Labour Ministry, Industry Discuss Changes In Salary Structure For Work From Home

India's Labour Ministry is in talks with companies on a proposal seeking to change the salary structure for employees working from home, with suggestions ranging from a lower house rent allowance to new deductions.

The discussions with industry representatives focus on a legal framework that will best suit the new work model in view of the ongoing pandemic that has forced employers to move out of offices, a ministry official told BloombergQuint on the condition of anonymity as the person is not authorised to disclose details.

Some of the changes discussed include reduction in house rent allowance, keeping in mind that employees have moved back to their hometowns, and introduction of new reimbursements such as electricity and WiFi, the official said. Reduction of HRA in percentage terms is yet to be finalised, the official said.

The draft framework will be proposed to the Finance Ministry. Any changes will require amendments to the tax laws.

BloombergQuint couldn't confirm whether this will be included in the Budget 2022 document. Emailed queries to both the ministries remained unanswered.

Human resource heads and chief executive officers of Indian companies interacted with the labour ministry through videoconferencing on Jan. 13.

"Union Minister Bhupender Yadav chaired the meeting where discussion on a range of issues, including enhancing employability and future skillset of the workforce, increasing productivity, and new policy on work from home were discussed," Rajeet Goswami, an industry representative who was part of the virtual meet, told BloombergQuint. "Industry heads were in unison with the central government's plans."

The Confederation of All India Traders, in a letter addressed to the Prime Minister last week, wrote, "Work-from-home culture has evolved over the past two Covid-19 years and this work module needs concrete and structured rules and policies in order to run smoothly."

Secretary General of the confederation Praveen Khandelwal said they have urged the central government to formulate "exhaustive" rules and regulations for work-from-home model to prevent dispute and conflicts between employers and employees.

The government had in January last year formalised work from home for the services sector through a standing order, allowing employers and employees to mutually decide on the work hours and other service conditions. The government is now planning to bring a comprehensive formal structure for all sectors.

Consultancy firm Deloitte India's pre-Budget expectation 2022 report has suggested more deductions on the “work from home” expenses for employees. “Considering the current situation, employees are working from home across businesses," the accounting firm said, recommending an additional Rs 50,000 WFH allowance for employees.

"Employees are likely to incur additional 'work from home-related expenditure', such as internet charges, rent, electricity, furniture, etc., and therefore, employers would need to provide allowances to meet these expenditures,” it said.

Deloitte India cited the U.K.’s example where the government has provided a flat rate of 6 pounds sterling (around Rs 609) per week of tax relief for additional household costs for those who are working from home.

The Institute of Chartered Accountants of India has also recommended that the government grant tax relief on work-from-home expenses in its pre-Budget memorandum. "Expenses incurred for furniture/other set-up charges may be specifically excused," the ICAI suggested.

A report by industry body Nasscom recommended six measures that the government can take to support the work-from-home model, including changes in labour laws to redefine working hours and shift timings, and changes in income tax laws since expenses incurred by employees to enable work from home need to be treated as business expenses.

This report was sent to the Ministry of Labour and Ministry of Telecommunications after a meeting of government officials with industry representatives in May last year.