Your Salary Structure May Change If You Wish To Work From Home

The salary structure of an employee may change if he wishes to opt for work from home on a permanent basis. The Ministry of Labour & Employment may soon allow employers to modify the salary structure of existing employees who opt for work from home permanently. Work From Home Increases Productivity? Senior Executives Vouch For WFH, Say It’s Likely to Continue in Post COVID-19 Era As Well

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According to a report in The Economic Times, This could entail a reduction in the house rent allowance component of the employees and an increase in reimbursement cost under the infrastructure component.

The financial daily citing a top government official mentioned that there is a need to redefine service conditions to ensure the employee compensation is structured taking into account the expenses incurred due to working from home.

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In a WFH condition, employees have to bear certain infrastructure costs such as electricity and WiFi and these need to be part of the compensation structure. Taking into consideration an employer’s point of view, the lower cost of living for an employee due to relocating to his or her hometown, in some instances to tier-2 and tier-3 cities, needs to reflect in the compensation package.

“The government is considering all the options and something concrete is likely to come soon,” the publication quoted the unnamed official as saying.

Prashant Singh, head and vice president, Teamlease Compliance and Payroll Outsourcing Business, said the employees opting for permanent work from home will have a change in salary stature, like in the components of HRA and professional tax.

Labour welfare fund is another issue, besides the applicability of state labour laws in such situations that needs to be clarified.

If a worker moves to his home town under WFH, the most significant tax impact could be on the HRA component. Under the current rules, the tax rebate for HRA is the least of three: 1) the actual HRA received from the employer, 2) 50% of basic salary + dearness allowance for those living in metro cities and 40% for those living in non-metro cities, and 3) actual rent paid minus 10% of basic salary + DA. Karnataka Government Clarifies on ‘Work From Home Advisory’ for Techies and IT Professionals

If the HRA component is reduced and not replaced with something for which tax rebate is available, then the tax liability of the employee may rise.