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Elements of Core CompensationBase Pay (recurring) Hourly pay/wage Annual salaryBase 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
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)
Elements of Discretionary BenefitsProtection Programs Income protection programs Health protection programsPay for time-not-worked Holidays Vacation Sick leave Personal leave Jury duty Funeral leave Military leave Cleanup, preparation, travel time
Elements of Discretionary BenefitsServices Employee assistance programs (EAPs) Family assistance programs Tuition reimbursement Transportation services Outplacement assistance Wellness programs
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
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
Defined Contribution vs Defined Benefit PlansPost-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.
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
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
Leave Encashment – Defined benefitFor whom? If company offers encashment of leave, all employeesWhat benefit? Will be based on the company policy Normally x days salary for each accumulated day of leaveHow 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
Gratuity – Defined BenefitFor whom? Engaged in Government, Factories, Mines, Plantations, Railways, Shops and establishments notified by Government In service for 5 successive yearsWhat benefit? 15 days wages for each year of service Maximum limit Rs 10,00,000.00 7 days wages per season for seasonal occupationHow Funded? Can be funded or unfunded. Special tax concessions if funded through a trust or insurance company
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
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