and-getting-paid-below-17742-per-month-well-somethings-wrong-look-at-the-minimum-wages/.

#MeToo? Better Late than Never!

The topic was “Sexual Harassment & Consent”.
The recent happenings made it more feminine. Hence the female lot majored the show. But there were a few men who considered it as Unisex. Hats off to you MEN.
Now, what’s sexual harassment? To give more clarity, we were given an activity.
Need to close our eyes & think of the happiest moment (sexual in nature) in one’s life. Now find a buddy seated next to you & share that experience. I had a glance at my peers & could see serious discussions with a psychotic smile on their faces. My buddy was my good friend Ms. Sreelekha of Amphenol FCI. We were chatting instead. Now you need to share how you felt while sharing that beautiful experience.
Then on one corner, a male participant complained, “I discussed everything with him but he never shared anything with me.” Hearing that all had face aches.
NIPM Infopark Group and NASSCOM POSH Session 2018
Click to view in larger size
We got the real feel when they mentioned, “if you find it difficult in sharing your beautiful sexual experiences, how hard it will be to share your sexual experiences that haunt you.”
Even though this is a familiar term, we could feel the pain then on. Monolita & Saj gave an amazing start continued by Shyama explaining the legal side of it.
NIPM Infopark Group and NASSCOM POSH Session 2018
To cut the story short….major focus was given to sexual harassment at the workplace & the importance of having POSH policies, legislation & redress process pertaining to POSH. It was a really good learning experience. Moreover, simple acts we need to follow were given due attention in the session.
NIPM Infopark Group and NASSCOM POSH Session 2018
Packed with activities, sharing, fun & awareness, it was a 100% interactive session for which the speakers had to borrow some more time from the organizers to solve the participants’ queries.
Great job, ROV & thanks much to NASSCOM & NIPM Infopark group for the wonderful show.
NIPM Infopark Group and NASSCOM POSH Session 2018
The above article was written by Kshama Sandeep, Director-Recruitment, Glowmind Recruitment Consultants, who was an attendee in the POSH workshop organised by NIPM Infopark Group and NASSCOM Kochi. The accounts are on personal capacity.

Ordinance to make functioning easier: Kerala Shops and Commercial Establishments (Amendment) Ordinance, 2018

Kerala government recently published an ordinance amending certain provisions in the Kerala Shops and Commercial Establishments Act, 1960. There have been multiple amendment acts to the original said act, but this ordinance (which will hopefully be adopted as an amendment act by the next sitting of Kerala Legislative Assembly) comes with a purpose of easing […]

Kerala government recently published an ordinance amending certain provisions in the Kerala Shops and Commercial Establishments Act, 1960. There have been multiple amendment acts to the original said act, but this ordinance (which will hopefully be adopted as an amendment act by the next sitting of Kerala Legislative Assembly) comes with a purpose of easing the operations of Shops and Establishments while making it safer and humane for the employees. Let’s look at what are changing.

Definition of employee

The original act defines employee as ‘a person wholly or principally employed in, and in connection with, any establishment and includes an apprentices’. The new amendment extends this definition by suffixing ‘any class of persons as the Government may, by notification in the gazette, declare to be an employee for the purpose of this act.

Round the week functioning

The old act demanded that the shop/establishment should remain closed for at least one day per week, and such a day should be permanently displayed as a notice by the employer at a conspicuous location at the work place. Such a closed-day could not be altered by the employer for more than once in a period of three months, too.

With the amendment, the ‘shop/establishment must be closed for a day per week’ is removed, and it shrinks to allowing every employee to be entitled to one full day holiday per week, provided s/he has worked for at least 6 days in that week including all authorised leaves. This, in turn, allows the employer to function the shop/establishment round the week, with making the weekly holidays of employees rotate.

Curfew relaxed for women employees

The original acts mandated that no woman or any person who has not attained the age of seventeen shall be required or allowed to work whether as an employee or otherwise in any establishment before 6 A. M. or after 7 P. M.

The amendment relaxes the time limit from 7 PM to 9 PM. Here comes the historic change: the employer can now employ women employees between 9 PM and 6 AM (which was prohibited earlier) after getting the consent of such women employees. Further, such women employees must be working in a group of at least 5 employees wherein at least 2 are women.

Further, adequate security measures to ensure safety, honour, dignity, and protection from Sexual Harassment of women employees working during these hours should be ensured by the employer. Moreover, transportation from the workplace to the residence of such women employees should be arranged for by the employer (though the amendment does not provide that a security personnel accompany the women employees during this travel, it is implicit since the act talks about ‘safety’ measures—hence it would be wise to have the security measures as well taken care of during this travel).

Kerala’s IT Policy, earlier, gave relaxations to the above effects, but the amendment now extends this to all the sections of Shops and Establishments.

Scroll down to the bottom of this page for full version of the ordinanceHumane changes

Humane treatments

There have been a lot of protests, especially from the textiles industry, regarding inhumane treatments by employers, where employees were not allowed to sit during work hours. Kerala Human Rights Commission had intervened in the issue long ago, and Kerala Government sympathised with the employees thus treated. With an insertion of a provision in the original act, 21B, the amendment officially and legally puts an end to such inhumane treatments

The amendment says that all the shops/establishments must provide suitable seating arrangements for their workers to avoid on-the-toe situations throughout the duty time. This will call for a drastic change in many of the industries coming under the definition of Shops/Commercial Establishments.

Fines gets finer!

The violation of various provisions in the act may now attract a fine of Rs. 1 lakh and 2 lakh respectively, which was as mere as Rs. 5000/- and Rs. 10000/- earlier. There are some changes to the calculation of such fine and fine for wilful obstruction of inspectors/labour/govt officers from carrying out their official duties, which are available in the PDF below.

Last but not the least – electronic age!

Earlier, employers needed to take special permission from the labour authorities before keeping employee data (muster rolls, payrolls, etc.) in digital format. This has been a point of debate by many, and the government is now forced to accept that things have really changed and people have started to migrate to the digital world, the condition of prior approval has been lifted in the amendment. Employers can now keep the data in digital formats as well, without any sort of permission/approvals.

Let me know your thoughts in comments! Here is the Amendment Ordinance. You can find the original act here.

 

Regards,
Arunanand T A

Originally posted on Arunanand’s blog: PeopleFirst

Content retrieved from: https://peoplefirst.in/ordinance-to-make-operations-easier-kerala-shops-and-commercial-establishments-amendment-ordinance-2018/.

The Agony and Ecstasy of Working as HR Professionals in Organisations Today

‘You should not stop being people’s advocate! The day you end being one is the day the HR dies’.

These words which I happened to randomly listen to while working at Oracle as an Engineer, later became the cornerstone of my HR career. While I believe that any job has its own merits and fashions, there are certain jobs that have the capability to make impacts of higher gravities. HR is one, nevertheless, it goes a thankless job in some organisations.

HR, like any other job, is like a two-sided coin. You will have happy days; and then there will be days that give you a headache. Interestingly, the primitives on which the functions of an HR are based invariably embrace the ‘headaches’. What’s fun if things go as in the books; HRs come into play when things are not in line or if there’s no line at all. Thus, the headaches become opportunities. We cannot really see these as binaries—either yes or no—but grey. Let’s have a closer look:

Leaders with People Mindset

HR team’s vision will only be successful when your company has a management that believes in people. Forget your company’s revenue, business strategy and everything else; it’s the faith of the management in the people business and their mindset of treating people as the largest investment that drives the success of any HR team.

Starting from the CEO, every C-level and VPs should have a clear understanding and buy-in to the policies that the HR team parks on. This is the biggest factor of all which decide if an HR’s life is hell or heaven. This article on HBR says that during 2008 recession, only a  third of HR departments were consulted when layoffs happened, pointing to lesser influence HRs had in strategic business/people decisions—this is fast changing now.

It’s imperative for the modern day HR to work closely with the line managers as well, to make sure that the ‘people mindset’ envisaged at the top level trickled down appropriately at the length and breadth of the organisation. The organisation’s profitability comes only through the growth; and growth comes only through its employees and culture—not the C-officers alone! HR is certainly a partner in strategy execution, and hence they should have business acumen and understanding as well as the people mindset. 33% of execs believe that there’s ineffective HR leadership that drives their organisation to the unsolicited directions as per this HBR report. This can be tricky and painful for some of us, but definitely the need of the hour; it has always been, but clearer in the recent years.


Data and Opportunities for Analytics

With the advance of technology, data has come to play a major role for the HR as well. This has helped establish data-driven strategies. Since most HR operations have gone digital, HR gets instant access to the data and can run an analysis on it to reach faster and effective conclusions. Analytics has resulted in the greater impact of HR activities starting with talent acquisition through engagement to exit.

Changing Workforce

Gen X is fast coming to the top of the ladders, and most ‘workforce’ now comprises of Gen Y and Z. The millennials tend to pose and trigger a change in the way most HR teams function. The factors that excited Gen X may no longer be valid/needed for the Gen Y/Z. This needs a larger discussion in all organisations, where HR takes the lead role.

Starting from how your recruit talent to keeping them engaged should change due to this workforce change. Your ‘food coupons’ or ‘telephone reimbursement’ may not be an attractive benefit as it used to be. Your vacation plans, office timings, attire requirements and health initiatives may need a thorough change keeping in mind the interest of the new workforce. This is one place where HR gets into agonies or ecstasies. This also points to changing your HR practices and policies to accommodate the new-styled workforce who love things to happen faster and easier.

Pay Gaps and Diversity

Gone are those days HR recruited the ‘protagonists’ alone. Ideologies and societal factors keep changing, and Diversity & Inclusion (D&I) has become another opportunity for HR. While this is seen as an ecstasy from a philosophical standpoint, various reports suggest that the pay gaps and men:women employee ratios are still really bad in numbers. The report from WeForum suggests that in 82 out of 142 countries, pay gaps based on gender is still increasing. This is alarming, and agonising for the HRs, for they have been trying to establish a reverse scenario through D&I and localisation initiatives.

KPMG reports that HRs around the world struggle to keep in line with the global workforce, which turns out to be an agony for the HR fraternity, yet. With globalisation, teams become more and more integrated and agile, which HRs must run fast to cope with. Increasing number of remote, and arguably virtual, employees demand that the HRs tighten their belts.

Attraction, Training and Retention

Organisations today want not job-seekers, but talents. For example, in IT, with the massive ‘attack’ of automation over the services sector has diminished the glitter of the old glossy, silky texture of the industry to a great extent. Companies today want to find talents (“attraction”) rather than applicants finding them for jobs (“acquisition”). The onus is on the HR team.

The new organisation have a diverse workforce that constantly looks for enhancing their skill set. The old school training curriculum is undergoing a thorough revamp, which is, yet again, equally agonizing and ecstatic for HRs. Starting from the training modes—virtual to gamification to anytime anywhere learning platforms—to the training content, organisations are thoroughly revamping their L&D strategies with the Gen Z in mind.

Another area of concern for the HR is retention. It’s way beyond creating a good brand; stories float about youngsters rejecting offers from big brands to choose what they want to do in small companies. Retention plans of the new age is another agony for HRs, planning of which needs a thorough analysis of their workforce as well as the industry trends. People don’t just stay back for money.

HR Tech: the future

As it goes without saying, HR Tech is already here. Yesteryears’ Personnel Manager changed to HR, and then got transformed into People Enablers over a period of time. The new role of HRs will be that of technology and business leaders enabling people functions with the help of cutting edge tech. Coming of tech into HR will certainly reduce the job opportunities of the existing HR workforce, but wait! It’s a two-sided coin again. While this is seen as an ‘oh-my-god-am-I-gonna-lose-it’ scenario, why don’t we look at the brighter side of it? It gives us room for learning technology and pouring it into what we have been doing, thereby making a yet greater, happier, better workplace! Ain’t it ecstatic?!

Disclaimer: Any of the discussions above does not reflect the views of author’s present or previous employers. Views are all personal. Originally posted by Arunanand T A on his blog peoplefirst.in

Expert Lecture on Kickstarting HR Analytics by Dr. Manoj Varghese

NIPM Infopark Group and NASSCOM are jointly organising an expert lecture on “Kickstarting HR Analytics“. The lecture will be delivered by Dr. Manoj Varghese (Former Dean AcademicsXIME; Former HR Director (JAPAC)Google, Former Director of User Operations—Facebook).
HR Forum - Kickstarting HR Analytics Expert Lecture - organised by NIPM Infopark Group and NASSCOM
HR Forum – Kickstarting HR Analytics Expert Lecture – organised by NIPM Infopark Group and NASSCOM
This will be a practice-oriented session, which will help the audience understand the need for HR analytics, set up baby steps at their organisation and how to drive it fruitfully to arrive at strategic decisions. Recommended for HR professionals of all walks and experience and CXOs.
Date: Wed, Oct 3, 2018.
Time: 3 PM – 4.30 PM.
Venue: NASSCOM Kochi Office, Infopark.
Registration (free but mandatory): http://bit.ly/hranalyticskochi
Limited Seats Only; based on First Come First Serve.

Gamification in HR – A case study

Roll them up! Humans are motivated by points – school ranks, appraisal ratings, share prices, mileage information…everything has a number to it, and entices the human mind to compete more. How else do you explain gaming addiction? Everyone knows it’s just a screen meant to entertain you for a bit. However, that doesn’t explain how closely we monitor our progress through the numbers and rankings. There’s a lot of adrenaline rush when you see the scores improving and a dash of depression when it is worse than your previous best.

And in came gamification. A buzz word a few years ago, before AI and Analytics took the franchise on buzziness 🙂

I think gamification is still relevant as a tool for HR folks and it is much easier now. Like all tools, there is a lot of planning and forethought required before blindly rushing into the game (pun intended).

Let me try to illustrate with an implemented example.

The thought of gamifying rewards and recognition in the organisation where I worked felt appropriate nearly six years ago. However, it took me nearly three years to get the concept accepted. Interestingly the first doubt I had to tackle was that of ‘misuse’. As HR folks we have seen far too many times how a benefit has to be withdrawn due to a few ‘corrupt’ minds. This is very much against the grain of the thought that we have an empowered adult population and they would know what to do best!

You can’t fight doubt or fear with those sorts of arguments – so, I decided to wait. It was sort of clear that the existing mechanism of recognition was failing. This, I could easily highlight using the survey results, exit interview feedbacks and other information. I ‘socialised’ the concept with a few senior managers and leads and employees. Just to get the pulse. Almost all were gung-ho.

Then we got together a small team to brainstorm the concept to the consequence. A lot of the loopholes were thrashed out. I think the consequence element was very important. How will it benefit? What will the points mean at the end? We also needed to be clear on the scope as well as the results: did we cover everything meaningful to be recognised? What were we encouraging as a result of this plan? Did it create any behaviours that would be detrimental to the company culture?

A lot of the answers boiled down to manager maturity. This is one statement we HR folks are always ready with. “If only, our managers did a better job of leading!”, we all love to say. Yet, a lot of manager behaviour is wrong because they are not given guidance or role models on what is right! It of course led to the big realisation that the process would be incomplete without manager’s being given a chance to understand the intent and what to do better at recognition.

From the start it was clear a system, a tech piece, was required to execute this. We started brainstorming the rules by which the logic would work.

All the discussions were recorded and presented in a ppt format for the consumption of senior leaders. The crux of it was that our annual awards would also be selected from the nominations received in the system. Our monthly schemes would also be selected from the nominations here. Recognition of all varieties would get a chance – project contributions, teaming, improvements and customer appreciations – each category had statements and points associated. We gave no choice but to have this system adopted.

And then we began. Every new initiative thrives on two things appeals and reminders. Appeal must push change. Reminders will create momentum.

We got our UI folks to envision the whole. They gave a lot of inputs. And made things a bit more fun and of course created appeal.

We created a space in our monthly meetings to mention this upcoming change. And we announced the name of the initiative on our Annual Day. Effectively, we were giving people a chance to get to know about this change and start the process of getting managers up to speed.

Our first month of roll out saw a total of 1045 points on the system. Nominators got points too. We got teams to see how their team fared on recognising colleagues and managers took it upon themselves to get the word in. Monthly awards were a huge boost, because managers who were on the panel realised quickly how little of a recognition culture they had created in their own teams (worked like a mirror 😊).

As a spin off, some managers started posting the nominations onto their monthly slides, giving it a little more fillip.

The dashboard of the system gave each individual a quick snapshot of their team toppers. And their own points.

As they say, it’s the simple things that matter. The fundamental change that took place was that employees started feeling recognised because they would receive an instant email with their manager on copy once a nomination got approved. And the monthly cut off ensured the recognition was given on time. We added a slide on discussing the process and the benefits in our manager development programmes.

Bi-annually toppers on the league table across the organisation, were also awarded separately.

To all those who are wondering what we named the system: it was called ‘Bonanza’!

To quote a senior manager in the organisation, “Ever since Bonanza was implemented, we haven’t had a single instance of staff grumbling about their colleagues who won the monthly recognition awards. This was rampant before Bonanza started. And that to me was the success factor that mattered most.”

It took just a few months to change the culture of only a few get recognised to ‘I too matter’ and I can say gamification helped achieve that CHANGE.

 

Aditi Radhakrishnan

Mitara Consulting Services

Linkedin Profile: https://www.linkedin.com/in/aditiradhakrishnan/

Dear Indians, stop saying this to youngsters!

Interesting incident happened today. I was at the church, at the end of the normal Sunday service with a lot of people gathered in small groups all around the premises greeting and talking with each other.

Churches and the Sunday gatherings are very important in ones social life. That’s when you meet your childhood friends, share the news and stories and the happiness. All in the 10 minutes after church.

But this was my first time to this particular church and I had hardly anyone whom I knew around me. While waiting for my wife to come out of the church, I just got too curious to eavesdrop into the conversation two young gentlemen were having just beside me.

One, near 25 years of age, neatly dressed, very evidently in the early stages of a successful career. Other, 18-ish, in his polo tees, is the confused teenager.

Elder: So, what plans next?

Younger: Not made up my mind, but thinking of going for ‘degree’ (the vernacular for under grad courses other than Engineering and Medical)

Elder: Oh… (definitely not impressed!) So… which course?

Younger: Thinking of B-Com or Humanities

Elder: At least choose B-Com. Humanities have ‘zero-scope’ (again another vernacular, meaning job opportunities)

Younger: Yeah, everyone is telling me this. So B-Com would be better, right brother?

Elder: Yeah, any day!

I know what you might be thinking. You might have heard similar conversations a hundred times, if not more and many a times, might have been one of the two in the conversation. But this time, it got me thinking.

  • Is it the right thing to say to a young boy who is trying to decide where he wants to go next?
  • Why are we so obsessed with the word ‘scope’?
  • What’s the best way of advising someone at that stage?
  1. NO. Talking about ‘scope’ of a course is not the right thing to tell someone who is trying to choose a line of study that might live with him for his lifetime.

Why are we obsessed about the ‘scope’?

We live in a country where the employment rates are not ideal, the society is wired to think about education as just a means to get a job. And they cannot be blamed for thinking about the most easy paths towards a job, any job, as the education with the best ‘scope’.

This forced the trend-wave of ITIs and ITCs (skill training institutes) 30 years back because they had huge ‘scope’ in the middle east.

This forced thousands of youngsters from my home state kerala choose nursing as their career a few years back, though many of them had zero interest in it.

This forces us to think that Engineering and Medical education are the only good education systems because they get you a job sooner than the others.

Was it completely wrong to be obsessed about ‘scope’? NO.

Because, in many ways, this has led our society forward and helped millions of our people be financially stable.

But is it wrong to be obsessed about scope still? YES.

Because, the world around us is not the same anymore.Gone are the days where job was a hard-to-grab thing. It is easier to get jobs. But the jobs themselves have changed.

Jobs are no more a commodity. Jobs these days, demand more than just ‘skills’ and ‘education’. Jobs these days, demand creativity, aptitude, enthusiasm, and most importantly the love for the job. Computers are getting better skilled than us in commodity jobs. Jobs of the future will demand more and more creativity from the humans, and only the love for the job can get one to be creative at the job.

Going into something that you do not love, just for the ‘scope’ would make you join the league of thousands of nurses (by education)doing the accounting jobs (the most basic ones) and thousands of engineers doing everything under the planet other than building stuff.

What is the right advice you can give someone at his/her late teen-ages?

I would do it this way. I would ask them this question:

“Think of this hypothetical situation. All the jobs in this world — a teacher, a software engineer, a cricket player or a singer — every single job has the same salary, the same job security, the same work environments. Which would you choose?”

I would give them days to think about this and encourage them to go ask everyone around for advice, not about which to choose, but about how each work is. I would encourage them to think. And their answer will be the way forward for them.

Because when money, job security and everything similar are out of the equation, you would choose what you LOVE the most. And that LOVE is what will create the ‘SCOPE’ for you.

“Choose a job you love, and you will never have to work a day in your life” – Confucius

What is in it for the HR professional in me?

The HR professional is probably one of the most affected by this healthy practice of people going after ‘scope’. We get people, aplenty of them. But we get very few who do things out of the interest. We get tons of people attending our interviews, but all of them ‘job seekers’. They are stuck in the suit that does not fit them, nor do they like wearing that suit. Each moment they sit inside our walls doing the job that we give them, they curse the choice they made and they curse the job. They do not love the job! That will be the root cause for low employee morale, high attrition, constant complaints, lack of belonging, low productivity, lack of innovation and all other issues you are fighting with in your HR job.

Here are a few things you could do as an HR professional.

  1. Measure the interest at interviews. We are running into a time where along with the skills and cultural fitness, we will need to measure interest as well. Armed forces offices interviews have traditionally employed a lot of psychometric analysis to gauge the interest that a person has towards the job. It is high time we start employing them too.
  2. Allow your people to cherish their interests AT work. Make sure your engagement activities are centred around interests of people. Identify what is the ‘other’ thing that the members of your team are interested in, make sure you give them all recognition and opportunities to do those AT work. They will start lovin the workplace.
  3. Talk about this. being HR professionals, you will be heard as the voice of the industry and job market by people in your circles. Be vocal about how interest, creativity and enthusiasm would drive the workforce of the future and not the choice by ‘scope’.

Jofin Joseph

Head of India Operations, FullContact

His Linkedin profile is at https://www.linkedin.com/in/jofin/ 

This article was first published by NIPM Kerala chapter our 2017-18 Annual Issue of ‘Kerala Personnel’ magazine.

Internship reloaded

India is riding an optimistic wave of becoming a global superpower. The country is set to achieve this on the wings of its burgeoning human capital that is predicted to reach 116 million, with the majority of the new workers to be in the 20 to 24 age bracket. But there is one small problem, a very simple and straightforward problem – only a very small percentage of this workforce is considered employable by the industry. Internships are being touted as the panacea for this problem of unemployability.

The nation as a whole seems to be laying the responsibility of creating and executing internships at the doorsteps of the corporate world. While smarting under the unfairness of this, corporate India, with the inherited arrogance of capitalism tends to shrug it off as an inconvenience that does not add value, thereby accentuating the reputation of callousness.

Thanks to my role as the co-founder of an Ed-tech startup – Fourth Ambit, I find myself equipped with some unique insights into this ecosystem inhabited by three organisms: (A) The Industry (B) The Student body and (C ) The College. While I do not believe that internships are a one-stop solution to all problems related to employability, I am optimistic that they can indeed be used as a tool for bringing about lasting change.

Before we proceed, for the purpose of discussion allow me to define “internship”.

“Internship is a brief period of engagement, with or without pay, between the student and the organisation so that the student may gain experience in a particular field of study. This term of engagement may be conducted during the course of the college education or when the student has just graduated. An ideal time frame would be between 2 to 6 months”

The Industry and Internships

There are a handful of organizations across India that have internships as part of their recruitment agenda and therefore have the attention of top management. This translates to an allocation of resources for this endeavour. However, most of these organizations offer internships only to the premier B-Schools and a few Tier 1 Engineering colleges of India.

For the rest of the lot internships are at best, a bullet point in the annual report and at worst, a knee-jerk reaction to young students who suddenly turn up at their office like an unexpected and often unwanted guest.

Please note that I am not even acknowledging the companies that take money from the students under the guise of internships and end up issuing a certificate at the end of the period.

If you are part of a team or the sole voice for propagating the virtues of internships in your organization, I hope you will find this to be a handy guide for instituting an internship programme.

Groundwork within the organization

  • Plan for internships should be created and approved with the annual resource budget plan. This will ensure that there is buy-in from the top management and accountability at the lower levels.
  • Once approvals are in, the departments that have opted for interns should be mandatorily required to submit clearly defined projects with timelines and expected deliverables from the interns.
  • There should be a mentor for each project. This should not be a force fit as the mentors can create or destroy a good internship programme. Never assume that the mentor is automatically equipped to handle interns.
  • Please ensure mentors are “educated” to guide and mentor the students. Very often you hear mentors making snide remarks such as “What do they teach you at college?”. This is completely counter-productive. A certain amount of sensitizing would be required for the mentors.
  • The mentors should conduct weekly reviews for the interns ( not more than 2 sessions a week of 30 minutes each)

The Intern and the Internship

If you are the anchor for the internship programme in your company, remind yourself that the interns are young and certain things need to be spelled out clearly to them.

  • Create a detailed orientation plan for the student intern. Understanding their project and its implication for the whole organization will ensure their buy-in. ( This should also include company policies, especially on “anti-harassment” and privacy issues. )
  • Spell out the benefits that the students gain from this programme – especially if they are not paid a stipend.
  • One of the key skills not taught at college is time management and creating processes. Ensure that both the anchor and the mentor stresses on this and guides the intern effectively.
  • Create networking opportunities for the interns – either an executive lunch hosted by a CxO or a “Hi-Tea”
  • Ensure that you collect detailed and anonymous feedback from the interns at the end of the programme. This will help with future improvements.

A seamless execution of these would ensure that your interns go back to college as your brand ambassadors.

The College and the Internship

At no point in history has there been a stronger trend of colleges and industries working at cross purposes than in the last one decade. The aim of the colleges is to beat the maximum pass percentage out of the student population. If that means teaching by rote, then so be it.

To expect people with limited resources and unlimited restrictions (I mean the teachers, of course) to manufacture employable graduates may be a utopian dream, but there are measures that the industry can put in place to assist them on this journey.

  • Identify partner colleges where you can make recommendations on the skills that the students need to be equipped with when they appear for internships.
  • Extend “Learning and Development” within the company to the faculty of the colleges on a pro bono basis. Teach the teachers how to teach so that ultimately you do not spend a lot of time retraining the students who enter the workforce.
  • Give candid feedback after the internship is completed, not just to the students but to college authorities. A constructive feedback mechanism will help colleges help their students.

It may not be possible to implement all the suggestions given here in the very first attempt. As with any project intended to make lasting change, internships should also be looked at with a long-term plan for the company. Beyond creating a recruitment pipeline for the organization, internships in the truest sense is experiential learning and a certain amount of preparation will go a long way in making this a meaningful journey for the students.

 

Ruby Peethambaran

Co-Founder, Fourth Ambit Technologies Pvt Ltd 

She can be found on Linkedin at https://www.linkedin.com/in/rubypeethambaran/