IT firms get DCA breather on staff salary disclosure

Information technology firms could breathe easy now on disclosure of remuneration particulars of employees posted overseas.

In a recent circular, the Department of Company Affairs (DCA) formally exempted IT companies from disclosing in their annual reports, the remuneration particulars of employees posted overseas. The exemption would, however, be available only in respect of those employees who earn less than Rs 24 lakh in a financial year.

The DCA in a recent notification said, "...particular of employees of companies engaged in information technology sector, posted and working outside India, not being directors or their relatives, drawing more than Rs 24 lakh per financial year or Rs 2 lakh per month, as the case may be, shall not be included in such statement of the board report."

However, the companies would be required to submit the details of remuneration paid to disclosure-exempted employees to the Registrar of Companies (RoC).

The Section 217 (2A) of the Companies Act, 1956, stipulates that the board of directors' report shall also include a statement showing the details of employees in receipt of remuneration prescribed in the rule.

The move is seen a significant as the exemption from disclosures in the annual report (as an annexure to the directors' report) would help the technology companies in retaining their high-flying employees.

The DCA move has been prompted by the representations made by the National Association of Software and Services Companies (Nasscom), which said that there should be no requirement for such disclosures.

The argument given by the industry is that this leads to poaching of talent as competitors are aware of the remuneration being offered.

Even though the company need not disclose the remuneration details in the directors' report, a shareholder of the company can seek such information at an annual general meeting (AGM) in which the remuneration is considered. The DCA would notify the format in which the company should file the details to the RoC later.