Employees play a vital role in the life of an institution or trust. Success or failure depends, to a large extent, on the quality of the employees.
Recruitment Procedure
Normally, the applicants for a job have to submit, along with the application, also other relevant documents, such as qualification certificates, birth certificate, experience certificate, etc. Then they are all interviewed on a given date by a board of selectors, after which a suitable candidate is selected. Once selected, the employee receives an appointment letter, which shows clearly the job for which the person is selected (e.g., office secretary), the nature (temporary, probation, contract, etc.) and tenure of the appointment (e.g. probation for six months, after which, if found suitable, will be made permanent) and the salary (consolidated in the case of a contract employee and pay scale in the case of others) and Provident Fund (PF) he would be paid. PF is applicable from the 1st day onwards, even on a probationary job. Besides, the appointment letter also contains information regarding the duties and responsibilities (job description) as well as rights and privileges (terms and conditions such as duty hours, holidays, leave, etc.) the employee is eligible for. Normally a person works for eight hours a day. If s/he is asked to work beyond that, s/ he is paid over time (OT). The employee gets at least one day weekly off, 10 days of casual leave, 11 days of medical leave and about 21-30 days earned leave (paid holiday) in a year.
Pay Scale and Calculation of Salary
Let’s take for example 3,000-300-4,500-500-7,000. Here Rs 3,000 is the basic and Rs 300 is the annual increment. Normally the dearness allowance (DA) is a fixed percentage of the basic and it is left to the discretion of the trust. For our understanding here, let’s take 50% as the DA, with an increase of 5% once in a year. There can be other allowances like house rent allowance (HRA), conveyance allowance (CA), education allowance (EA), city compensatory allowance (CCA), medical allowance (MA), etc. These allowances can be either a fixed percentage of the basic or a fixed sum for all. A fixed percentage will maintain the gap between the topline and bottom-line employees, whereas a fixed amount will narrow the gap between them. Here for our understanding, let’s take a fixed amount of allowances for all classes of employees, i.e., HRA – Rs 2,000, Rs CA – Rs 2,000, EA – Rs 1,000, CCA – Rs 1,000 and MA – Rs 1,000 and DA is 50%. Then, the salary will consist of Rs 3,000 basic, Rs 1,500 (50% of basic) DA, Rs 2,000 HRA, Rs 2,000 CA, Rs 1,000 EA, RS 1,000 CCA and Rs 1,000 MA, thus making a total of Rs 11,500. This is known as gross salary. After all the deductions, including the employee’s contribution for PF, the amount paid to the employee is the net salary.
PF or EPF and Gratuity
Both PF and gratuity are considered future social security for the employee. Hence, it is to be taken seriously. PF is 12% of the salary as contribution from the employer as well as the employee. For PF and gratuity purpose, salary means the total of basic and DA only. Thus, according to the above example, salary for PF calculation will be Rs 4,500 (3,000 basic + 1,500 DA). 12% of 4,500 is 540. Thus both the employer and employee will contribute Rs 540 each towards the PF of the employee. If the salary for PF calculation (basic+DA) is Rs 15,000 and above, then the employer may stop his share of PF at Rs 1,800 (12% of 15,000) and the employee may continue paying 12% even beyond Rs 15,000. If the employer has started paying more than Rs 1,800 per month as his share for the employee’s PF, then he cannot bring it back to Rs 1,800 per month. However, for saving income tax under section 80C, a maximum of Rs 1,50,000 is the upper limit. Withdrawal from PF before the completion of 5 continuous years in service will have income tax liability. An employee can avail advances (not loans) from one’s PF account for specific purposes, such as buying a house, repaying a housing loan, medical needs, education or marriage of children, etc. EPF (Employee’s Provident Fund) enjoys the status of EEE (income tax exempt during contribution, when interest is earned and when withdrawal is done).
Any trust with over 20 employees has to register itself under the government EPF scheme and the 12% contribution from the employer and the employee is pooled together and managed by the Employees’ Provident Fund Organization (EPFO) of the govt. In such as case, 8.33% of the employer’s contribution goes for the employees’ pension scheme (EPS), which will be used for the future pension of the employee.
Gratuity is applicable to any trust having 10 or more employees. It is calculated from the 6th year of employment, including the probation period too. It is calculated on the basis 15 days salary for every year completed in service. If the basic and DA together is Rs 10,000 per month and the employee has completed 20 years at a stretch in service, then the formula is: 10000/26*15*20. Gratuity amount up to Rs 10 lakhs is exempt from income tax.
Employees’ Savings
Besides the mandatory EPF and gratuity (the latter may not be applicable in some cases), we should encourage our employees to do some regular savings for their future. A scheme like a recurring deposit (RD) in a post office or bank or a systematic investment plan (SIP) in a mutual fund every month will go a long way in making a provision for their future needs. If possible, even a housing scheme can be provided for them, whereby an interest-free loan is given to the homeless employees, and they repay the loan in monthly instalments.
Just Wages
According to Canon Law (1286.2) we ought “to pay a just and decent wage to (our) employees so that they are able to provide fittingly for their own needs and those of their dependents.” What is a “just and decent wage” for our situation? I am taking the example of a middle class family with 5 members (two parents, two children and one parent of the parents) living in a city. The following may be their needs: Food (for 5 persons @ Rs 50/day for 30 days) Rs 7,500, house rent Rs 3,000, travel to school/work place (for 2 persons @ Rs 40/day for 30 days) Rs 1200, medical needs (Rs 6,000 for the entire family for one year divided for 12 months) Rs 500, clothes (Rs 6,000 for the entire family for one year divided for 12 months) Rs 500, education (for 2 children @ Rs 300/child/month) Rs 600, study materials/uniform, etc. for 2 children @ Rs 100/child/month) Rs 200, electricity bill Rs 500, household needs (Rs 3,600 for the year to buy a cycle, fan, piece of furniture, etc., divided for 12 months) Rs 300, social needs for the family (birthday gift, wedding gift, etc.) 300/month, all put together making a total of Rs 14,600/month.
With this breakup in mind, I believe that anything less than this amount in a city would be an unjust wage.
Just Wages: Our Responsibility
We cannot argue or give a lower salary, saying, “Where do we get the money from?” or “By working here they are able to earn at least something,” “Even we do not get so much salary,” “What if there are two earning members in the family?” or “What if they live in their own house?” In fact, for many of us, priests and religious, our expenses per head will be much more than this! Any unwanted justification of our unjust wages is sheer exploitation of the poverty of our employees. It is the unjust wages that lead to more and more debt, lack of education of the children, unhygienic living conditions, sickness, drinking, fights within the family, greater poverty and misery, etc., in our employees’ families. And we will be held responsible for their misery on the Last Judgement Day.
In the next article, we shall discuss the topic “How to deal with our employees.”
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