Maruti Udyog on Thursday said it has entered into a new five-year wage settlement with its employees' union, aimed at drastically cutting costs and simplifying the wage structure.

As per the new wage settlement, to be effective from November 1, 2003, the annual wage growth of employees has come down to 3.5 per cent from 9 per cent earlier.

Besides, the one-time increase has also been brought down to 5.9 per cent from the 27.18 per cent as per the previous wage settlement effective since 1996.

"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 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.

"By severing the link between consumer price index and employee compensation, the new settlement brings the wage structure in tune with market competitiveness," Maruti, which is 54.2 per cent owned by Japan's Suzuki Motor Corp, said.

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.