Upto 25% Salary Cut For Work From Home Employees Can Become The New Normal: But Why?

Upto 25% Salary Cut For Work From Home Employees Can Become The New Normal: But Why?
Upto 25% Salary Cut For Work From Home Employees Can Become The New Normal: But Why?

Not so good news for the employees who have moved to their native places in smaller towns, after initiation of work from home (WFH) caused by the Covid pandemic, as they may witness pay cuts, according to the sources

Reportedly, service sector companies have started evaluating the option of salary reduction for employees who opt to move to smaller towns from metros and tier-I cities.

These stakeholder discussions commenced on the labour ministry’s draft rules on the service sector’s work from home norms, as per reports.

Who Will Get Affected?

Mainly these changes would be affecting the employees in the IT/ITeS, financial services and professional services.

It is noteworthy here that the labour ministry had sought views on a draft on formalising the work from home concept for the services sector. 

Some of the HR experts and consultants mentioned that salary changes for few WFH employees may be likely to happen under new rules. 

The new rules may see employers save 20-25% of the cost per small town WFH employee, if and when they formalise.

Those employees who continue to WFH but haven’t left their existing location may see a change in allowance components without any change in the overall salaries.

Why Would This Happen?

Basically, companies have already started reimbursing new components, including WiFi and other infrastructure costs to their employees.

They may remove the allowances like transport according to the experts.

Currently, HR professionals from companies are looking into all these options and may take a call once the rules are finalised.

The practice leader, retirement and benefits, Aon India, Vishal Grover said, “Companies are currently evaluating this. Under the assumption that the Labour Codes would be effective from April 1, 2021, organisations are currently carrying out financial modelling under various scenarios under the new Definition of Wages to determine the potential impact on payroll costs,”.

23% of the organisations factor in location while managing salaries revealed by a recent survey by Aon. 

Grover said, “Therefore, over a period of time, we do expect organisations to review their compensation strategy for functions and roles which would be offered a permanent work from home model, especially if it leads to relocation of employees from tier-I to tier-II or III cities,”.

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