Definition of Employee Benefits Narrow Employer provided benefits
Definition of Employee Benefits Narrow Employer provided benefits for: Death Accident Sickness Retirement Unemployment Broadest All benefits and services, other than wages, provided to employees
Five Traditional Categories of Employee Benefits l l l Legally required social insurance programs – Social Security, Workers’ Compensation Payments for private insurance and retirement plans – Medical, disability, life insurance Payments for time not worked – Vacations, parental leave Extra cash payments to employees – Educational expenses, suggestion awards Cost of services to employees – Subsidized cafeterias, adoption assistance, parking
Overview of Employee Benefit Scenario In India Employee Compensation Salary Allowances & Bonus Employee Benefits
Overview of Employee Benefit Scenario In India Employee Benefits Mandatory Provident Fund Gratuity Personal Accident Voluntary Life Insurance Leave Encashment Mediclaim Superannuation
Employee Benefits – Insurance Co’s viewpoint Employee Benefits Insurance Accident Mediclaim Retirement Life Leave Encashment Superannuation Gratuity Defined Benefit Defined Contribution
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 • List of exclusions BOTH BENEFITS ARE OFFERED BY NON-LIFE INSURANCE COMPANIES
Life Insurance • Benefit payable on accidental/natural death (limited exclusions) • Convenient eligibility conditions • Additional Optional riders PROVIDED BY LIFE INSURANCE COMPANIES 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 l What benefit? – Will be based on the company policy. – Normally x days salary for each accumulated day of leave l 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 l
Gratuity – Defined Benefit For whom? – Engaged in Factories, Mines, Plantations, Railways, Shops and establishments notified by Government – In service for 5 successive years l What benefit? – 15 days wages for each year of service – Maximum limit Rs 3, 50, 000/ – 7 days wages per season for seasonal occupation l How Funded? – Can be funded or unfunded. – Special tax concessions if funded through a trust or insurance company l
Superannuation – Defined Contribution/ benefit For whom? – Non-mandatory, defined by company policy l 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 l How Funded? – Can be funded our unfunded. – Special tax concessions if funded through a trust or insurance company l
Retirement Benefits - Trends • 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
Factors Influencing the Growth of Employee Benefits l Industrialization l Influence of organized labor l Wage controls l Cost advantages l Tax advantages l Inflation l Legislation
Employment Opportunities in Employee Benefits l Marketing l Human resources l Finance l Insurance l Accounting l Communications l Actuarial science l Social science l Medical
Current Issues in Employee Benefits l Impact of terrorism on group life insurance l Health care costs l Health care quality l Mental health parity l DNA testing l Social Security reform l Medicare prescription drug coverage l Long term care insurance
Current Issues in Employee Benefits (cont. ) l Mismanagement of 401(k) plans l Investing in your employer’s stock l Accounting treatment for stock options l Cash balance pension plans l Impact of pension investments on firm profits l Unfunded pension liabilities
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