Components of employee benefits


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Components of employee benefits

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Components of employee benefits

  1. 1. Components of Employee BenefitsDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor
  2. 2. Employee Compensation Employee Compensation Employee CompensationSalarySalary Allowances, Allowances, Employee Employee & Bonus Benefits Benefits & Bonus
  3. 3. Elements of Core CompensationBase Pay (recurring) Hourly pay/wage Annual salaryBase Pay Adjusted Over Time as Follows: Cost-of-living adjustments (COLAs) Seniority pay Merit pay Incentive pay or variable pay Pay-for-knowledge and skill-based pay
  4. 4. Elements of Legally Required Benefits Social Security Act of 1935 Unemployment insurance Retirement insurance Benefits for dependents Disability benefits Medicare State compulsory disability laws Workers’ Compensation Family and Medical Leave Act of 1993 (12 weeks of annual unpaid leave)
  5. 5. Elements of Discretionary BenefitsProtection Programs  Income protection programs  Health protection programsPay for time-not-worked  Holidays  Vacation  Sick leave  Personal leave  Jury duty  Funeral leave  Military leave  Cleanup, preparation, travel time
  6. 6. Elements of Discretionary BenefitsServices  Employee assistance programs (EAPs)  Family assistance programs  Tuition reimbursement  Transportation services  Outplacement assistance  Wellness programs
  7. 7. Employee Benefits in India Employee Benefits Employee Benefits Legally Required Legally Required Discretionary Discretionary Life Life Leave LeaveProvident Fund Gratuity Insurance Insurance Encashment Encashment Provident Fund Gratuity Mediclaim Super- Super- Personal Personal Mediclaim annuation Accident annuation Accident
  8. 8. Employee Benefits –Insurance/Retirement Insurance Insurance Retirement RetirementAccident MediclaimAccident Mediclaim Life Life Leave Leave Superannuation Superannuation Encashment Encashment Gratuity Gratuity Defined Defined Defined Defined Benefit Contribution Benefit Contribution
  9. 9. Defined Contribution vs Defined Benefit PlansPost-employment benefit plans (such as pensions and health care) are categorized as either defined contribution plans or defined benefit plans. Under defined contribution plans, expenses are recognized in the period the contribution is payable Defined benefit plans are post-employment benefit plans other than defined contribution plans.
  10. 10. Companies providing benefit (%)Analysed items 2004House Rent Allowance 97Gratuity 95Housing Loan 91Medical reimbursement/ allowance 90Insurance 89Leave Travel allowance 87Hospitalisation 86Variable Bonus 85Conveyance allowance 84Superannuation 61Car Loan 54Social/ Sports club membership 51Incentive/ Sales Commission 44Hard Furnishing 39Medical check-up 39Fixed Bonus 33Other allowances 26Flexible benefit plan 16
  11. 11. Mediclaim Insurance•Reimbursement of medical expenses following hospitalization•Cash less hospitalization facility available under certain plans•Tax deduction available Accident Insurance•Can offer compensation for any/all of the following: •Accidental death/disability •Medical expenses for treatment - post accidentBOTH BENEFITS ARE OFFERED BY NON-LIFE INSURANCE COMPANIES
  12. 12. Life Insurance• Benefit payable on accidental/natural death• Convenient eligibility conditions• Additional Optional ridersPROVIDED BY LIFE INSURANCE COMPANIES Life Insurance – Trends• LIC of India providing Life Insurance for many years• Increased popularity amongst employers/employees• General cover is about 3 to 5 times the gross annualsalary
  13. 13. Leave Encashment – Defined benefitFor whom? If company offers encashment of leave, all employeesWhat benefit? Will be based on the company policy Normally x days salary for each accumulated day of leaveHow Funded? Institute of Chartered Accountants of India require that a provision be made for the liability No special tax benefits for self-funding through a trust Insurance plans available to manage the funds
  14. 14. Gratuity – Defined BenefitFor whom? Engaged in Government, Factories, Mines, Plantations, Railways, Shops and establishments notified by Government In service for 5 successive yearsWhat benefit? 15 days wages for each year of service Maximum limit Rs 10,00,000.00 7 days wages per season for seasonal occupationHow Funded? Can be funded or unfunded. Special tax concessions if funded through a trust or insurance company
  15. 15. Superannuation – Defined Contribution/ benefit For who m? Non-mandatory, defined by company policy Wh at ben efit? Can be defined benefit (certain formula of last drawn salary) /defined contribution (certain %age of salary every month contributed to a fund) Can be different for different grades Ho
  16. 16. Retirement Benefits - Trends• Provided by life insurance company• Offered a cash-accumulation conventional scheme• More and more companies now funding throughInsurance• Unit-linked – a preferred platform• Pension benefits - from Defined Benefit to definedcontribution