EMPLOYEE BENEFITS PROGRAMS

Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. In instances where an employee exchanges (cash) wages for some other form of benefit is generally referred to as a 'salary packaging' or 'salary exchange' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.

OBJECTIVES

Based primarily on the employees' needs To establish and maintain an employee benefit program that complements the efforts of employees on their own behalf To evaluate the employee benefit plan annually To compare the employee benefit plan annually

To maintain a level of benefits To determine annually the cost To maintain continual communications Attractive and competitive total remuneration

CLASSIFICATION OF EMPLOYEE BENEFITS

Employees benefit can be further classified under these seven major groups: Disability Income continuation Loss of Job Income continuation (Layoffs and termination) Deferred Income Spouse and Family Income protection Health and Accident Protection Property and liability protection

CLASSIFICATION OF EMPLOYEE BENEFITS

Disability Income continuation

Short term disability Long term disability Social security Travel accident insurance Sick Leave Accidental death and dismemberment Group Life Insurance -Total Permanent Disability Retirement Plans

Loss of Job Income continuation (Layoffs and termination)

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Unemployment Insurance Supplemental Unemployment Benefit Insurance Guaranteed Annual Income Guaranteed Income Stream

Deferred Income Social Security Qualified Retirement Plan Pension Plan, Profit Sharing Plan, Stock Bonus plan. Group Life Insurance Plans Stock Purchase Plan

Spouse and Family Income protection

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Life Insurance Retirement Plans Social Security and Medicare Travel Accident Insurance Health Care Coverage X-Rays and Laboratory coverage, Home visits by the doctor, ambulatory or outpatient surgery, Annual check ups, health insurance plans for the survivors of deceased company employee retirees, non hospital psychiatric care. These are the various compensation components that provide employees with personal Property & Liability Protection.

Health and Accident Protection

Property & Liability Protection

STATUTORY WELFARE PROVISIONS IN INDIA

These are amenities that are necessary to be provided to the employees under different labour lagislation.The important provisions which call for these welfare provisions include. The Factories Act, 1948, Plantation Act, 1951, Mines Act, 1952, Motor Transport Workers Act, 1961, Contract labour Act, 1970. Espacially one act called Employees State Insurance Act 1948 is clearly talking about employees benefit that are as follows:-

Sickness and extended sickness benefits Maternity benefits Disablement benefits Dependents benefits Funeral benefits

FACTORS INFLUENCING CHOICE OF BENEFIT PACKAGE

Employers factors

Relationship to total compensation costs Costs relatives to benefits Competitors offerings Role of benefits in Attraction Retention Motivation Legal Requirements

CONTD..

Employees factors Equity (Internal+External) what others of same /similar status receive Personal needs as linked to Age Sex Marital status No. of dependents etc

GUIDELINES TO MAKE BENEFIT PROGRAM MORE EFFECTIVE

Fringe benefits programs should be looked at as a worthwhile corporate instrument in HRM. Future policy planning in this area will have to keep in view some fresh reference points. Non unionization and skills shortage are no more relevant for policy considerations. Any meaningful package of benefits must reflect some perspective planning. Inflexibility brings stagnation. Separate programs directly beneficial to workers from those that are directed towards community welfare. Clubbing them together adds to their cost. This may not be liked by workers.

CONTD..

It is advisable not to have a facility rather than neglecting it in its administration. Poor internal communication hurts the programme in at least three ways i) more money is spent for officers welfare ii) Excess money spent on corporate image building at the cost of more bonus iii) priority of officers children in admission to schools. Therefore, make the internal communication system effective. Devise new ways to involve workers and their representatives at all levels of planning and implementation.

FRINGE BENEFITS
MEANING:

The term Fringe benefits refer to various extra benefits provided compensation in addition to direct wages or salaries,such as company car, house, allowance, medical insurance, paid holidays, pension schemes, subdisied meals.

CHARACTERISTICS OF FBT

It is a tax on expenditure, not income. It is a tax on employer, not employees. It cannot be recovered from the employees. It is to tax benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees. A combination of presumptive and non-presumptive approaches has been adopted.

CLASSIFICATION OF FRINGE BENEFITS

PAYEMENT FOR TIME NOT WORKED:-Benefits under this category include sick leave with pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time, bargaining time, travel time etc. EXTRA TIME FOR TIME WORKED:-This category covers benefits such as premium pay, incentive bonus, shift premium, old age insurance, profit sharing, unemployment compensation, deewali or pooja bonus, food cost subsidy, housing subsidy, recreation etc. EMPLOYEE SECURITY:-Provided with the benefits of confirmation of the employee on the job creates a sense of job security. further, a minimum and continuous wage or salary gives a sense of security to life. SAFETY AND HEALTH:-In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to providing a safe working environment.

FRINGE BENEFIT TAX

A new tax was imposed on employers by India's Finance Act 2005 was introduced for the financial year commencing April 1, 2005. Employer's expenses on entertainment, travel, employee welfare and accommodation. The law provides an exact list of taxable items. Employer's provision of employee transportation to work or a cash allowances for this purpose. Employer's contributions to an approved retirement plan (called

Employee stock option plans (ESOPs) have also been brought under fringe benefits tax from the fiscal year 200708. Employer's expenses on entertainment, travel, employee welfare and accommodation. The definition of fringe benefits that have become taxable has been significantly extended. The law provides an exact list of taxable items.

HOW FRINGE BENEFITS TAX IS CALCULATED (STATUTORY METHOD)

To calculate the FBT payable on your Motor Vehicle using the Statutory Method, a formula set by the Taxation Office is used: FBT Payable = (PurchasePrice) X (StatutoryRate) X (Gross Up Factor) X (FBT Rate) Purchase Price = Cost price of vehicle (excluding stamp duty, registration and fleet discount but including dealer delivery and GST). Gross Up Factor = 2.0647 where GST is payable 1.8692 where GST is not payable.

Condt.

Statutory Rate = Based on the number of kilometres you will travel within the FBT year 0kms-14,999kms= 26% 15,000kms- 24,999kms= 20% 25,000kms- 40,000kms= 11% 40,001kms- and above= 7%

FBT Rate = 46.5% Example: Purchase Price of Vehicle: 50,000.00 Distance travelled: 16,000. Kms Statutory Rate = 20% FBT Payable = 50,000.00 x 20% x 1.8692 x 46.5% = 8691.78

FRINGE BENEFITS AND THEIR EFFECTS

Contribution to Motivation or Contribution Performance/ hygiene To HRM Function goodwill Attraction,retention, Performance direct Motivator Pensions Motivation Company cars Attraction,retention, Performance direct Motivator And fuel Motivation Attraction,retention, Performance direct Work related Depends Motivation Equipment Training and (Goodwill) Retention, Education performance derivative Motivator Motivation provided by Employers Benefits Accommodation Attraction,retention, Motivation Various Attraction,retention, allowences Motivation (Goodwill)performance derivative Motivator

(Goodwill)performance Motivator derivative

DIFFERENCE BETWEEN PERQUISITES AND FRINGE BENEFITS:

Fringe benefits Expense done by employer on the entertainment facilities of employee Perquisites Free education facility provided to Employees children

Fringe benefits are not clubbed With the salary and tax on the same is paid by employer
Fringe benefits are taxed in the hands of employer

The perquisites are clubbed under the head income from salary and tax accordingly to employee The perquisites are in the hands of employee himself