MYSTIC EAST - NEW WAGE CODE ...an unexplored horizon - February 2021 A Bi-monthly Magazine by HRAEI ...
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MYSTIC EAST
...an unexplored horizon A Bi-monthly Magazine by HRAEI | Vol 7 | Issue 1 | January - February 2021
NEW
WAGE CODE
Wage rules with a simpler approach may
have made payroll structures friendlier for
both employers and employees
DIRECTOR'S NOTE
RRecently some hospitality associations have
launched the #Godirect Campaign to counter
the dominance of certain online travel agents
(OTAs). This is certainly a judicious move ex-
pected to eliminate intermediaries and save
We have a huge advantage over the
OTAs when it comes to nurturing a
relationship with the guest.
we're in control of our own destiny and
we must implement a proven marketing
strategy. This will not only maximize the
number of direct bookings that a property
is driving through its own website, but also
exorbitant commissions to hotel aggregators, a strategy that uses OTAs for their intended
especially when the hospitality sector is go- purpose to find new guests. In other words,
ing through a critical situation. We at HRAEI if you have used OTAs in the past to find
have been fighting against the arm-twisting and book new guests, now tap those guests
tactics of the aggregators for quite some directly. We have a massive advantage over
time. Last year we had decided to stop taking the OTAs when it comes to developing and
bookings from, two top online travel portals nurturing a relationship with the guest. The
for charging heavy commissions from hotel relationship between the OTA and the guest
owners and offering indiscriminate discounts exists only online or through calls via phone,
to customers through their platforms. These but we have the distinct privilege of actually
online booking portals initially charged hosting the guest and the opportunity to
between 15 and 18 per cent as commissions, build a real and meaningful relationship.
but the figure climbed to over 40 per cent This should be followed up through regular
last year-end. communication with the guest and build
It's time for our industry to realize that brand loyalty.
Mr Sudesh Poddar
President, HRAEI
MYSTIC EAST | 3
EDITOR’S MESSAGE
It wasn't that long ago that the only green,
plant-based food generally spotted in fast-food
MYSTIC EAST
restaurants was the shredded lettuce separating a A BI-MONTHLY MAGAZINE BY HRAEI
Vol 7 | Issue 1 | January - February 2021
hamburger from its mayonnaise slathered bun. But
as the vegetarian and vegan community rapidly
grows, even fast-food fans are becoming less afraid EDITORIAL BOARD
SUDESH PODDAR
of eating their greens. Last November, McDonald's
PRESIDENT, HRAEI
announced that it is offering a meatless burger
DR. SUBORNO BOSE
called the McPlant, and Pizza Hut became the first SENIOR VICE PRESIDENT
national pizza chain to partner with leading vegan MOHAMMED AZHAR
meat producer Beyond Meat to introduce plant- HONOURARY SECRETARY
based meat pizzas across US and Europe. Some VIJAY SHRIKENT
industry watchers believe that plant-based meat GENERAL MANAGER-TAJ BENGAL & CITY GENERAL
MANAGER, KOLKATA
is on its way to becoming the fifth protein, in with
EDITOR
Plant-based beef, chicken, seafood and pork. ATIKRAM GUPTA
Meanwhile, in a country like India, where major
meat is on its EDITORIAL CONSULTANT
SUSMIT BARMAN
food giants are forced to introduce vegetarian
way to becoming options on their menu, including plant-based meat CHIEF DESIGNER
SOMU DUTTA
the fifth protein, options might not be a bad idea. Although we
in with beef, see a few vegan restaurants coming up across the ‘Mystic East’ magazine is printed
and published by Atikram Gupta on behalf of Hotel and
country, particularly in the metros, fast food chains
chicken, seafood here are yet to tap this segment of plant-based
Restaurant Association of Eastern India.
Printed at CDC Printers Private Limited, No.45, Radha Nath
and pork meat. Researchers from the University of Bath, the Chowdhury Road, Tangra Industrial Estate-II, Kolkata, West
Bengal 700 015
Good Food Institute, and the Center for Long Term
Priorities collaborated on the first quantitative com- Hotel and Restaurant Association of Eastern India, 18A/1,
parison of consumer attitudes towards plant-based Everest , 18th Floor, 46C,
Chowringhee Road, Kolkata- 700 071;
and clean meat across China, India, and the U.S. Telephone- +91 33 2288-1742/43, 40035993.
The report by Deloitte found out that the three E-mail: info@hraei.co.in
Website: www.hraei.co.in
most populous countries in the world have robust
consumer interest in plant-based and clean meat.
Interest in clean meat is expected to grow once
there is a product on the market and consumers
are more familiar with it.
THIS ISSUE OF MYSTIC EAST CONTAINS 56 PAGES INCLUDING COVER AND BACK COVER
All information in Mystic East magazine is derived from sources we consider reliable and a sincere effort is made to report accurate information. The publisher
regrets that he cannot accept liability for error and omissions contained in this publication that might have crept in inadvertently. Similarly, opinions/views
expressed by third parties are not necessarily shared by the magazine. However, we wish to advise our readers that one or more recognised authorities may hold
different views than those reported. Material used in this publication is intended for information purpose only. Readers are advised to seek specific advice before
acting on information contained in this publication which is provided for general use, and may not be appropriate for the readers’ particular circumstances..
No part of the magazine may be reproduced, stored in retrieval system or transmitted in any form without the permission of the publication in writing. The same
rule applies when there is a copyright or the article is taken from another publication. An exemption is hereby granted for the extract used for the purpose of
fair review, provided two copies of the same publication are sent to us for our records. Publications reproducing material either in part or in whole, without
permission could face legal action. The publisher assumes no responsibility for returning any material, solicited or unsolicited, nor is he responsible for material
lost or damaged.
4 | MYSTIC EAST
January - February 2021
The new and common definition of 'wages' under
the recently passed labour codes has got most
organisations to take yet another look at their payroll
structures to determine what impact they will face.
The new codes have been passed by Parliament to
"amalgamate, simplify and rationalise" existing laws
on various subjects like payment of wages, minimum
wages, bonus, social security, etc., and are anticipated
to become a binding law from April 2021. Is this the
change the industry had wanted and hoped for?
No doubt a common and consistent definition is
good, and that is certainly a positive one. PF, ESI, stat-
utory bonus, leave encashment (for factory workers),
gratuity, retrenchment compensation, etc. will all be
calculated using a common definition of 'wages.'
The definition of wages continues with the age-
old formula of stipulating broadly worded inclusions
along with vaguely worded exclusions, and then adds
a layer of complexity on top by setting out exceptions
for situations where the excluded components would
also have to be treated as wages. No doubt, there
could be certain entitlements, such as the construct
The definition of wages of CTC - such as statutory bonus, overtime, etc., which
may or may not be treated as 'wages' based on the
continues with the age- circumstances. It could have been a lot simpler and in
old formula of stipulating tune with the compensation practices being followed
broadly worded inclusions today - internationally and in India.
Mr Mohammed Azhar
Honourary Secretary
MYSTIC EAST | 5
Inside
Cover Story
January - February 2021
23
NEW WAGE
CODE
Wage rules with a
simpler approach may
have made payroll
structures friendlier for
both employers and
employees
8
UNION BUDGET:
OUR WISH LIST
Expectations are increasing
from all sectors before the THINGS TO STAY
Union Budget, particularly The ever-resilient hospitality
the hospitality sector, that
was hit the hardest by to the
lockdown restrictions
14 industry rose up to the
challenge, reinvented itself and
bounced back
6 | MYSTIC EAST
January - February 2021
18 READY FOR FAKE
MEAT? 32 NEW NORMAL
TRAVEL
Plant-based meat selections
appeal to meat eaters in a
way traditional vegetarian
substitutions haven’t The current pandemic has ensured
that travelling won’t be the same as
before. Some trends are going to
28 GO DIRECT,
BYPASS OTA
stay even after normalcy returns
An important goal for both
large hotel chains and
38 STELLAR
REVIVAL
Odisha Tourism has undertaken a drive
smaller, individual hotels, is to sensitise hospitality service providers
to encourage guests to across the state in COVID-19 safety
book directly through their protocols. Innovative schemes are
websites drawing tourists in hordes
MYSTIC EAST | 7
NEWS ANALYSIS
OUR WISH LIST
As we inch closer to the much-awaited Union Budget 2021, the expectations are
increasing from all sectors, particularly the hospitality, travel and tourism segments
that were directly impacted due to the lockdown restrictions
Industry status
T
HE coronavirus pandemic continuously asked the government
and the consequent lock- for several concessions, 'industry The hospitality sector contributes
down in India crippled the status 'being a continuous demand. almost 10 percent of the GDP to the
Indian economy and disrupted the The sector contributes almost 10 economy and our employment is
lives of millions in an instant. Out percent of the GDP to the economy around 9-10 per cent. Hence, we have
of the sectors that were the most and employs around 9-10 per cent. been demanding that hotels, resorts
affected, hospitality and travel It's time the government gives some and restaurants need to be accorded
and tourism had to face the wrath attention to this sector. Following industry status. We need to get the
of calamity in the absence of any are some of the demands of the industry status which helps in reduc-
safety net. The hospitality sector has hospitality sector. ing our costs. It helps in making the
8 | MYSTIC EAST
January - February 2021
business more viable and profitable. state governments have been proac- The industry status allows hospi-
That is the long-standing demand tively lending a helping hand to the tality establishments in the state to
which we have been seeking. There tourism & hospitality sector in their be levied electricity rate, electricity
is so much tourism potential in this respective states, providing various charges, water charges, property tax,
country it actually would be simply relief measures to help the sector development tax, increased carpet ra-
wonderful if the government con- stay afloat during these trying times. tio and non-agricultural tax at indus-
sidered this and gave the industry Last month, in a move to reboot the trial rates (with effect from 1st April
this privilege. It would change things sector, the Maharashtra government 2021). As a result, operating costs for
considerably conferred 'industry' status to the hospitality players in Maharashtra
In the past few months, several state's hospitality sector. are expected to reduce significantly
MYSTIC EAST | 9
NEWS ANALYSIS
as industrial tariffs are much lower rich heritage, and cultural diversity,
than the commercial tariff that they which attracts tourists from across
currently pay. the country and the world. However,
Earlier in October 2020, the state The hospitality sector we have still not tapped into the full
had also reduced pre-establishment contributes almost potential of tourism in the country,
licenses for the sector from 70 to 10, especially leisure tourism, mainly
which along with the industry status
10 percent of the due to the lack of good quality hotel
is expected to boost the growth in GDP to the economy infrastructure.
the hospitality sector in Maharashtra. and our employment The hospitality sector is highly
We now hope that other states will capital intensive and the high cost
take cognizance of what Maharash- is around 9-10 per of capital often makes investments
tra has done and follow the same. cent. Hence, we have in this sector seem less attractive.
This could then be the harbinger of The sector is a significant contributor
change for the industry, one that
been demanding that to the country's GDP growth and
could significantly impact its fortunes hotels, resorts and employment and granting infrastruc-
in a much-needed positive manner. restaurants need to ture-lending (infra) status to the sec-
tor- a long-pending request by key
Infrastructure-lending status be accorded industry stakeholders - will be the next frontier
India is one of the fastest growing status in its growth path.
travel & tourism economies in the The government has granted infra
world thanks to its diverse landscape, status to three-star or higher catego-
10 | MYSTIC EASTNEWS ANALYSIS ry hotels outside cities with a popula- with/without supporting vendors/ will improve occupancy and help In- tion of over one million and to hotels manufacturers, and designated ser- dian hotels be more competitive and with a project cost of more than INR 2 vice providers or a certified Common on a par with other Asian economies billion (excluding land costs). Howev- Service Provider. such as Hong Kong, Thailand and Sin- er, this has not provided any signifi- We request for treating payments gapore, where tax rates range from cant fillip to the sector as the benefits received from international tourists 0 to 7%. GST for restaurants located have been limited to a minuscule as Foreign Exchange for the purpose in hotels where room tariff exceeds proportion of projects. of EPCG scheme and that the time ₹7,500, is currently pegged at 18%. In the recent past, there have to perform export obligation under It should be brought down to been several successful examples of the scheme be extended by 5 years. 12% with full benefit of input credit. sectors, such as hospitals, logistics In other words, we request grant of Bringing liquor under GST will ensure and affordable housing to name a extension in export obligation fulfill- single tax and will eradicate multiple few, which have witnessed exponen- ment period by an additional three state taxes and duties, it said. The tial growth in investments after they years beyond 6 years for all the licens- body also suggested increasing li- were accorded the infrastructure es expiring during current and next 2 cence timelines from the existing one status. financial years, without attracting any year to 3-5 years. Similarly, infrastructure status will penalty or interest. Secondly, the amendment in sec- provide the Indian hospitality sector tion 17(5) of GST Act and respective with several benefits and conces- GST, SEIS & direct taxes State Acts had led to an unfavourable sions, including longer loan repay- We seek a cut in GST rates charged position by denying credit to hotel ment tenure and lower borrowing on services offered by hotels. For in- buildings/structures. This defeats the rates, which will help in attracting stance, GST on room bookings should objective of GST law principles of free substantial fresh investments and be reduced from 18% to 12% which flow of credit when the output is in will go a long way in improving the health of the sector, which is currently struggling due to the ongoing pan- demic. The growth of the hospitality sector will in turn fuel the economy in the post-COVID world, making a compelling case for the sector being granted infrastructure status. Extension of EPCG Scheme The Export Promotion Capital Goods scheme (EPCG) is an initiative by the Government of India and is a part of the Foreign Trade Policy (FTP) 2015- 20. It was first operationalised on 1 April 2015 and under this scheme, capital goods imported for the manu- facture of export products enjoy zero or concessional rates in the customs duty. The imported capital goods include spare parts for production, that is pre and post-production. The scheme also covers merchant exporters associated with supporting manufacturers, manufacturer exports 12 | MYSTIC EAST
January - February 2021
the course of furtherance of business. enable investments into developing Encourage spending
Therefore, input credit should be more globally acceptable products To get the economy kicking, the
allowed on civil structures that will and will help in earning higher government needs to encourage
result in an 8-10% savings in overall foreign exchange. Also IGST billing spending. We need to have policies
cost. to the hotels for corporate bookings where business companies, corpo-
If the government allowed the and MICE must be allowed. This will rates allow their employees, and it is
ability for hotels to bill on IGST for enable the companies to avail GST all tax deductible.” In order to boost
corporations for the MICE business, input credit which will incentivize domestic tourism, citizens should
that would again bring a lot of cheer them to spend their annual budgets be allowed to avail LTA benefits for
to the industry. in Indian cities instead of turning to hotel stays too for a period of two
We also need enhancing funding holiday destinations of South East years. One way is by rolling back
limits to raise the SEIS rates to 10 per Asia. LTCG tax. To incentivise Indians to
cent for the hospitality industry to To ease direct taxes, such as lowering travel within India.
enhance the quality of accommo- income tax rates (nearly 34.94%) for All associations in the hospitality,
dation and to enable discharging hotels to help increase cash flows. It travel and tourism business sincerely
GST liabilities. SEIS is a way to set recommended that business losses be hope this year’s Budget to take our
off indirect tax levied to reduce our allowed to be carried forward for up to industry most seriously. This Budget
cost of exports. It was also allowed 12 years instead of eight financial years will make or break our dream of
to discharge service tax liabilities owing to the unprecedented circum- Incredible India. We hope that the
through the scrips. This will enable stances brought by the coronavirus Government considers us as an inclu-
the discharge of GST liabilities pandemic. Hotels should be charged sive part of the economy, one which
through the SEIS scrips. It will also power rates applicable to industries. cannot be ignored.
MYSTIC EAST | 13STRATEGY THINGS TO STAY One of the oft-repeated quotes during the time of pandemic was Winston Churchill’s “Never let a good crisis go to waste.” The ever-resilient hospitality industry rose up to the challenge, reinvented itself and bounced back. Some changes are going to make the sector stronger Set aside a small portion of your marketing budget in 2021 for influencer marketing 14 | MYSTIC EAST
January - February 2021
A
LOT has changed in 12
months. A year that began
with hotels competing for
Instagram-worthy moments is fin-
ishing off in a much different space.
It's a space that's double disinfected,
a space where contactless guest
experiences are the new normal, and
a space where even the most adven-
turous travelers are thinking twice
about going somewhere over the
holidays. Despite its challenges, some
silver linings have emerged out of the
chaos.
1. Housekeeping staff,
the new star
Prior to the pandemic, housekeep-
ing was an element of the hotel
experience that wasn't meant to
be seen. The bulk of housekeeping
was completed prior to arrival, post
departure, and between guest use.
During the day, housekeeping would
navigate hotel corridors like magi-
cians, popping in to tidy a guest room
and vanishing just in time for a guest
to return.
The unexpected shift to bring
housekeeping staff to the front of
house is important for a number of
reasons. The change to make house- With cleaning efforts now front and centre, hotels unwittingly shined a spotlight
keeping more visible came as a result on these historically hidden employees whose role has never been more critical.
of needing to disinfect high touch
and frequently used guest areas more products it took to clean a guest hotel room every day.
regularly. With cleaning efforts now room almost doubled. During times Lastly, since hotel room cleanliness
front and centre, hotels unwittingly of unpredictability, it is important to is one of the most common com-
shined a spotlight on these historical- maximize the efficiency of staff hours plaints from guests on travel review
ly hidden employees whose role has to reduce labour costs and make sure sites, the need for a well-organized
never been more critical. resources are being allocated in the cleaning process is an absolute must
Some hotel owners and managers best possible way. for every hotel. When health concerns
also realised that outsourcing house- In addition to dirtier rooms, there like Coronavirus are more prevalent,
keeping work is not always beneficial can be other downsides to opting-out guests may be on high alert when it
and compromises protective efforts of daily hotel room cleaning. Having a comes to meeting their cleanliness
amid an increased risk of COVID-19. roving team of room attendants pro- standards.
In some cases, it was observed, when vides several significant benefits that
the job was outsourced they were may otherwise go overlooked. Since 2. Drive Market and
found dirtier than those that were housekeepers are often first to catch Meta Search
serviced daily by regular house- maintenance and security issues, it’s As airlines struggle to convince travel-
keeping staff. In fact, the time and good to have someone checking on a lers to book flights, and as frequent
MYSTIC EAST | 15STRATEGY
flyers shift away from in-person meet-
ings to video conferencing, target
markets are shrinking. We're seeing
paid search campaigns, which until
recently included targeting based on
factors like airline data, now focused
within local and drive markets.
With road trips and staycations
becoming the preferred method of
travel this year, it's not surprising
that hotels have tightened up their
advertising spend. Smart hotels aren't
pausing paid advertising completely,
they're simply reallocating.
Update pay-per-click ads with key-
words that speak to today's travellers.
Many prospective guests are seeking
out hybrid vacation experiences, stays
that incorporate remote work space
for grown-ups, remote learning space
for students, and an atmosphere that
allows them to unplug when the day
is done. If you're able to offer a hybrid
staycation, make it known.
Meta search is another great place
to allocate budget meta search
encompasses search engines within
search engines including online travel
agencies (OTAs). Many travellers
begin their search for hotels on these Hold strong to your rate and instead focus on adding value
sites because of the convenience of to the guest experience
an aggregated list to comparison
shops. Love them or hate them, OTAs people aren't traveling at the same It will take the US hotel industry ap-
are a part of your marketing mix, and pace. COVID-19 is what's crushed proximately five years to achieve the
you can use the billboard effect of our economy and threatened our occupancy, revenue, and profitability
OTAs to your advantage. Prospective industry. While the gut reaction to of 2019, forecasted HotelAVE , an as-
guests visit OTA sites to narrow their loss of business might be to drop set manager. The hotels who took the
search before returning to Google to rates, dropping rates won't convince most desperate measures with their
review their short list and with any people to travel. Prospective guests revenue management strategy in the
luck, book direct. Entice your new aren't price shopping, they're holding short run will have the toughest time
website visitors with an offer they out for a time when travel feels safe recovering in the long-run.
won't find on the OTAs: your flexible again. Also, discounts are useless if people
cancellation policy. According to a report in Skift, aren’t traveling for safety concerns.
hotels that are the fastest to drop Hotels must make sure that when de-
3. No Deep Discounts their rates and who drop their rates mand does come back, we’re sure not
Lowering rates too much isn't going the deepest can be the last ones to to be missing any dollar by having
to convince a person who is afraid to recover when demand comes back. gone too low.
travel, to book a trip. This downturn The loss of pricing power can con- Hold strong to your rate and
is different. COVID-19 is the reason tribute to a slow recovery in revenue. instead focus on adding value to the
16 | MYSTIC EASTJanuary - February 2021
guest experience. Guest reviews have adapting quickly, rolling out pack- While mainstream, well-known
never been more important as pro- ages, updating outlets, and creating influencers command thousands of
spective travellers weigh perceived content that speaks to the moment. rupees per social media post, a new
risks with the rewards of vacation Look to independent hotels in your crop of influencers, known as micro
time. Instead of spending millions on neck of the woods to lead the way. influencers, are ideal partners for
marketing trying to find new cus- independent hotels. Their following is
tomers, reach out to your past guests 5. The Rise of Micro-Influencers typically smaller but more engaged,
who know what to expect, and will be With marketing budgets slashed and their focus is typically more
more likely to rebook. When it comes as a result of lower occupancy and defined. Choose a micro influencer
to guests who've recently checked traditional media outlets unsure of that speaks to, looks, and sounds like
out, ask for reviews on Tripadvisor, the travel stories worth sharing, smart your target market. The influencer will
Facebook, Expedia, even Instagram. marketers are turning to social media come to your property, stay with you,
These testimonials will serve you to reach their audience with little deliver on the agreement, and share
again and again. Word of mouth cost and decent returns. We're talking the experience across their social and
advertising is a powerful tool. about influencers. While the name digital channels.
itself connotes a certain disdain, influ- When it comes to influencer
4. Small is Beautiful encers are proving their value during agreements, don't be afraid to ask
Across the country, we've seen a these uncertain times. for what you need. Many influencers
major shift away from tourist traps When it comes to influencer are skilled photographers, writers, or
and city center destinations to off the partnerships, it's important to find graphic designers, and micro influ-
beaten path experiences. Travelers partners with real influence over your encers in particular are eager to show
are choosing country drives over target market. Influence that extends value. Lay out the deliverables in your
interstates, longstanding city dwellers beyond social media channels. If in- agreement, and provide examples of
are migrating to the suburbs, and fluence is limited to Instagram, while the visuals and content you hope to
high rise hotels are grappling with you may see an uptick in followers, receive in return.
an uncertain fate. Meanwhile in less you can't take followers to the bank. While big influencers don't typically
populous areas, particularly where It clicks to your website you're after, work for trade, micro influencers are
the outdoors is the major draw, in- that is if you want to put heads in more willing to negotiate. Set aside
dependent hotels are facing a much beds, so choose an influencer who's a small portion of your marketing
different outlook: more interest than willing to write and publish a blog budget in 2021 for influencer mar-
ever, sold out shoulder seasons, and post with links to your website. keting. Be sure to track and measure
extended stays. the effectiveness of these campaigns
Small hotels in northern West Ben- as you would any other marketing
gal are welcoming travellers at rates program.
they'd never seen before. Gangtok
From pulling back the
and other small towns of Sikkim had curtain on housekeeping, What's Ahead
a record fall season, and it's impos- to shifting advertising It's pretty amazing to look back at all
sible to find a place to stay on the the ways our industry has adapted in
coasts of Digha, Puri and Gopalpur on
budgets to drive markets, the wake of the pandemic. From pull-
weekends, nearly at the double last from holding strong to ing back the curtain on housekeep-
year's rates. With fewer places to jet rates, and by harnessing ing, to shifting advertising budgets
off to, small towns and forest resorts to drive markets, from holding strong
are breaking records. the power of word of to rates, and by harnessing the power
Regardless of location, indepen- mouth advertising, of word of mouth advertising, hotels
dent hotels are poised to navigate continue to beat the odds. The ability
these tricky waters more easily than
hotels continue to to respond to guests' needs has never
the big box variety. With fewer levels beat the odds. been more important, and it's posi-
of management and brand standards tioned small and independent hotels
to meet, independent hotels are as the ones to watch.
MYSTIC EAST | 17FOOD TREND
GET READY FOR
MOCK MEATS
Plant-based meat selections appeal to meat eaters in a way traditional vegetarian
substitutions haven’t. Fast food chains in several countries abroad have begun to tap this
sunrise segment
Recent embrace of plant-based meat by big fast-food brands brought their recognition to another level
I
T wasn't that long ago that the offering a meatless burger called the Foods to offer plant-based burg-
only green, plant-based food McPlant, and Pizza Hut became the ers. Dunkin' and Del Taco have also
generally spotted in fast-food first national pizza chain to partner introduced plant-based substitutes
restaurants was the shredded lettuce with leading vegan meat producer with Impossible's rival firm Beyond
separating a hamburger from its may- Beyond Meat to introduce plant- Meat. But the recent embrace of
onnaise slathered bun. based meat pizzas across the country. plant-based foods by McDonald's and
But as the vegetarian and vegan The fast-food giants are following in Pizza Hut brought their recognition to
community rapidly grows, even fast- the footsteps of rivals Burger King, another level.
food fans are becoming less afraid of Carl's Jr. and White Castle, which Some industry watchers believe
eating their greens. Past November, have partnered with the rival fake that plant-based meat is on its way
McDonald's announced that it is meat producing company Impossible to becoming the fifth protein, in with
18 | MYSTIC EASTJanuary - February 2021
beef, chicken, seafood and pork. example, the Vegan Society estimat- Notwithstanding the above health
ed that the number of vegans in the and environmental drivers, it is worth
Fake meat market in India UK increased by a factor of 2.6 times noting the growing awareness that
Meanwhile, in a country like India, in the ten years to 2016. However, the certain plant based products also
where major food giants are forced significant growth in the plant-based have potential negative impacts, such
to introduce vegetarian options on market is driven by the flexitarian as: high levels of water use (almond
their menu, including plant-based consumer. There are various factors milk); use of genetically modified
meat options might not be a bad driving the switch towards plant- crops (soy); and high salt content
idea. Although we see a few vegan based products, including: (meat based alternatives). Negative
restaurants coming up across the • significant media coverage of the media coverage could potentially
country, particularly in the metros, impact of meat and dairy product have an impact on the future growth
fast food chains here are yet to tap production on global warming and of certain products
this segment of plant-based meat. resource consumption in relation to Widening range of ingredients and
Researchers from the University of greenhouse gases flavours As the market for plant-
Bath, the Good Food Institute, and • animal welfare rights groups have based alternatives grows, a wider
the Center for Long Term Priorities gained significant traction and the range of ingredients are being used
collaborated on the first quantitative ways in which animals are treated to broaden the product range. These
comparison of consumer attitudes in the production of products has ingredients are often identified
towards plant-based and clean meat caused a switch in consumer prefer- because of their ability to provide the
across China, India, and the U.S. ences consumer with high levels of protein
The report by Deloitte found • numerous reports on the potential and nutritional value. In the dairy
out that the three most populous links between high consumption of alternatives market, there has been
countries in the world have robust processed or red meat and cancer. a significant increase in the variety
consumer interest in plant-based and
clean meat. Interest in clean meat
is expected to grow once there is a
product on the market and consum-
ers are more familiar with it.
Flexitarian consumer
A major factor in the growth of the
plant-based industry, especially in the
UK, is the increased ethical focus of
the consumer. This is partly led by the
millennial generation and the emer-
gence of the ‘flexitarian’ consumer.
The ‘flexitarian’ consumer is an indi-
vidual who still consumes meat and
dairy but wishes to reduce the quan-
tity on ethical, environmental and/
or health grounds. The flexitarian’s
alternative consumption could take
the form of specific substitutes or
meat/ dairy free meal choices. In the
past, plant-based diets were mostly
consumed by the relatively small
market of vegetarians and vegans. In
recent years the number of vegetar- Rival fake meat companies Beyond Meat and Impossible Foods have sparked off
ians and vegans has increased – for the trend of plant-based burgers
MYSTIC EAST | 19FOOD TREND Plant-based meat analogues are made from plants such as soy, wheat,fungi and pea proteins. of ingredients used to produce milk rising demand for innovative prod- are moving both to protect their alternatives, including, for example, ucts has driven a significant increase market share and to capitalise on the soy, oat, coconut, almond, rice, and in new product development across growing market. One example of this hemp etc chilled, ambient and the frozen is Unilever’s acquisition of The Vege- The wider variety of ingredients segments. This innovation gives the tarian Butcher in December 2018 for allows the consumer more choice consumer a wider choice of products an undisclosed amount. Established and more exciting flavours, as well as and brands, and allows plant-based meat-based protein manufacturers ensuring that their dietary require- products to gain increased shelf space as well as dairy producers have also ments are met. This also means that and recognition. According to a recent expanded into the plant-based meat some ingredients will become more Mintel press release, the UK is now the and dairy-free space. For example popular and others less. Ingredients global leader for vegan food launches. Danone acquired leading plant based such as tempeh, pea, almond and In 2018 approximately 16 percent of dairy alternative producer Alpro in seitan are increasingly in demand, new food launches were vegan. the purchase of The Whitewave Foods whereas soy products are to some de- Company in 2017, for a value in ex- gree challenged because of concerns New strategy cess of £9bn. This deal was Danone’s about genetic modification. As part of The existing industry players, and in largest acquisition since 2007, and any investment decision in the plant- particular the multinational branded offers a fast way to gain significant based sector, careful consideration food and drinks companies, have market share in the growing market. of the particular plant-based protein increasingly become aware of the source will be important. small disruptor brands innovating in Direct to consumer models New product development: The the plant-based market space, and Direct to consumer (D2C) models 20 | MYSTIC EAST
January - February 2021
turer of vegan and vegetarian foods,
launched “Amy’s Drive Thru” which
is the first plant-based fast-food
restaurant.
Global market
Despite the rise in the availability of
plant based alternative products, the
industry is still in a relatively early
stage of its lifecycle and therefore
offers significant room for further
growth. The industry’s global reach
is expected to be enhanced by new
product development and rising con-
sumer demand. European dominance
The European plant-based alterna-
tives market leads the way in terms of
market size, with the European meat
substitutes market accounting for
around 40 per cent of the global mar-
ket. The market is forecast to grow to
€2.4bn by 2025 from €1.5bn in 20182.
The European market, of which the
UK is the largest sub-market, is the
Plant-based meat is on its way to becoming the fifth protein, in with beef, leader currently by value. This reflects
chicken,seafood and pork.
the wealth of the average European
customer, particularly in Western
Europe, as cost is often a key barrier
have become increasingly import- demanding a better experience, and to buying plant-based alternatives
ant in the food and beverage sector, more tailored and personable service. due to the premium price attached to
allowing processors to gain valuable D2C allows the companies to build a many products.
insights into consumers’ behaviour direct relationship with the consumer
and a more tailored approach to that would not be available through Significant investment
marketing and differentiation. When grocery channels. Examples of D2C There has been significant invest-
executed well, this model also allows models being used in the plant-based ment aiming to meet consumer
higher margins to be obtained. This alternatives sector include: demand. The market has received
growth in the D2C business model investment from a number of high-
has been facilitated by the increase • All plants, a UK meal-kit delivery ser- profile individuals, as well as financial
in online shopping and the increase vice of healthy, plant-based, frozen investors and companies, including,
in social media use, which allows and ready to eat meals, which raised for example:
businesses, including start-ups, to £7.5m in a Series A venture capital • Tyson Foods Inc. £41m investment in
reach a wide market from a relatively funding in September 2018 Beyond Meat Inc. in December 2017,
low cost base, while avoiding the • Daily Harvest, a US plant-based for an undisclosed stake. Beyond
need to route products through vegan frozen fast-food company, Meat is a US-based plant-based meat
traditional wholesale and retail backed by Serena Williams and alternatives producer
operators. 9 Plant-based alternatives Shaun White, which provides a • Bill Gates & Li Ka-Shing invested in
Driving industry M&A Furthermore build-your-box service which deliv- Impossible Foods, a US-based start-
the increase in D2C has been driv- ers your order to your doorstep up creating a “bleeding” plant-based
en by the fact that consumers are • Amy’s Kitchen, a US-based manufac- burger. The company raised $75m in
MYSTIC EAST | 21FOOD TREND the most recent funding round vegetarians, these new products substituting a plant-based meat for • Richard Branson & Tyson Foods directly targeted meat eaters. traditional meat because plant-based Inc. invested in Memphis meat, a burgers do not contain cholesterol US-based company which produces COVID-19 accelerates trend and have fiber and antioxidants “clean meat” by culturing animal COVID-19 magnifies health, climate, animal meat does not contain (and tissue from cells and meat supply-chain concerns that which American diets often lack). • Serena Williams and Shaun White in- plant-based meats aim to correct and On the other hand, the answer leans vested in Daily Harvest, a US-based has created a surge in demand for towards “no” because they often have frozen plant-based foods company plant-based products in grocery stores. about the same number of calories, •Google co-founder, Sergey Brin, Burger King and Starbucks launched total fat, and saturated fat as their provided $330k to fund the world’s plant-based breakfast sandwiches with traditional meat counterparts. They’re first lab-grown hamburger produced Impossible Foods’ new plant-based featured in indulgent menu items by Dutch start-up, Mosa Meat. These pork a year ago. With the onset of such as burgers and can contain in- investors have tended to invest in COVID-19, and questions about animal gredient formulations that our bodies plant-based start-ups as they have protein supplies, plant-based meats have not encountered before. recognised the shifting trend in the and other plant-based foods have a So, for now the answer is balance. market and the need to produce role to play to help rebuild the restau- Plant-based meats are still new and more sustainable food. The public rant industry. It’s a way to recapture are in their first and even second prominence of a number of the indi- growth, build-up check average, appeal recipe revisions; they may become viduals has created additional media to younger consumers, and overall healthier to help people be healthier. coverage for plant-based alternative help restaurants rebound. But there is no denying that plant- industries. Plant-based meat analogues are based meat is on its way to becoming Anyone in the foodservice or made from plants such as soy, wheat, the fifth protein, in with beef, chicken, restaurant business in India must fungi and pea proteins. Health seafood and pork. So anyone in the understand that plant-based is more experts advise to eat less meat and food business should take this trend than a trend, it has created a par- eat more plants to improve overall seriously and gear up for creating adigm shift in how the world eats health. But do plant-based meats fit recipes with fake meat. meat. that bill? The answer is complicat- Since 2018 Beyond Meat™ and ed. On one hand, the answer leans Courtesy: Plant-based alternatives, a Impossible™ emerged and disrupted toward “yes” if you’re occasionally report by Deloitte, UK the meat industry by creating (with their plant-based burgers) a whole new plant-based-meat food category known as meat analogues. Meat analogues are designed to: • Have the aesthetic qualities and/or flavor/textural characteristics of meat • Display alongside meat on the gro- cery store shelves • Appeal to meat eaters • Directly compete with meat to get people to eat less meat • Almost overnight plant-based meats gained impressive traction. Unlike the often frozen plant-based meat Health experts advise to eat less meat and eat more plants to improve substitutes marketed directly to overall health 22 | MYSTIC EAST
COVER STORY January - February 2021
NEW WAGE CODE
Rather than a lengthy definition with several inclusions, exclusions, and
explanations, a simpler approach may have made payroll structures friendlier for
both employers and employees
The definition of
wages continues with
the age-old formula
of stipulating broadly
worded inclusions
along with vaguely
worded exclusions,
and then adds a
layer of complexity
on top by setting
out exceptions for
situations where the
excluded components
would also have to be
treated as wages.
The new code could have been a lot simpler and in tune with the compensation
practices being followed today - internationally and in India.
T
HE new and common defi- 2021. Is this the change the industry continues with the age-old formu-
nition of 'wages' under the had wanted and hoped for? la of stipulating broadly worded
recently passed labour codes No doubt a common and consis- inclusions along with vaguely worded
has got most organisations to take tent definition is good, and that is exclusions, and then adds a layer of
yet another look at their payroll struc- certainly a positive one. PF, ESI, stat- complexity on top by setting out
tures to determine what impact they utory bonus, leave encashment (for exceptions for situations where the
will face. The new codes have been factory workers), gratuity, retrench- excluded components would also
passed by Parliament to "amalgam- ment compensation, etc. will all be have to be treated as wages. The
ate, simplify and rationalise" existing calculated using a common definition definition still looks and reads like it
laws on various subjects like payment of 'wages.' belongs to a statute from the 1950s
of wages, minimum wages, bonus, so- However, consistency seems to and not 2021. It could have been a lot
cial security, etc., and are anticipated have come at the cost of unnecessary simpler and in tune with the compen-
to become a binding law from April complexity. The definition of wages sation practices being followed today
MYSTIC EAST | 23COVER STORY
- internationally and in India.
Most organisations follow the EMPLOYEES, EXPECT
concept of CTC (cost to company),
which has become almost customary
BIG CUTS
The government has come out with new compliance cost burden and penalties, if
in terms of practice and implemen-
compensation rules to increase the social any.
tation. The CTC is typically split into
security benefits for employees. Accord-
(i) fixed or guaranteed components
ing to the new wage definition, in effect, at One area where the firms will certainly see
of salary (like basic salary, dearness least 50 per cent of the gross remuneration an impact is the increased gratuity cost. As
allowance, HRA, etc.), (ii) variable or of employees should form the basis to cal- of now, it is applied to all employees, man-
conditional components (such as per- culate benefits such as gratuity, retrench- agement and otherwise. Also, it is calculat-
formance-linked incentives, commis- ment compensation and provident fund, ed on 15 days of basic pay and dearness
sions, etc.), and (iii) other costs such etc. in situations where the sum of basic allowance. Now, with the new calculation,
as the employer's cost of contribu- salary and other fixed allowances (such as gratuity will have to include the other al-
tion towards social benefits like the dearness allowance) is less than 50 per cent lowances of wages such as travel, special
provident fund (PF), employee's state of the gross remuneration. allowance, etc.
insurance (ESI), etc.
The new definition is part of the Wage Code So, in the long run employees might gain
No doubt, there could be certain
2019 that was passed by the Parliament last higher retirement benefits, but low-paid
entitlements outside the above-men-
year and also reflects in the more recently employees who may want more cash in
tioned construct of CTC - such as
passed codes on Social Security. hand may have to suffice with lower take
statutory bonus, overtime, etc., which home salary.
may or may not be treated as 'wag- The new wage definition is an attempt to
es' based on the circumstances. A simplify the various regulations related to But, these are broad generalisations and
simpler approach would have simply wages with the promise of easier imple- there are several grey areas that remain
been to define wages as including all mentation. However, India Inc still awaits unclear. It is not clear whether this rule
fixed elements of pay and excluding the details. The Bill is anticipated to get will apply to all wages or will be applicable
variable or conditional components, enforced by April 2021. Some of the wage above a certain wage threshold. Also, the
with limited exceptional rules for thresholds for laws such as Bonus, Provi- other Acts, such as PF Act have their wage
items like overtime and other statuto- dent Fund, Employees State Insurance, etc. threshold, it remains to be seen whether
have not been decided yet. those wage thresholds will apply or not.
ry entitlements.
The new definition ignores this easy
Several laws that had their own definition Moreover, labour is a concurrent subject in
to comprehend construct in favour
of Wages have been consolidated under the constitution and hence, the Act related
of vaguely drafted inclusions and the Labour Codes. There were different to wages will have to be amended by the
exclusions. In the process, it creates definitions under Minimum Wages Act, state governments as well. The Labour de-
ambiguities and concerns such as the Provident Fund Act, Bonus Act, etc. All of partment in the State and the Law enforce-
following: these laws were meant to extend certain ment bodies in the Central Government
*HRA is counted as wages to check benefits to employees or give them certain have to be restructured to make sure that
if an employer has paid its employ- rights. This is an attempt to make the defi- there's clarity and harmony while enforce-
ees on time, but not counted to nition of wages uniform, as proposed in the ment. These must happen over the next
determine whether employees are Wage Code, 2019 which has been duplicat- three-four months when the implications
receiving minimum wages. This is ed in the other Codes as well. will be clear. For instance, minimum wages
and overtime rates for employees are to be
manifestly unfair, since HRA is nor-
While it will simplify the nomenclature, it administered by state governments but it
mally guaranteed in nature. Even the
will have significant cost repercussions for is not clear if overtime hours will be appli-
current Minimum Wage Act includes
firms. As the base to calculate PF and gra- cable for all employees in an enterprise and
HRA, and this appears to be a poorly tuity increases, employers will have to shell how they will be tracked, verified and com-
thought through result of wanting to out more as part of their workforce cost. plied with. Besides, the rates for minimum
maintain a consistent definition. Also, there will be a one-time cost increase wages are yet to be published by the gov-
*"Remuneration payable under any for employers to audit their current base ernment bodies. So it’s not known whether
award or settlement between the of employee pay structure and align with the wages will rise or remain the same as
parties" is not counted as wages. In a the new system. It may also result in rising a result.
24 | MYSTIC EASTJanuary - February 2021
Several laws that had their own definition of Wages have been consolidated under the Labour Codes
unionised environment, all wages are be counted as wages till 50% of the tion discussed above, which excludes
agreed under settlements between gross remuneration. This appears to many components that would nor-
the employer and unionised workers, have been picked up from what the mally be considered wages.
which often span 2-3 years or more. PF department proposed many years *Another flipside to creating
It is quite meaningless to say that ago to ensure that PF contributions consistency is that the wages for
none of these mutually negotiated are made on a larger portion of pay calculating gratuity will no longer be
and settled elements of pay would (even though there is no discernible limited to basic salary and dearness
be treated as "wages" for certain legal rationale for this 50% stipula- allowance alone. This will mean that
purposes, such as minimum wage tion). While it made some sense in the the gratuity costs for organisations
compliance. PF context, it appears that this 50% will go up significantly.
*The definition states that all limit is now also acting as a backward Therefore, rather than a lengthy
excluded components must also partial fix to the convoluted defini- definition with several inclusions, ex-
MYSTIC EAST | 25COVER STORY
Another flipside to
creating consistency
is that the wages for
calculating gratuity
will no longer be
limited to basic
salary and dearness
allowance alone.
This will mean that
the gratuity costs for
organisations will go
up significantly.
In the long run, employees might gain higher retirement benefits, but low-paid
employees may get lower take home salary.
clusions, provisos, and explanations, treated as wages and not based on Workers (about whom the Social
a simpler approach may have been context, could have been dealt with Security Code is completely silent
to tackle the definition of "wages" in the specific chapters dealing with at present) which are currently
based on core principles (and if payment of wages and minimum uncapped can now potentially be
necessary, through illustrations and wages/payment of bonus, respec- limited to 50% of the gross.
examples, as several other statutes tively. Some issues the codes could have
do) - in other words, any component That said, there is still an overall addressed, but have missed the op-
that is fixed or guaranteed in nature improvement and organisations will portunity to do so:
is wages; anything which is condi- also stand to benefit as follows: *The codes could have stipulated a
tional, contingent, or discretionary *Organisations will retain the ability comfortable wage threshold beyond
is not; along with other obvious to structure wages as tax efficient which overtime payments wouldn't
exclusions towards pension contri- as possible, with the caveat that if be mandatory. Currently, there is
butions, benefits in kind, expense excluded components exceed 50% of a risk that even well-paid employ-
reimbursements, and end of service the gross, they'll be counted as wages ees could seek overtime payments
payments. Few components like till the 50% limit. despite earning in multiples of the
overtime, which deserve to both be *PF contributions for International stipulated minimum wages.
26 | MYSTIC EASTJanuary - February 2021
*Currently, many components of etc., and shouldn't result in undue *While the coming few months
pay tend to be front or back-loaded advantage to the employee merely will show what shape the final codes
for tax planning purposes. For e.g., because of the timing of the amount and underlying rules will take, the
many companies only pay allowances for tax planning purposes. government could certainly have
like LTA as a lump sum at the year- *The codes could have clarified the taken a more progressive approach to
end. The codes could have clarified manner in which entitlements would the new definition of wages, to better
that such components should only be pro-rated for part-time workers, address ambiguities and legal uncer-
be considered on a pro-rata basis to which is currently subject to cer- tainties resulting in fewer disputes
calculate the end of service pay- tain ambiguities, depending on the and litigation.
ments and benefits like retrenchment manner in which part-time work is
compensation, maternity benefits, structured. Source: Atul Gupta/Trilegal
How salary structures will change
Currently, most employers have a wage struc- 50% of the total remuneration. The definition This will not only impact the financials of the
ture in which the basic salary ranges from also provides for certain termination related company since corporates are required to
25% to 40% of the CTC of the employee, and payouts such as gratuity etc. and these are provide for the increased liability through an
this forms the basis for both provident fund not subject to the 50% limit. Further, the val- actuarial valuation but also impact the take-
and gratuity contributions. uation of benefits in kind is also provided for. home of the employee.
The four labour codes subsume 29 legisla- Currently, most employers have a wage struc- Unlike the above simplistic example, in prac-
tions. The purpose of each of these regula- ture in which the basic salary ranges from tice, most companies would include both the
tions was varied and hence the definition of 25% to 40% of the CTC of the employee, and employer contribution to PF as well as gra-
wages under many of these regulations was this forms the basis for both provident fund tuity entitlements as part of CTC. Hence, an
also different. The codes are aimed at unifi- and gratuity contributions. With the wages increase in gratuity payout will reduce the
cation, simplification, and consolidation of under the codes moving to at least 50% of quantum of special allowance and the take
these regulations, and hence have a common the CTC, there is going to be an impact from home pay of the employee.
approach, which includes having a uniform both PF and gratuity perspectives. Let us take
definition of wages across all these regula- a simple example of an employee having a From a PF perspective, contributions to PF
tions. monthly salary of Rs. 25,000. on wages beyond the statutory wage ceiling
are not mandatory. This is based on the pro-
This is a significant change, and while the In the above scenario, the gratuity would be visions of the PF scheme as they stand today,
intent of having a singular approach is wel- computed under the current payment of gra- as well as the principles arising from the Su-
come, it would mean that the industry needs tuity act provisions on the basic salary of Rs. preme Court ruling in the case of Marathwa-
to analyse and understand the impact of the 10,000 per month. From a PF perspective, giv- da Grameen Bank.
same under each of these subsumed legisla- en the principles that arose from the Supreme
tions. Court (SC) ruling in the case of Vivekananda Hence, where employers are contributing PF
Vidya Mandir and others, the employer would on wages up to Rs 15,000 per month, com-
The term "wages" as defined under the codes have contributed PF on Rs. 15,000 per month panies may adopt a view that there is no in-
today, envisages that "all remuneration" pro- (which is the statutory wage ceiling for PF). crease in contribution required.
vided to the employee is to be considered, and
is subject to certain specified exclusions, such Under the codes, the wages for this employee However, there is definitely a need to look at
as statutory bonus, conveyance allowance, would amount to Rs. 17,000 per month, and the employment contract and the internal
travel concessions, housing benefit, or house hence this needs to be considered for cal- policy of the organisation to ensure that these
rent allowance, contributions to PF and pen- culating gratuity. If this employee quits the are aligned with the position being adopted.
sions, overtime, commission, etc. organisation from the codes become effec- There would be an impact on PF in respect of
The aggregate of these exclusions is limited tive, and let us presume has put in 15 years employees with wages below the statutory
to 50% of remuneration, and hence the wag- of service, the gratuity payable ( calculated as wage ceiling as well as international workers.
es as ultimately calculated would be at least last drawn pay /26* 15* no of years of service)
50% of total remuneration. Clearly, the intent would be Rs. 147,115 as against the earlier Overall, it is important for organisations to
of the codes is to ensure that contributions to amount of Rs. 86, 538 a clear increase of 1.7 analyse the impact of the change in the defi-
PF, gratuity payouts, etc. are made on at least times. nition of wages.
MYSTIC EAST | 27You can also read
