Employee benefits
Session-15
Benefits
• Benefit
– An indirect compensation given to an employee
or group of employees as a part of
organizational membership.
• Strategic Perspectives on Benefits
– Benefits absorb social costs for health care
and retirement.
– Benefits influence employee decisions about
employers (e.g., recruitment and retirement).
– Benefits are increasingly seen as entitlements.
What are fringe benefits?
• Fringe benefits are benefits which employees
receive from their employment but which are
not included in their salary cheque or wages.
• They include such things as company cars,
private medical insurance paid for by the
employer and cheap loans.
FEATURES OF FRINGE BENEFITS
• An employee enjoys them in addition to the
salary he/she receives.
• They are not given for specific jobs performed
but to make jobs more attractive.
• They are not linked to productivity so do not
reward performance in any way, criteria used is
other than performance.
• They have an indirect impact on workers’
efficiency. If impact is direct, it is not a fringe
benefit.
NEED FOR FRINGE BENEFITS
• Employee demands
• Trade Union demands
• Employer’s preference
• As a social security
• To improve human relations
Types of Fringe Benefits
• Pay for time not worked
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Hours of work
Paid holidays
Shift premium
Holiday pay
Paid vacation
• Employee security
 Retrenchment compensation
 Lay off compensation
Types of Fringe Benefits
•Safety and health
Workmen’s compensation Act
Health benefits(Sickness benefit,
Maternity benefit, Disablement benefit,
Dependant’s benefit, Medical benefit)
Voluntary arrangements
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Welfare and recreation
Canteens
Consumer stores
Credit societies
Housing
Legal aid
Holiday homes
Educational facilities
Parties and picnics
Types of Fringe Benefits
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Old age and retirement
Provident fund
Pension
Deposit link insurance
Gratuity
Medical benefits
Calculation of EPF,EPS & EDLI
Scheme Name
Employee contribution
Employer contribution
12%
3.67%
Employees’ Pension scheme
0
8.33%
Employees Deposit linked
insurance
0
0.5%
EPF Administrative charges
0
1.1%
EDLIS Administrative charges
0
0.01%
Employee provident fund
Benefit Design
• Decisions Affecting Benefit Design:
– How much total compensation?
– What part of total compensation should benefits
comprise?
– What expense levels are acceptable for each
benefit?
– Which employees should get which benefits?
– What are we getting in return for the benefit?
– How will offering benefits affect turnover,
recruiting, and retention of employees?
– How flexible should the benefits package be?
Benefits Administration
• Benefits Communication
– Benefits Statements
• Annual “personal statement of benefits” that
translates the benefits into monetary terms to
show their worth.
– The Internet and Benefits Communication
• Web-based HR information systems allows
employees to change their benefit choices,
track their benefit balances, and seek benefit
information on-line.
Typical Division of HR Responsibilities:
Benefits Administration
Most common benefits provided in
India
•HRA
•Gratuity
•Housing loan
•Medical reimbursement/allowances
•Insurance
•Leave travel allowances
•Conveyance allowances
•Education allowances
•Superannuation
•Car loan
•Social/sports club membership
•Home furnishing
Flexible Benefits Plans (Cafeteria Plans)
Benefit plans that enable individual
employees to choose the benefits that
are best suited to their particular needs
Advantages
•More appreciation of benefits offered
•Better match between benefits and employee
preference
Disadvantages
•Increased design and administrative costs