According to the latest study by Willis Tower Watson, India Inc. has anticipated changes in the labour code. In light of these regulatory changes, labour reforms and increasing cost of providing retirement benefits, 53% of organisations in India are planning to review their retirement or long-term benefits design in the next two years. Some of the key pointers of the report are below -
Top factors to upgrade benefits strategy
According to the study, employee experience (49%) is the top influencer of long-term employee benefits strategy, followed by regulatory complexity (45%). Digitalisation of benefits is also ranked amongst the top influencing factors at (26%).
Employees and employers alike believe that 64% expect a significant impact on their P&L; yet 34% are unsure of making changes to their compensation structure. Quite a few employers (46%) are planning to continue Provident Fund contributions on basic salary.
Impact on Employees’ Provident Fund
According to the study, seven out of ten employee’s provident funds are being managed by a regulator. The study believes that the EPFO services have significantly improved with increased administration efficiency and digitalisation. Yet in the new world of work, (73%) respondents feel that market volatility and the current bond downgrades have been a cause of increasing concern for their self-managed provident fund. Half the surveyed companies report that regulatory compliance has become a significant burden and a similar number said that managing their own provident fund trust is not a sustainable option in the long-term.
Impact on superannuation and national pension system (NPS)
The study found that 73% of the employers currently provide or plan to implement Corporate NPS and amongst those that already provide it, 61% are exploring strategies to increase the participation rate.
Also, 13% have ported from the Superannuation scheme to NPS, 25% are in the process or are considering to port and 36% offer or plan to offer both. On the other hand, 44% of organisations plan to continue to offer legacy superannuation plans and almost half have retained or are planning to retain the scheme for new entrants.
44% are currently providing superannuation schemes to their employees and 71% are not considering winding up or porting to NPS.
Commenting on the study findings, Ritobrata Sarkar, Head of Retirement, WTW India, said, “Organisations are gradually coming out of the pandemic survival mode and focusing on issues such as the long-term implications of retirement adequacy and employee benefits. Our study shows that the retirement benefit landscape in India is evolving, with organisations retaining superannuation as an option in addition to promoting NPS.”
She also added that while both these avenues co-exist, it will be critical for organisations to consider the regulatory environment, flexibility for employees, cost-benefit analysis and most importantly, employee experience as they review their long-term employee benefits strategy and mix. Hence, NPS continues to be a focus area with a large majority exploring strategies to increase employee participation rates.