(1) pay for time not worked (eg.
(3) retirement benefits
(2) insurance benefits
Benefit: indirect financial and nonfinancial payments employees receive for
continuing their employment with the company
3. Employee Benefits
⮚Do not directly related to worker’s performance like incentives
⮚But inadequate benefits lead to employee dissatisfaction
⮚ Benefit and service offerings add about 30-40% to an organization’s payroll cost
⮚ Benefits become the focus of negotiations with employees when large wage and
salary increases are not feasible
4. 1. Pay for Time Not Worked
a. Severance pay: A one-time payment when terminating an employee for
reasons originating from the organization.
In US, employers expect a 1 to 2 weeks notice, and similarly pay a 1 to 2
weeks severance pay, in Bangladesh the common practice is usually 2
to 3 months, stated specifically in the employment contract.
Reasons for granting severance pay:
• Acts as a humanitarian gesture and good public
• Avoids litigation from disgruntled former employees.
• Meets Worker Adjustment and Retraining Notification
(“plant closing”) Act requirements.
• Reassures employees who stay on after the employer
downsizes its workforce of employer’s good intentions.
5. Pay for Time Not Worked (cont’d)
b. Supplemental unemployment benefits (SUB)
Payments that supplement the laid-off or furloughed employee’s unemployment
The employer makes contributions to a reserve fund from which SUB payments
are made to employees for the time the employee is out of work due to
layoffs, reduced workweeks, or relocations.
SUB payments are considered previously earned compensation for
unemployment calculation purposes.
c. Vacations and Holidays:
Most firms offer vacation leave benefits. About 90% of full time
workers and 40% of part timers get paid holidays in the US, an
average of 8 paid holidays off.
It is termed and offered in many names different companies across
7. 2. Insurance Benefits
A. Workers’ compensation:
Provides income and medical benefits to work-related accident victims or their
dependents, regardless of fault.
1. Death or disability: a cash benefit based on earnings per week of employment.
2. Specific loss injuries: statutory list of losses
❑ Controlling worker compensation costs
• Screen out accident-prone workers.
• Make the workplace safer.
• Thoroughly investigate accident claims.
• Use case management to return injured employees to work as
soon as possible.
B. Life Insurance: In addition to hospitalization and medical benefits, most employers
provide group life insurance plans. Employees can usually obtain lower rates in a group
8. Insurance Benefits (cont’d)
C. Hospitalization, health, and disability insurance
Provide for loss of income protection and group-rate coverage of basic and major medical
expenses for off-the-job accidents and illnesses.
In Bangladesh usually calculated based on basic salary(2x or 3x usually), some MNCs pay at
actual by providing insurance.
• Preferred provider organizations (PPOs)
Groups of health care providers that contract to provide medical care services at reduced fees.
Many corporate employees (Like Telco or Bank) get upto 25% discount on fees, from
hospitals or medical centers like LabAid, Medinova.
• Employees can select from a list of preferred individual health providers.
• Preferred providers agree to discount services
• Employees using non-PPO-listed providers may pay all of the service costs or the
portion of the costs above the reduced fee structure for services.
9. 3. Retirement Benefits
Pension plans: Plans that provide a fixed sum when employees reach a
predetermined retirement age or when they can no longer work due to
In Bangladesh, Government & Private sector pension plans vary!
– Contributory: employees contribute to the plan.
– Noncontributory plans: employer makes all contributions to the plan.
– Defined contribution: contributions of employees and employers are
specified; plan payouts are not.
– Defined benefit plans: plan payouts are specified; however,
contributions must be sufficient to insure payouts. Eg. 401k in US
11. Provident Fund
• The Employee Provident Fund, popularly known as PF is the retirement saving scheme
available to all the salaried employees, is backed by the government on which fixed interest
• A provident fund is a form of social safety net into which workers must contribute a portion of
their salaries and employers must contribute on behalf of their workers.
• Example: at company “X” both the employees and employers contribute 10% of the basic
wages and dearness allowance to the provident fund (PF) account.
>>Total contribution to the PF= 20% X basic salary x months of service <<
Basic Salary of Mr Rehman is 20,000 BDT, he contributes 10% of his basic salary for PF, and his employer
matches it with another 10%.
If Mr Rehman worked for his employer for 10 years, then what amount of PF will he get upon resignation/
Note: However, full/partial contribution depends of service tenure
• Gratuity is a long term financial benefit given by the employer to its employee during
separation. As per Bangladesh Labor Law 2006 gratuity is not mandatory to employers.
• Gratuity policy depends upon company's own resolution. It may be applicable after 3 years
or 5 years continuous service tenure.
Company “X” allow Gratuity after 5 years of continuous service.
1. Mr. Amin’s basic salary is 60,000 BDT, he worked for his employer for 22 years, and
his employer pays gratuity after 5 years, so if he retires/ resigns now, how much will
he get as gratuity? A months salary is paid as gratuity for each year’s service.
2. If Mr Amin worked for his employer from Jan 1st , 2018 to Jan 1st, 2054, and
employers has a minimum eligibility of 5 years, and then calculates gratuity in
following way, calculate his gratuity amount upon retirement/ resign? Gratuity is
calculated in following manner.
– 1 year’s salary for 5 years’ service
– 2 year’s salary for 7 years’ service
– 3 year’s salary for 9 years’ service
– 5 year’s salary for 12 years’ service
Note: However, sometimes company use different “basic salary” for different service tenure. Usually
Dismissed employees don’t received Gratuity.
13. Flexible Benefits Programs
The cafeteria (flexible benefits) approach
Each employee is given a benefits fund budget to spend on the
benefits he or she prefers.
The fund limits the total cost for each benefits package.
Core plus option plans establish a core set of benefits which are
mandatory for all employees.
Flexible spending accounts
Enable employees to pay for medical and other expenses with pretax
dollars by depositing funds in their accounts from payroll deductions.