India is fast strengthening its position as one of the most promising economies globally, with a diverse talent pool. Talented employees are in high demand and businesses are making constant efforts to project themselves as attractive options for prospective candidates.

Do you want to retain skilled and experienced members of your workforce? Do you also want to ‘attract ‘talented workers from outside your workforce, into your organization? Well, a well-designed employee benefits program can do wonders for your business, in both these contexts. In this article, we will discuss everything you would like to know about providing a well-designed employee benefits program to your workforce, the costing involved herein and other important matters associated with these.

Here we go!

Let’s start with the very basics first!

What is an Employee Benefits Program? Why is it important for your business?

Employee benefits programs or packages are payouts made by businesses to employees that go above and beyond the range of salary. They are also non-monetary benefits granted to employees as a part of their employment contract. These are also called perks or fringe benefits, These benefit programs may be mandated by legislation or made accessible voluntarily by the employers.

Employee benefits do not take into account the excellence or performance of any employee. These are designed to make the employees feel valued. Paid holidays, health insurance, life insurance, gratuity, retirement benefits and other perks may be included in employee benefit packages.

In the dynamic and highly competitive job market today, employee benefit programs can prove to be an indispensable tool for growing businesses. Employee benefits can help your company's bottom line by engaging employees and enhancing their productivity, work-life balance and overall well-being.

Offering a well-designed and comprehensive benefits package to your employees is essential because it demonstrates that you care about and are willing to invest towards their general health, job satisfaction, and future. It can also make it much easier for your recruiters to bring on top-tier talents on board. Employee benefits assist in keeping such employees sufficiently compensated, without raising their salaries to exorbitant levels. Furthermore, an appealing employee benefits package is critical for retaining and attracting skilled and experienced employees. In the long run, it will help your company to secure its future and build a workforce committed to the company's goals.

Types of Employee Benefits

What are the different benefits employers offer in India?

In India, two types of Employee Benefits Programs are usually offered by employers to their employees- mandatory and optional or voluntary.

  1. Mandatory Benefits
  • Employee's Provident Fund (EPF) and Employees' Pension Scheme

The Employee's Provident Fund (EPF) is an integral part of the social security payments in India and is supervised as per the provisions mentioned in the Miscellaneous Provision Act. Employers covered by the EPF Act are required to contribute 12% of their employees' wages to EPF. From his end, an employer also pays 12% of an employee's principal income. 8.3% of the 12% is utilized for pensions, with the remaining 3.67% going to the EPF account. Moreover, employees have the option of foregoing 24% of their EPF contribution rate if they so desire.

  • Gratuity

Every employee is entitled to gratuity, according to the Gratuity Payment Act. This is a payment of 15 days for each year of employment.  Employers can obtain a tax benefit of approximately Rs. 1,000,000 by simply providing gratuities. An employee is eligible for a gratuity if-

  • He resigns after working for a minimum of five years with a particular company.
  • The employee dies
  • The employee retires. It takes into account the company's retirement plans.
  • He suffers from any disability, due to prolonged illness or accident.
  • Employee State Insurance (ESI)

This insurance scheme is made mandatory for all employees earning up to INR 21,000 a month (INR 25,000 for specially-abled employees). It covers the medical expenses for the family of the employee, widow's pensions and other such benefits. The contribution is distributed equally between the employer, the employee, and the Central Government. This plan, regulated by the ESI Act of 1948, is intended to safeguard employees' rights in times of maternity, sickness, disability, or death resulting from a workplace injury.

  • Health/medical insurance

Most companies are required to provide medical insurance to their employees in accordance with health insurance benefit policies known as indemnity commodities. The insurance provides coverage for the employee, spouse and children. Few employers also provide insurance policies that cover the employee's parents.

  • Statutory Leaves & Holidays

Every state's Shops and Establishments Act or the Factories Act governs these mandates. Sick, casual, and earned leaves, national holidays, state-recognized holidays, and bereavement leave are all examples of such leaves.

In addition to these, employees should be entitled to paid time off for a variety of reasons such as annual holidays, maternity breaks, sick leaves and so on. Full-time employees may choose to save their paid leaves for future use. Employees in some companies may prefer cash payments for unused paid leaves when leaving the company.

  • Paid maternity leave

All employees are entitled to 26 weeks of paid maternity leave. In India, the Maternity Benefits (Amendment) Act of 2017 requires employers with more than 50 employees to cover creche expenses for children up to the age of six.

2. Optional or voluntary benefits

Some notable optional coverages offered by companies are discussed below-

  • Group personal accident insurance

In India, employee benefits may consist of a fully insured group personal accident policy. The plan provides coverage for permanent total disability (TPD), accidental death, double dismemberment (DM), permanent partial disability (PPD), weekly partial income replacement to 104 weeks, temporary total disability (TTD ), home and vehicle modifications, accident-related medical expenses, funeral expenses, child education expenses and other such benefits.

  • Group term life insurance

Many large corporations offer fully-funded group term life insurance policies. This benefit is provided in the form of a fixed amount or 2 to 3 times the annual salary, on a tiered basis. This benefit is provided either as an Accelerated benefit (which lowers the available Sum Assured (SA) for the death benefit ) or as a separate limit on top of the GTL SA.

  • Group medical insurance

Group medical insurance provides the following-

  • Hospitalization coverage with no waiting periods or exclusions for pre-existing disease
  • Newborn baby coverage
  • Maternity benefits
  • Add-on hospitalisation benefits such as cyber-knife or robotic treatment, new types of cancer treatment and infertility /fertility treatment.
  • Business travel accident

Employers may offer their traveling workers group business travel accident plans. personal responsibility, accidental medical, death, and travel difficulties are all covered by this insurance cover.

  • Food coupons

Many organizations provide food coupons to their employees. They can use these coupons to procure lunch during office hours.

  • Flextime

Flextime assists the employees in an organization to maintain a healthy work-life balance. This will keep the employees satisfied and motivated. As a result, they will be at their best to deliver efficiently. Employee satisfaction has a direct impact on an organization's productivity.

  • Transportation

Many organisations make it easier for employees to commute by providing a shuttle service. This makes it more convenient and safer for employees to travel late owing to work-related challenges. Senior management employees at certain pay levels are also provided with corporate cars for the same reason.

  • Financial education

Many Indian businesses have launched financial wellness initiatives for their employees. These programs are designed to assist employees in developing a firm understanding of financial management, meeting short-term financial needs, and planning for long-term financial goals. It also helps employees overcome the anxiety that is sometimes linked with retirement plans. Thus, these initiatives are aimed at reducing their levels of financial stress.

How to design an Employee Benefits Program in India?

When developing an employee benefits package, it is critical to evaluate the elements that influence compensation costs. A comprehensive strategy is required to establish a cost-effective and employee-friendly benefits plan.

The procedures below will assist you in creating the best compensation package in India for your organization-

  1. Identify your company objectives and budget

The first step is to identify your organisational objectives for the benefits package and the budget you have set aside for it. This information, together with a clear goal in mind, will give you a decent understanding as to which perks to include and the general structure of the plan. You should also consider the size of the employer, the employee's location, and the industry sector. It is also critical to leave some budget space for discussions for a tailored benefits package in exceptional circumstances.

2. Analyze the needs of the employees

Assessing what employees require or expect from the benefits package will assist in developing the optimal solutions. You can also consider your competitors' benefit plans in order to offer superior options in your organization. Another critical factor to consider is the average age of your workers. Different age groups may demand different types of benefits. As a result, you must create a benefits plan that meets the demands of employees of various ages.

Conducting market research and preparing your plan accordingly is a reliable method. To better understand the benefits, one typical research strategy is to distribute research forms in the workplace. Then, based on the feedback received, you can formulate the best possible plan to meet the expectations of your employees.

3. Formulating the benefits plan

Following the completion of the analysis, it is time to design the benefits package. Using data from market trends and employee surveys, you can add the appropriate perks based on their priority. Then, you can calculate the plan's cost and adjust it to fit the given budget. This process can be difficult because many factors must be considered before the plan's final formulation. You could consider making the plan more cost-effective, removing underused benefits, containment features, and employee participation.

4. Share the plan with the teams

After creating a draft plan, discuss it with the workers to get constructive feedback. The plan's goal is to provide assistance and comfort to the employee while staying below an acceptable budget. As a result, the worker's participation is critical to the plan's success.

5. Evaluate the benefits plan periodically

The benefits plan is subject to changes in certain circumstances such as the market environment, regulatory environment, demographics, and so on. Therefore, it is essential to constantly examine whether the benefits program will withstand the test of time.

What affects the cost of your Employee Benefits Program?

In the section above, we have discussed how important an Employee benefits program can be for your business. But designing a comprehensive and appealing employee benefits program is not going to be any cheap. The truth is that you must find a method to deliver the greatest environment possible to your employees while remaining financially viable. Employee benefits packages may become costly, both in terms of money and the number of work hours required to establish, operate, and administer them.

Furthermore, perks are becoming increasingly expensive every year. As per a recent report by PwC, during the last five years, the expenses of benefits have climbed by an average of 5-7% per year. Because of the COVID-19 pandemic, this increase could be enormously higher this year and beyond. Workers will be more likely to use mental health care services, take vacation days, get immunizations, and avail of voluntary perks such as mental wellness programs. All these are bound to eat up a significant share of your projected budget.

Also, without getting down with an expert and discussing your specific needs, determining the cost of your benefits package is extremely difficult. However, in general, the cost of your employee benefits program will be determined by two major factors: the size of your organization and the scope of your plan. The more coverage and benefits a plan has, the more you'll have to pay per employee.

If we break down the average costs of different types of employee benefits, based on the factors that influence their cost, we will see that health insurance is typically the most expensive part of an employee benefits plan. When it comes to workers' compensation packages, it is seen that low-risk businesses, such as accountants, technology startups,  law firms and other office-based businesses, have to pay relatively low costs. Businesses in high-risk industries, such as construction, should expect to spend much more in this category.

Talking about voluntary benefits, you can choose from any such benefits (yoga classes, gym membership, mental health benefits, just to name a few!) to make your workspace a better one for the employees. The nature and form of these initiatives can vary greatly based on your company and workforce. Therefore, it is hard to calculate how much such benefits might cost. However, the value they can deliver to your workers can make them worth the investment, irrespective of their costs.

Is it Possible to Reduce the Cost of Employee Benefits Programs?

Is it possible to reduce the cost of Employee Benefits Programs?

You can employ the following, in order to keep the costs of Employee Benefits Programs down, to some extent-

  • Consider what coverage to include in your employee benefits package. Make it a point to assess your programs on a regular basis and solicit employee feedback. From these inputs, you would come to know about certain pricey perks your employees do not desire or use often.
  • Allowing your employees to share some of the costs may be a great way to handle a part of the expenditures. Encouraging employees to contribute serves two purposes. Firstly, they will be able to obtain a group discount on coverages they couldn't get individually. Second, if the employees have a stake in the program,  there will be less misuse and spurious claims. It will help lower the overall cost for everyone.
  • Educating the employees on how to choose and use their health and retirement benefit options could lead to significant savings. This is particularly true for organisations with younger employees who may not be completely clear on how these benefits work and how to get the best value from them. It's also a good idea to check with your package provider if they can give training or guidance to your employees.
  • Creating and providing services to encourage employees (and their families) to stay healthy can help you save money on health insurance. You can avoid potentially costly claims by providing free or discounted immunizations, cancer screenings and mental health helplines. Including wellness-promoting amenities, such as yoga courses,  free gym memberships and company-sponsored exercise events can result in a healthier workplace.

Obviously, benefits packages are expensive and need a significant amount of time and effort to put together. In today's competitive job market, however, an employer cannot afford to not provide employee benefits coverage to his employees.

The footnote:

We hope the discussion above will help you understand the different elements of an employee benefit program. We have also discussed what it means for your business and how to get the best out of your budget while designing a comprehensive one for your workforce. For the best recommendation on any insurance, you may contact BimaKavach. Here, you can get the best advice for any insurance product in just 5 minutes.

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