3. Elements of Core Compensation
Base Pay (recurring)
Hourly pay/wage
Annual salary
Base 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
4. 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)
5. Elements of Discretionary Benefits
Protection Programs
Income protection programs
Health protection programs
Pay for time-not-worked
Holidays
Vacation
Sick leave
Personal leave
Jury duty
Funeral leave
Military leave
Cleanup, preparation, travel time
6. Elements of Discretionary Benefits
Services
Employee assistance programs (EAPs)
Family assistance programs
Tuition reimbursement
Transportation services
Outplacement assistance
Wellness programs
7. Employee Benefits in India
Employee Benefits
Employee Benefits
Legally Required
Legally Required Discretionary
Discretionary
Life
Life Leave
Leave
Provident Fund Gratuity Insurance
Insurance Encashment
Encashment
Provident Fund Gratuity
Mediclaim Super-
Super-
Personal
Personal Mediclaim annuation
Accident annuation
Accident
8. Employee Benefits –Insurance/Retirement
Insurance
Insurance Retirement
Retirement
Accident Mediclaim
Accident Mediclaim Life
Life Leave
Leave Superannuation
Superannuation
Encashment
Encashment
Gratuity
Gratuity
Defined Defined
Defined Defined
Benefit Contribution
Benefit Contribution
9. Defined Contribution vs Defined
Benefit Plans
Post-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.
10. Companies providing benefit (%)
Analysed items 2004
House Rent Allowance 97
Gratuity 95
Housing Loan 91
Medical reimbursement/ allowance 90
Insurance 89
Leave Travel allowance 87
Hospitalisation 86
Variable Bonus 85
Conveyance allowance 84
Superannuation 61
Car Loan 54
Social/ Sports club membership 51
Incentive/ Sales Commission 44
Hard Furnishing 39
Medical check-up 39
Fixed Bonus 33
Other allowances 26
Flexible benefit plan 16
11. 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 accident
BOTH BENEFITS ARE OFFERED BY NON-LIFE INSURANCE COMPANIES
12. Life Insurance
• Benefit payable on accidental/natural death
• Convenient eligibility conditions
• Additional Optional riders
PROVIDED 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 annual
salary
13. Leave Encashment – Defined benefit
For whom?
If company offers encashment of leave, all employees
What benefit?
Will be based on the company policy
Normally x days salary for each accumulated day of
leave
How 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
14. Gratuity – Defined Benefit
For whom?
Engaged in Government, Factories, Mines, Plantations,
Railways, Shops and establishments notified by Government
In service for 5 successive years
What benefit?
15 days wages for each year of service
Maximum limit Rs 10,00,000.00
7 days wages per season for seasonal occupation
How Funded?
Can be funded or unfunded.
Special tax concessions if funded through a trust or insurance
company
15. 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
16. Retirement Benefits - Trends
• Provided by life insurance company
• Offered a cash-accumulation conventional scheme
• More and more companies now funding through
Insurance
• Unit-linked – a preferred platform
• Pension benefits - from Defined Benefit to defined
contribution