Budget 2017 – Review and Insights for the Indian HR community
The 2017-18 Budget presented last week, was a much anticipated event across all sections of the Indian industry, the workforce as well as the HR community. The Finance Minister, Shri Arun Jaitley, had aligned the Budget offerings with its vision to ‘Transform, Energise and Clean India’, and as such they have offered the Indian masses muted cheer.
The Indian workforce and the HR community had been hopeful of a few tax sops and incentives, however, these weren’t offered as expected. A few additional tax sops would certainly have brought some delight – but then again, there wasn’t much to complain, as a majority of the tax payer base feel their interests have been largely protected.
As for industry, the efforts to stabilise itself from the government’s demonetisation efforts, and from IMF’s recent downgrading of India’s growth outlook are still underway. These are times without a precedent for this generation, and the industry did hold hopes that the Budget would ease some of the everyday challenges of business
Finally, as members of HR the fraternity, we observe a definitive slant on skill development – particularly among the women and rural workforce, which should create greater access to well trained and energised workforce in the long run. This is a positive step and will help secure industry interests for the future. Ensuring pay attractiveness in the short term is however not going to be an easy task, read on to know more…
Key Implications for HR professionals
1. Skilled workforce and secure access to quality talent
The Budget has apportioned a generous Rs.4000 crore to the Skill India initiative enabling 3.5 crore of our youth to secure skills that will ensure their employability.
Further, the government has announced several initiatives that will leverage information technology to deliver higher education. These include the SWAYAM platform that will offer 350 online courses and a National Testing Agency that will serve as an autonomous and self-sustained premier testing organisation and conduct entry level evaluations for higher education institutions.
Initiatives such as the Pradhan Mantri Kaushal Kendras (PMKK) and Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) will also promote the acquisition of vocational skills that can be readily transferred into the market. Initiatives such as the Mahila Shakti Kendra centres will ensure skill development for rural women and drive digital literacy and employability within the group.
All these initiatives highlight the government’s intent to ‘teach the people to fish’ as opposed to simply feeding them with sops. In the long run, these initiatives will drive consistency in skills and standardized skill mapping across sectors. These will enable the HR community to benefit from greater availability of well-trained and quality workforce, and help industries expand across new markets and geographies. Further, these will offer fair and equitable opportunities, and secure access to high-growth jobs for the millennial workforce across the country.
2. Flexible savings through the National Pension System (NPS)
The recent budget provisions will now allow employees investing in the National Pension System (NPS), the freedom to withdraw up to 25% of their contribution without worrying over tax implications. The withdrawal flexibility together with the tax exemption, will align the NPS closer to the EPF, and will incentivise employees to show greater interest in enrolling into the scheme.
3. Personal tax – cheer for many, but not for all
The Budget announced a revision to the existing tax slab rates for income levels between Rs.2.5 lakhs to Rs.5 lakhs, reducing the tax by half from 10% to 5%.
The move offer reasons for cheer to entry level professionals drawing a modest pay, and secures the interests of 70% of the tax payers in the country – who draw an annual income of Rs.500000 and under. Although a modest saving measure, HR professionals will likely find it easier to curtail the movement of talent from out of semi-urban industrial centres into better paying jobs in the city. Together with other internal initiatives, these measures will create effective ways to reduce attrition within remote operations centres.
While the Budget chose to protect the interests of most tax payers, it did hold a surprise for those with income levels between Rs.50 lakhs to Rs.1 crore, through a 10% surcharge. The surcharge will bring a significant increase in the annual tax burden for the affected employees, and dampen the joy of any pay rises for them.
HR and reward managers as well will be forced to look at ways to ensure the attractiveness of pay rises, or be driven to pay higher salaries to offset the budget for those in the high income bracket.
4. Sectoral Impact on employee budgets
The Budget delivered many provisions on cue, however certain sectoral expectations have been ignored. For instance, the IT sector has been desperately looking for some reprieve given the unfriendly H1B visa regulations in the US. Many industry leaders were hopeful for support and incentives for R&D, but these expectations remain unmet.
Also, while the corporate tax rate was brought down for smaller companies – from 30% to 25%, these reductions weren’t extended to larger organisations. A cut in the tax rate will have helped to increase the competitiveness for Indian companies and offered a level playing field with other Asian businesses.
With the IT sector expectations and favourable corporate tax structures for larger organisations ignored, it is very likely that employee related spends will be affected. Overall, we can expect that salary, benefits, and budgets for employee related initiatives and programmes will likely stay conservative through the year.
To sum it up, the present budget has enabled broad-based interventions to improve the quality of the workforce, and these will drive considerable growth in the future within specific industries and allied sectors. Additional surcharges and lack of corporate tax cuts will challenge the HR community’s ability to attract, reward and incentivise talent.
All we can say is, this is indeed an interesting time – to think up change, creativity and collaborative strategies!
Budget 2017 – Review and Insights for the Indian HR community
The 2017-18 Budget presented last week, was a much anticipated event across all sections of the Indian industry, the workforce as well as the HR community. The Finance Minister, Shri Arun Jaitley, had aligned the Budget offerings with its vision to ‘Transform, Energise and Clean India’, and as such they have offered the Indian masses muted cheer.
The Indian workforce and the HR community had been hopeful of a few tax sops and incentives, however, these weren’t offered as expected. A few additional tax sops would certainly have brought some delight – but then again, there wasn’t much to complain, as a majority of the tax payer base feel their interests have been largely protected.
As for industry, the efforts to stabilise itself from the government’s demonetisation efforts, and from IMF’s recent downgrading of India’s growth outlook are still underway. These are times without a precedent for this generation, and the industry did hold hopes that the Budget would ease some of the everyday challenges of business
Finally, as members of HR the fraternity, we observe a definitive slant on skill development – particularly among the women and rural workforce, which should create greater access to well trained and energised workforce in the long run. This is a positive step and will help secure industry interests for the future. Ensuring pay attractiveness in the short term is however not going to be an easy task, read on to know more…
Key Implications for HR professionals
1. Skilled workforce and secure access to quality talent
The Budget has apportioned a generous Rs.4000 crore to the Skill India initiative enabling 3.5 crore of our youth to secure skills that will ensure their employability.
Further, the government has announced several initiatives that will leverage information technology to deliver higher education. These include the SWAYAM platform that will offer 350 online courses and a National Testing Agency that will serve as an autonomous and self-sustained premier testing organisation and conduct entry level evaluations for higher education institutions.
Initiatives such as the Pradhan Mantri Kaushal Kendras (PMKK) and Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) will also promote the acquisition of vocational skills that can be readily transferred into the market. Initiatives such as the Mahila Shakti Kendra centres will ensure skill development for rural women and drive digital literacy and employability within the group.
All these initiatives highlight the government’s intent to ‘teach the people to fish’ as opposed to simply feeding them with sops. In the long run, these initiatives will drive consistency in skills and standardized skill mapping across sectors. These will enable the HR community to benefit from greater availability of well-trained and quality workforce, and help industries expand across new markets and geographies. Further, these will offer fair and equitable opportunities, and secure access to high-growth jobs for the millennial workforce across the country.
2. Flexible savings through the National Pension System (NPS)
The recent budget provisions will now allow employees investing in the National Pension System (NPS), the freedom to withdraw up to 25% of their contribution without worrying over tax implications. The withdrawal flexibility together with the tax exemption, will align the NPS closer to the EPF, and will incentivise employees to show greater interest in enrolling into the scheme.
3. Personal tax – cheer for many, but not for all
The Budget announced a revision to the existing tax slab rates for income levels between Rs.2.5 lakhs to Rs.5 lakhs, reducing the tax by half from 10% to 5%.
The move offer reasons for cheer to entry level professionals drawing a modest pay, and secures the interests of 70% of the tax payers in the country – who draw an annual income of Rs.500000 and under. Although a modest saving measure, HR professionals will likely find it easier to curtail the movement of talent from out of semi-urban industrial centres into better paying jobs in the city. Together with other internal initiatives, these measures will create effective ways to reduce attrition within remote operations centres.
While the Budget chose to protect the interests of most tax payers, it did hold a surprise for those with income levels between Rs.50 lakhs to Rs.1 crore, through a 10% surcharge. The surcharge will bring a significant increase in the annual tax burden for the affected employees, and dampen the joy of any pay rises for them.
HR and reward managers as well will be forced to look at ways to ensure the attractiveness of pay rises, or be driven to pay higher salaries to offset the budget for those in the high income bracket.
4. Sectoral Impact on employee budgets
The Budget delivered many provisions on cue, however certain sectoral expectations have been ignored. For instance, the IT sector has been desperately looking for some reprieve given the unfriendly H1B visa regulations in the US. Many industry leaders were hopeful for support and incentives for R&D, but these expectations remain unmet.
Also, while the corporate tax rate was brought down for smaller companies – from 30% to 25%, these reductions weren’t extended to larger organisations. A cut in the tax rate will have helped to increase the competitiveness for Indian companies and offered a level playing field with other Asian businesses.
With the IT sector expectations and favourable corporate tax structures for larger organisations ignored, it is very likely that employee related spends will be affected. Overall, we can expect that salary, benefits, and budgets for employee related initiatives and programmes will likely stay conservative through the year.
To sum it up, the present budget has enabled broad-based interventions to improve the quality of the workforce, and these will drive considerable growth in the future within specific industries and allied sectors. Additional surcharges and lack of corporate tax cuts will challenge the HR community’s ability to attract, reward and incentivise talent.
All we can say is, this is indeed an interesting time – to think up change, creativity and collaborative strategies!
