Edition 46

  • Posted on: 11 December 2017
  • By: ruchir@saralweb.com

Introduction

On the first day of the month, Finance minister Mr. Arun Jaitley, presented the annual budget for the financial year 2018-19. The budget, expected to be full of freebies before presentation, has been received with a mixed response. Directly supporting agricultural, rural, and healthcare section, the budget is expected to make an impact on the private security sector also. Analysing the annual budget for the private security sector, we bring to you the 46th edition of Saralweb’s industry research note.

Direct Impact

Although the name “private security industry” was missing in the budget speech, some of the announcements are of direct interest for the industry. The government, in order to improve the ease of doing business, has extended the fixed term employment to all sectors. The move will allow organisations to hire employees for a short-term assignment, and terminate their services when projects are completed. The fixed term employment workers will be entitled to statutory benefits, available to permanent workers.

The move will allow organisations to hire employees on a project basis. Private security industry, according to FICCI-PWC report, has a potential to employ 3 million employees by 2020. The additional manpower can help boost the competitiveness of an organisation, while the statutory requirements, make the record keeping work tedious. Data redundancy can create trouble, if record maintenance lacks well defined structure.

Another major game changer introduced by Finance Minister, is the amendments in the Employee Provident Fund and Miscellaneous Provisions Act,1952. As per the changed norms, the women employees’ contribution for the first three years of their employment will be 8%, with no change in employer contribution. Also, the employees getting EPFO membership for the first time, will be provided 12% contribution from the government.

This too would make the record keeping a tedious task, but its major impact will be on payslip generation. Organisations will have to generate accurate payslips with the factors like gender, tenure, etc., being taken into consideration. The level of complexity of statutory reports might increase. Organisations relying on software might be challenged with software’s flexibility; those relying on spreadsheets, might face a nightmare with data integration challenges.

Indirect Impact

One of the biggest highlights of the budget has been the development of infrastructure. 99 cities will be getting an investment of Rs. 2.04 lakh crore. Railways is also increasing its infrastructural capabilities. Keeping a track of policemen per citizen ratio, one can expect a pool of opportunities for the private security sector. The new proposed changes in fixed term hiring may allow organisations to get the maximum out of these opportunities, but the correlation between training and fixed term employees is yet to be clarified. Meanwhile, the proposed outlay for Ministry of Skill Development and Entrepreneurship has been raised to Rs.3400 crore.

The government has also made significant changes in healthcare. A handsome amount is to be distributed for the improvement of health and living conditions of citizens, especially the segment providing a major share of labour force for the industry. It’s application too needs clarification; if the announced reforms make an impact on ESI policy, organisations might face a challenge, quite similar to what is expected with changed EPF scenarios.

The compliance implementation along with the changing scenarios is slowly and steadily transforming the private security sector. The challenges discussed above also, find their solution in digitalisation of processes. In times to come, there could be offerings for the sector in order to inject organised structure in daily practises. The government has allocated Rs.3073 crore for Digital India. While the exact impact on business practises will be observed in times to come, the budget can be said to be leaning towards a structured, digital private security industry.