Employee Benefits

Two points follow. The statutory layer depends on thresholds, so coverage is a question of fact about the establishment and the employee rather than a policy choice. And these entitlements are not benefits in the discretionary sense, so describing them in a benefits brochure alongside voluntary provision, without distinguishing them, misleads employees about what can be changed.

Verify the applicable thresholds, wage ceilings and rates under the Code on Social Security, 2020, the Code on Wages, 2019, the OSH Code, 2020 and the applicable state legislation, since these vary by state and by establishment size and no figure is stated here.

The thresholds in that table are worth having precisely, because they are what decides whether a benefit is an obligation or a choice, and they are not the same number. The First Schedule to the Code on Social Security sets them: provident fund at every establishment with twenty or more employees; state insurance at every establishment with ten or more persons other than a seasonal factory, extended to a notified hazardous or life-threatening occupation even with a single employee; gratuity at every factory, mine, oilfield, plantation, port and railway company, and every shop or establishment with ten or more employees on any day of the preceding twelve months; and maternity benefit on the same footing as gratuity. Bonus under the Code on Wages applies to an establishment in which twenty or more persons are employed, or were employed on any day during the accounting year.

Three of the benefits have recorded content rather than only a threshold. Gratuity under section 53 is fifteen days' wages for every completed year, and for a part of a year in excess of six months, on the last drawn rate, with pro rata entitlement for a fixed term employee and no five-year qualification where termination is due to death, disablement or expiry of the fixed term. Maternity benefit under section 60 is the average daily wage subject to the minimum wage fixed under the Code on Wages, for a maximum of twenty-six weeks of which not more than eight may precede the expected date of delivery, reduced to twelve weeks for a woman with two or more surviving children, and conditional on the woman having actually worked not less than eighty days in the twelve months preceding the expected date of delivery. The creche duty under section 67 attaches at fifty employees, with four visits a day allowed including rest intervals, and nursing breaks under section 66 running until the child is fifteen months old.

What is not stated here is the money going in. Provident fund and state insurance contribution rates and the wage ceilings are in this Code's notVerified list, so no percentage appears in this entry.

• Group health insurance, usually covering the employee and dependants, and often the benefit employees weigh most heavily when comparing offers.
• Group personal accident and term life cover, which cost relatively little and are underappreciated until claimed.
• Transport, meals or canteen provision, particularly for shift and frontline populations where they materially affect whether a job is workable.
• Flexible benefit structures allowing employees to allocate part of their package across components with different tax treatment.
• Loans and advances, which carry their own perquisite valuation consequences where they are interest-free or concessional.
• Wellbeing and assistance programmes, whose value depends almost entirely on whether employees believe use of them is confidential.
• Leave beyond the statutory floor, and support such as extended parental leave or bereavement leave.

The recurring mistake is adding benefits without measuring use. A programme nobody uses is a cost that produces goodwill only among the people who remember it exists.

This is the benefit with the highest emotional weight and the most frequent misunderstanding, and most of the problems are foreseeable.

• Waiting periods and pre-existing condition exclusions, where a corporate policy often waives what a retail policy would not, and employees assume either the best or the worst.
• Room rent limits and sub-limits, which produce a shortfall at discharge that the employee did not anticipate.
• Dependant definitions, including whether parents or parents-in-law are covered and on what terms, which is a significant question in Indian families.
• Cover ceasing on the last working day, leaving a leaver uninsured during a notice period or between jobs unless portability is explained.
• Claim process and cashless network, which is what determines whether the benefit feels real at the moment it is needed.
• Additions and deletions at joining and exit, which have to be processed promptly or a new joiner discovers at admission that they were never added.

Explaining these in advance is worth more than increasing the sum insured, because almost every complaint about this benefit is a complaint about an expectation nobody corrected.

• Distinguish statutory from voluntary in every communication, so employees know what can change and what cannot.
• Reserve discretion explicitly for voluntary benefits, and remember that consistent provision can still create an expectation that is hard to withdraw.
• Record every benefit centrally, including things granted at a location or by a manager. Unrecorded benefits are where cost, tax treatment and equity problems accumulate quietly.
• Check the tax treatment of each benefit and apply it in payroll rather than at year end, since non-cash benefits are taxed as perquisites in the employee's hands.
• Check the wages question separately, because whether a benefit enters the contribution base follows the definition of wages rather than its tax treatment.
• Measure utilisation and ask employees what they value. Benefits budgets are frequently allocated to what was introduced years ago rather than to what the current workforce would choose.
• State the total value in the annual communication. Employees consistently underestimate employer contributions and insurance costs because they never see them in one place.