A brief note from our CFO on Teams reads, 'Payroll must be ready by April 1 when the Labour Codes are implemented - no surprises.' Suddenly, HR, finance, and payroll are in daily meetings, as no one wants the responsibility of explaining an unexpected pay slip to 700 employees. The HRBP is constantly questioning whether to start with compensation restructuring, PF impact modelling, or policy rewrites first, while the CEO desires a single 'green status' slide for the board. In the meantime, our payroll vendor is asking for final component mapping and 'wage definition' assumptions. However, the leadership is hesitant to commit until there's clarity. Thus, the pressing question becomes: What should we finalise first - CTC structure, payroll configuration, or policy changes, and why?
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The situation you're facing is indeed complex, but not uncommon. The implementation of new labour codes requires careful planning and prioritization. Here's a step-by-step action plan:
1. Begin with the Compensation Restructuring: The first step should be to restructure the Cost to Company (CTC) structure. This is because the new labour codes will change the definitions of wages, which will directly impact the CTC structure. It's crucial to understand how the new wage definition will affect the various components of the CTC, such as basic pay, allowances, and benefits.
2. Proceed to PF Impact Modelling: Once the CTC structure is clear, you can move on to Provident Fund (PF) impact modelling. The new labour codes could potentially increase the PF contributions due to changes in the wage definition. This will have a significant impact on both the employee's in-hand salary and the employer's PF contribution.
3. Undertake Payroll Configuration: After the CTC restructuring and PF impact modelling, you should reconfigure the payroll system. This involves adjusting the payroll software according to the new CTC structure and PF contributions. It's crucial to ensure that the payroll system is ready before the labour codes are implemented to avoid any discrepancies in the pay slips.
4. Finally, Policy Rewrites: Once the above steps are completed, you can rewrite the company policies in line with the new labour codes. This includes updating the compensation policy, leave policy, and other relevant policies.
Remember, communication is key during this transition. Keep the employees informed about the changes and how it will impact their pay. This will help in managing their expectations and reducing anxiety. Also, ensure that your HR team is well-trained and prepared to handle any queries or concerns from the employees.
From India, Gurugram
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1471. Begin with the Compensation Restructuring: The first step should be to restructure the Cost to Company (CTC) structure. This is because the new labour codes will change the definitions of wages, which will directly impact the CTC structure. It's crucial to understand how the new wage definition will affect the various components of the CTC, such as basic pay, allowances, and benefits.
2. Proceed to PF Impact Modelling: Once the CTC structure is clear, you can move on to Provident Fund (PF) impact modelling. The new labour codes could potentially increase the PF contributions due to changes in the wage definition. This will have a significant impact on both the employee's in-hand salary and the employer's PF contribution.
3. Undertake Payroll Configuration: After the CTC restructuring and PF impact modelling, you should reconfigure the payroll system. This involves adjusting the payroll software according to the new CTC structure and PF contributions. It's crucial to ensure that the payroll system is ready before the labour codes are implemented to avoid any discrepancies in the pay slips.
4. Finally, Policy Rewrites: Once the above steps are completed, you can rewrite the company policies in line with the new labour codes. This includes updating the compensation policy, leave policy, and other relevant policies.
Remember, communication is key during this transition. Keep the employees informed about the changes and how it will impact their pay. This will help in managing their expectations and reducing anxiety. Also, ensure that your HR team is well-trained and prepared to handle any queries or concerns from the employees.
From India, Gurugram
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SALIENT FEATURES ON ALL LABOUR CODES - TELUGU VERSION.pdf
Compensation policy.doc