Total Reward is a concept that describes all the tools available to an employer that may be used to attract, motivate and retain employees. To an employee, the notion of total rewards includes perceived value as a result of the employment relationship.
“In the last five years, we have seen so many New Corporate have evolved for employees’ Health Benefits, Tax- saving benefits App/debit cards and so many other benefits”
Compensation and Benefits (C&B) is the most critical instrument for attracting and retaining talent. Over the years, we have experienced so many changes that happened in the statutory framework and equally giving impetus on the design of Fixed Compensation.
In the recent past, we have seen significant changes in the statutory environment where norms of social security related salary compensation and other benefits got changed:
Statutory Benefits with Recent Changes:
- EPF eligibility limit is enhanced from Rs. 10,000 to Rs.15,000 on Basic Salary in 2017. The Major change came in 2019 when Supreme Court pronounced “The Allowances” in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. Essentially, it means that the PF contribution will be on the total amount including all the allowances paid to an employee and not just on the basic salary along with certain exceptions
- Employees’ Deposit Linked Insurance (EDLI) applies to all employees with a basic salary under Rs. 15,000/- per month. If the basic salary goes above Rs. 15,000 per month, the maximum benefit is capped at Rs. 6,00,000/- it is changed in the year 2015 against their earlier limit of Rs. 3,60,000.
- Employees’ Pension Scheme (EPS), an individual has to fulfill the following criteria:
- An employee should have completed 10 years of service.
- An employee has reached the age of 58 years.
- An employee can also withdraw his EPS at a reduced rate from the age of 50 years.
- Supreme Court orders to EPFO to change an old pension rule in 2019. The apex court order mandated that EPFO give full pension to all EPS subscribers. That means all retiring employees can now draw a pension on the basis of actual salary, and not on the basis of the earlier Rs. 15,000/ Month cap on pension contributions.
- ESIC ceiling enhanced from Rs.15,000 to Rs.21,000. When this ceiling was enhanced, it was also decided to reduce employer share from 4.75% on Gross Salary to 3% and employee share was reduced to 1.75% to 1% for new establishments and Establishment which incepted this post announcement of the scheme for two years. Again giving a surprise, permanent reduction in the rates were announced where the New Rate of Employer share made 3.25 while the New Rate of Employee share became 0.75%. This became effective since 1st July 2019
- Under the Payment of Gratuity (Amendment) Act 2017 limit on gratuity has been doubled to Rs. 20 lakh from the existing Rs. 10 lakh.
- Under the Bonus Amendment Act, the Statutory bonus ceiling has been raised to Rs. 21,000. And accordingly, the calculation ceiling has also been raised from Rs. 3,500 to Rs. 7,000 and came in to effect since 01st April 2014. This means all employees whose salary is less than Rs. 21,000 per month fall under the criteria of bonus. If the salary of an employee exceeds Rs. 7,000, then the bonus should be calculated on Rs. 7,000 only. If the salary of an employee is less than Rs. 7,000, then the bonus is to be calculated on the actual amount.
- Maternity Benefits got a revision of Paid Leaves from 12 weeks to 26 weeks, Maternity Leave for adoptive and commissioning mothers is made for 12 weeks and Creche facility is mandatory under new provisions.
Corporate also use services of insurance scheme to cover the employees who are exempted from ESIC and such as Group Mediclaim, Group Personal Accident, Group Term Insurance, where it is not enforced by any regulatory body from the Labour Department but still they are doing this to Minimize the risk and felicitate the employees to cover health risk, loss of pay and life.
Performance-Based Variable Pay:
Performance Linked Incentive: This is one of the essential parts of compensation which varies from 10-30% of the total Reward and varies from industries. Performance pay is generally paid based on the organization as well as the Individual’s Performance level. Variable pay increases with the growing hierarchy, role, and responsibility.
Sales Incentive: It is given to Sales Team on Achievement or Over Achievement of their Targets
Retention Bonus: It is based on the tenure of work and paid as a retention tool to motivate the employees.
Employees Stock Option (ESOP): This is given to attract the employees with high yield and outstanding performance in a constant manner. It is also used as a retention tool as an employee has been trained with a staggering period in order to get the benefits.
Employees Perks and Benefits:
- Corporate in various organized sectors motivate employees with various kind of employee gifting benefit schemes such as Meal cards/ Wallet/App are the upcoming measures to the employees in order to motivate and sometimes consider as Tax Benefits schemes.
- Employee Health Checkup for self and Family on as a corporate initiative to concern about employee and family healthcare.
- Cab/Taxi facilities through App based operators like operators as a bill to company for movement on official tours, home to the office for ease of swift commutation.
- Tie-ups for Voucher to enjoy recreation activities like Play/Movies for the family time.
- Vouchers for Online shopping/ Hypermarket stores as Rewards/Benefits to motivate them.
- Senior Executives are being given Accommodation, Company’s Car, Drivers, etc. to feel esteemed as part of perks and benefits.
Current Compensation Scenario
External factors like retarded growth in automotive, building materials and construction, in traditional industries having the largest market share in terms of employment generation. Sectors Like IT and ITES where compensation is higher in comparison of traditional sectors seen ballooning with the inflow of venture capital and aspiration of youngsters to become an entrepreneur.
On the other side, Corporate India is trying to achieve the Growth rate of 8% on year on year to achieve the business of $5 Trillion for the entire economy by 2025. This means lots of opportunities are upcoming.
Among these, all corporate are facing financial distress where GDP rate became lower and a wider gap has been experienced in the demand and supply. Employable Manpower Vs Available Manpower is like finding a needle inside a pond.
Many Industries are even not ready for this due to their immediate liabilities and changing Business Environment. Although in the long run, these changes are going to yield benefits to all of Industries with growth as we are pushing for 8% GDP growth. With the increasing challenges for social security in the form of upcoming labour code other related obligations, corporate in the current scenario of stressed business performance have challenges on perks and benefits.