Maruti inks 5-year wage settlement

India’s largest carmaker Maruti Udyog Ltd (MUL) has entered into a five-year wage settlement with its employees’ union, aimed at c...

India’s largest carmaker Maruti Udyog Ltd (MUL) has entered into a five-year wage settlement with its employees’ union, aimed at cutting costs substantially and simplifying the wage structure.

The new wage settlement, to be effective for five years starting November 1, 2003, provides for an annual wage growth of only 3.5 per cent compared to the existing settlement which provided for an annual wage growth of 9 per cent. Besides, the one-time increase owing to the new wage settlement is 5.9 per cent. In the earlier wage settlement effective since 1996, the increase on this account was 27.18 per cent. “With this wage

settlement, Maruti’s normally high wage will be aligned closer to the market,” the company said in a release.

As per the new wage settlement, dearness allowance has also been delinked from changes in the consumer price index and basic pay. Instead, Maruti workers would now receive a fixed hike in their dearness allowance. The company stated that “by severing the link between consumer price index and employee compensation, the new settlement brings the wage structure in tune with market competitiveness.”

Allowances for the employees have also been delinked from changes in basic pay and dearness allowances, and instead they have been merged to form a consolidated perquisites basket. This, Maruti said, would further simplify the wage structure. The carmaker would also make a one-time lump sum payment of Rs 40,000 to each worker as per the new wage settlement. The new wage settlement and the VRS are part of efforts by Maruti to contain rising cost pressure due to increasing steel prices and an appreciating yen, by improving productivity and rationalising costs.