The document discusses various components of employee benefits including core compensation like salary, allowances, and bonuses. It describes legally required benefits such as social security programs and family leave. Discretionary benefits are also outlined and include health insurance, retirement plans, paid time off, tuition reimbursement, and employee assistance programs. Specific benefits commonly offered in India are then detailed such as provident funds, gratuity, life and medical insurance, leave encashment, and superannuation plans. The trends in retirement benefits moving from defined benefit to defined contribution plans are also summarized.

1. Components of Employee Benefits
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor

2. Employee Compensation
Employee Compensation
Employee Compensation
Salary
Salary Allowances,
Allowances, Employee
Employee
& Bonus Benefits
Benefits
& Bonus

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. 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. 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. Elements of Discretionary Benefits
Services
 Employee assistance programs (EAPs)
 Family assistance programs
 Tuition reimbursement
 Transportation services
 Outplacement assistance
 Wellness programs

7. Employee Benefits in India
Employee Benefits
Employee Benefits
Legally Required
Legally Required Discretionary
Discretionary
Life
Life Leave
Leave
Provident Fund Gratuity Insurance
Insurance Encashment
Encashment
Provident Fund Gratuity
Mediclaim Super-
Super-
Personal
Personal Mediclaim annuation
Accident annuation
Accident

8. Employee Benefits –Insurance/Retirement
Insurance
Insurance Retirement
Retirement
Accident Mediclaim
Accident Mediclaim Life
Life Leave
Leave Superannuation
Superannuation
Encashment
Encashment
Gratuity
Gratuity
Defined Defined
Defined Defined
Benefit Contribution
Benefit Contribution

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. Companies providing benefit (%)
Analysed items 2004
House Rent Allowance 97
Gratuity 95
Housing Loan 91
Medical reimbursement/ allowance 90
Insurance 89
Leave Travel allowance 87
Hospitalisation 86
Variable Bonus 85
Conveyance allowance 84
Superannuation 61
Car Loan 54
Social/ Sports club membership 51
Incentive/ Sales Commission 44
Hard Furnishing 39
Medical check-up 39
Fixed Bonus 33
Other allowances 26
Flexible benefit plan 16

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 accident
BOTH BENEFITS ARE OFFERED BY NON-LIFE INSURANCE COMPANIES

12. Life Insurance
• Benefit payable on accidental/natural death
• Convenient eligibility conditions
• Additional Optional riders
PROVIDED 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 annual
salary

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. 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. 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. Retirement Benefits - Trends
• Provided by life insurance company
• Offered a cash-accumulation conventional scheme
• More and more companies now funding through
Insurance
• Unit-linked – a preferred platform
• Pension benefits - from Defined Benefit to defined
contribution