Your Salary Hike This Year Wouldn't Mean Higher Cash In Hand: Here's Why

There is news doing the round that after a bleak 2020, companies may resort to salary hike but this unlikely to mean a higher cash in hand for most salaried class.

Your Salary Hike This Year Wouldn't Mean Higher Cash In Hand: Here's Why

Here we detail on it:

For this year, the government has come with a new wages definition and in compliance of it companies may contribute more towards EPF. And even as for the ongoing year, companies' exponentially have plans of increasing the salary by as much as 7.7% on an average in comparison to just 6.1 percent last year, it may not mean higher disposable income in the hands of employees.

"We expect the increment dynamics or 2021 to play out over a longer period of time given the uncertainty and potential impact of forthcoming changes," said Nitin Sethi, partner and CEO of Aon's performance and rewards business in India.

"The proposed definition of wages under the new labour codes could lead to additional compensation budgeting in the form of higher provisioning for benefit plans like gratuity, leave encashment and PF. We expect organisations to review their compensation budgets in the second half of the year once the exact financial impact of the labour codes is known," he said.

Nonetheless there is a belief that the newly laid down wage code will have minimal impact on employee's pay out as nearly 35-40% of employee's CTC is paid out as basic pay or basic allowance.

Also, as per the human resource consulting firm, India has projected the highest salary increase among BRIC countries.

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