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Employers may restructure your pay

Source: PTI
July 07, 2009 18:52 IST
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The removal of the Fringe Benefit Tax (FBT) proposed in the Budget is being regarded as a welcome move for companies and may also provide them scope to restructure employee remuneration, HR experts said.

According to HR experts, although the Budget has not concentrated much on the salaried corporate professionals, the abolishment of FBT will provide some relief for companies, which may look at restructuring employee salary structures.

"While the abolishment of the FBT is a welcome move from employers, it may not be an unmixed blessing.

"The removal of the FBT means that perquisites will be taxed in the hands of employees at the marginal rate of tax applicable to them...we will have to await the valuation rules applicable to perquisites," PricewaterhouseCoopers India Leader for People and Change practice R Sankar told PTI.

However, there is a scope for restructuring employee remuneration taking into account the tax proposals, he added.

"With the withdrawal of FBT, we can look forward to companies reintroducing and strengthening superannuation plans as the third retirement benefit for their staff," Gangapriya Chakraverti, business leader, information product solutions, Mercer Consulting India said.

Sandeep Chaudhary, practice leader - performance & rewards, South & West Asia, Hewitt Associates said that the FBT abolishment comes as a positive for the employers although it might not be so good for the employees.

"The companies grappling with the global downturn may find the removal of the tax a welcome move. There are possibilities that companies may look at increasing salaries to an optimal level but it depends on specific companies and their respective remuneration policies," Chaudhary said.

Further, stock options that serve as effective long term wealth creation instruments would regain their place in the salary structures of employees and employers may reconsider introduction of the same, particularly against the anticipated future growth in the stock markets, Chakraverti added.

Chaudhary added that a positive for employees would be the stock options as companies may include them in the salary structures.

HR experts said that the removal of 10 per cent surcharge is also a good move and would be seen as beneficial for the salaried class, particularly against the prevailing backdrop of salary freezes and reductions.

Meanwhile, Deloitte India's chief people officer Dhananjay Bansod said the FBT removal would have a neutral impact on employees and the affect would be clear only after the fine print on tax on perquisites become clear.

"The mass of the salaried individuals have not got any major incentive from the Budget this time, as the Rs 10,000 increase in the salary limit for income tax coverage does not amount to much relief," Bansod said.

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