FLEXIBLE BENEFITS Chitra Jayasimha 11 th August 2017

FLEXIBLE BENEFITS Chitra Jayasimha 11 th August 2017 13 th Seminar on Current Issues in Retirement Benefits

Employee Benefits Landscape in India Employee Benefits Coverage Retirement & Leave Benefits Risk Based Benefits Wellness • Health Insurance • Gratuity • Health Check Up • Life Insurance • Provident Fund • Dental/Optical • Disability • Superannuation • Critical Illness • National Pension • Employee Family Benefit • scheme • • Employee Assistance Plans System • Health promotion Post Retirement • Domiciliary Medical Benefits Lifestyle Benefits • Company Car • Housing Assistance • Loans • EAPs Leaves • Counselling • Higher Education Assistance - Privilege Leave • Health risk • Transport Facility - Sick Leave - Casual Leave - Maternity Leave - Other Leaves assessment • Gym/Fitness reimbursements • Childcare Support Others • Rewards & Recognition • Notice Period Reimbursement • Domestic Travel Assistance • Domestic Relocation Assistance • Alternative work arrangements (Shift & Overtime)

What do employees have to say? Gen Y Gen X • “Work-life balance & financial incentives are important to me” • “Give me what I need to manage my work-life balance” • “Cash is not my ONLY need” • “I am young and have two children. Will my organization help me with school fees? ” • I am young, single and care about transportation programs, on-site health programs and professional development • “ I am willing to spend my own money for family medical care” Baby Boomers • “I am getting older & closer to retirement. Please help me plan & save for my retirement” • Monitoring my health is important to me and so are all health & insurance programs”

Flexible is Incredible! 10% 20% Employees rank Flexible Work Arrangements amongst Top 3 benefits while considering to join an organization Employees Want flexibility in Benefits with a Menu Option 31% 81% 30% 40% 50% 60% Employees value Flexible Work Arrangements as the top 2 rewards in recognition of high performance 35% Source: Aon Hewitt Study – Employees Listening 70% 80% 90% 100% Employees willing to make voluntary contribution to get access to certain additional benefits 61%

Typical Flex Framework Flex Credits Basic Life, AD&D and Medical Insurance Employee to submit reimbursement • Based on current benefit investment Core Benefits Sample Employee to make selection during annual enrolment • Align with Company’s Philosophy • Staff Grade • Family Status • Length of Service • Performance • …. Optional Benefits Flexible Spending Account Family care Housing Insurance Work-life Health Retirement • Depending on the overall funding and available credits, employees may have left over credits, employer can choose to: • Allow employee to cash it out • Carry over to next year 5

Flexible Benefits : Case Study Benefits Design: Flex Credits Benefit Pre-Flex Benefit Offering Cost to Company Health Insurance INR 300, 000 for self + spouse + 2 kids + parents INR 15, 000 Life Insurance INR 20, 000 SA for Self INR 10, 000 Benefit Core Benefit Cost to Company Health Insurance INR 200, 000 for self only INR 5, 000 Life Insurance INR 10, 000 SA for Self INR 6, 000 = Benefit Credits transferred to employee’s FSA Health Insurance INR 10, 000 Life Insurance INR 4, 000 + Initial Flex Credit Grants by the employer INR 10, 000 In this sample design, we see that all employees have been moved from their existing benefits plan to the default minimum core benefits plan. = Total FSA : INR 24, 000

Flexible Benefits Case Study Choices made by the employee from the Benefits Menu Health Insurance Annual Leaves Coverage Cost Credits Transferred to Employee’s FSA INR 200, 000 Self only INR 5, 000 Nil INR 400, 000 Self only INR 10, 000 (INR 4, 000) INR 300, 000 Self +Spouse + 2 kids + 2 parents INR 15, 000 (INR 11, 000) INR 600, 000 Self +Spouse + 2 kids + 2 parents INR 25, 000 (INR 20, 000) Sum Assured Total Leaves Available Credits Transferred to Employee’s FSA Sell 3 days 22 days INR 25, 000 Sell 2 days 23 days INR 16, 000 Sell 1 day 24 days INR 8, 000 Do Nothing 25 days Nil Buy 1 day 26 days (INR 21, 000) Buy 2 days 27 days (INR 42, 000) Buy 3 days 28 days (INR 63, 000) Leave Days Life Insurance Cover Sum Assured INR 10, 000, 000 pp INR 20, 000, 000 pp INR 30, 000, 000 pp Annual Health Check up Plan Coverage Cost Credits Transferred to Employee’s FSA Self only INR 6, 800 Nil Self + Spouse INR 13, 600 (INR 6, 000) Self INR 10, 000 (INR 4, 000) Self +Spouse INR 27, 200 (INR 20, 400) Self INR 20, 400 (INR 13, 600) Self +Spouse INR 40, 800 (INR 34, 000) Choice made by the employee Total Cost Credits Transferred to FSA Self only INR 8, 500 Nil Self + Spouse INR 17, 000 (INR 9, 000) Self + Spouse + 2 kids INR 25, 500 (INR 17, 000) Self + Spouse + 2 parents INR 34, 000 (INR 25, 500) Self + Spouse + 2 kids + 2 parents INR 42, 500 (INR 34, 000) Check –up Plan

Flexible Benefits Case Study Employees Final Order FSA Opening balance Benefit Health Insurance Life Insurance Health check up Annual Leaves INR 24, 000 Benefit Chosen Credits Transferred to Employee’s FSA INR 600, 000 Self + Spouse +2 Kids + 2 Parents (INR 20, 000) INR 20, 000 for Self Only (INR 4, 000) Self + Spouse (INR 9, 000) Sell 3 days INR 24, 000 FSA Closing balance INR 15, 000 (Carry Forward)

Flex Opportunities : Benefits in India Benefit Opportunity to flex Comments Retirement Gratuity v Statutory benefit Provident Fund v Statutory benefit NPS v Attractive to middle age employees v Expensive so may involve salary sacrifice Paid Time off v Most common flexible benefit Privilege Leave v Possibility of Buy and Sell v Could be designed to be cost neutral to company v Utilization & Needs varies across employees Sick/Casual/Other Leaves v Event based hence not rational Risk Benefits Group Hospitalization v Most common flexible benefit Group Life/ADD v Possibility of top up and top-down v Opportunity to share costs with employees Critical illness/Any other group insurance v Utilization& Needs varies across employees v Access to discounted group rates

Flex Opportunities : Benefits in India Benefit Opportunity to flex Comments Health and Wellness Health Check up Domiciliary treatment Wellness vouchers/equipment Personalized Coaching on Fitness/Gym Lifestyle Car Accessories Mobile & Laptop v Employer costs v Utilization& Needs varies across employees v Access to discounted group rates v Expensive to trade v Tax disadvantages/considerations Vacations v Administration Hard/Soft Furnishings v Vendor buy-in Concierge Services Meals Creche/Childcare

Flex Opportunities : Benefits in India Other Potential Flex Benefits Opportunity to flex Comments Clothing Parking Financial Planning v Employer costs Dental v Utilization& Needs varies across employees Optical v Access to discounted group rates Educational Courses v Expensive to trade Broadband/Internet v Tax disadvantages/considerations Books/Journals v Administration Retail Vouchers Household Insurance Movie Tickets Social Causes v Vendor buy-in

Flex Benefits Approach 8 -9 weeks 8 -10 weeks 10 -12 weeks 4 -6 weeks Feasibility Study Plan Design Implementation Communication Assessment of organization’s readiness for Flex Ben; review of existing benefit plans; inputs from leadership & employees, costings, utilizations, demographics, benchmarking, vendor buy-in On Going Flex Administration Detailed design including core/optional benefits, flex credit allocation formula, benefits budget & cost impact projections. Timelines mentioned are indicative only Configuration of system requirements; user testing; design of administration process; initiation of enrolment Communication strategy & roadmap; definition of target audience; preparation of material; train the trainer 12