Employee Benefits & Services

Prof. Sunita R Shukla

Prof Sunita R Shukla

In addition to a salary, employees may receive a range of benefits and services from their employers. Benefits and services may vary depending on the employee's position or seniority, but most employees of a company will generally share the same basic benefits package. Benefits and services packages also differ among companies.

Overview of Employee Benefit Scenario

Employee Benefits
Voluntary
Life Insurance Leave Encashment Superannuation

Mandatory

Provident Fund

Gratuity

Personal Accident

Mediclaim

Mediclaim Insurance
Reimbursement of medical expenses following hospitalization Cash less hospitalization facility available under certain plans Tax deduction available for the business

Accident Insurance
Can offer compensation for any/all of the following:
Accidental death, disability Medical expenses for treatment post accident

Life Insurance
Benefit payable on accidental/natural death Convenient eligibility conditions

Life Insurance Trends

Monopoly of one single company so far Increasing popularity amongst employers/ employees General cover is about 3 to 5 times the gross annual salary Companies with huge staff strength opt for profit-sharing

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

Gratuity Defined Benefit

For whom? Engaged in 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 7 days wages per season for seasonal occupation How Funded? Can be funded our unfunded. Special tax concessions if funded through a trust or insurance company

Superannuation Defined Contribution/ benefit

For whom? Non-mandatory, defined by company policy What benefit? 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 How Funded? Can be funded our unfunded. Special tax concessions if funded through a trust or insurance company

Retirement Benefits - Trends

Only one life insurance company in the market till 2000 Offered a cash-accumulation conventional scheme More and more companies now funding through Insurance Unit-linked a preferred platform

Pensions benefits - from Defined Benefit to defined contribution

Fringe Benefits
Fringe benefits are benefits which employees or directors receive from their employment but which are not included in their salary cheque or wages. On the tax return form they are called 'benefits in kind'. They include such things as company cars, private medical insurance paid for by the employer and cheap or free loans.

 The taxation of perquisites -- or fringe benefits -- provided by an employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. Any benefits -- or perks -- that employees (current or past) get as a result of their employment are to be taxed, but in this case in the hands of the employer.

(f) maintenance of guest house; (g) conference; (h) employee welfare; (i) use of health club, sports and similar facilities; (j) sales promotion, including publicity; (k) conveyance, tour and travel, including foreign travel expenses

 (l) hotel boarding and lodging; (m) repair, running and maintenance of motor cars; (n) repair, running and maintenance of aircraft

 (o) consumption of fuel other than industrial fuel; (p) use of telephone; (q) scholarship to the children of the employees.

 Financial and non financial rewards not included in the direct compensation payable to employees are called fringe benefits
Organizations pay most of these rewards voluntarily but some others like PF are given due to legal requirements

Payment without work It refers to different kinds of leave facilities offered to the employees. The purpose of providing pay without work is to enable the employees to take rest and refresh themselves. It facilitates the employees to sustain the same level of productivity and interest in the job.

This is one of the most important benefit available to the employees. It is one of the costliest forms of benefits as employees get a lot of time off and there is absolutely no productivity during the period. Egs: SL, CL, Earned Leave, Maternity leave, vacations and sabbatical as part of pay without work scheme

 The definition of 'Fringe Benefit' under the new chapter XII H (As per subsection (2) of section 115 WB of Income Tax Act, 1961), excludesa) Any expenditure on or payment through paid vouchers, which are not transferable and usable only at eating joints or outlets. b) Meal Pass is exempted from fringe benefit tax for the employers and is tax free for the employees

c) Meal Pass can be used for making payments both within and outside office premises.

Thank You