employee benefit solutionpresentation
TRANSCRIPT
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Employee Benefit SolutionsDate : 27th January, 2010
Presented by: Shailesh Mehta
Tiger Trail Corporate Solutions
843/1 MG Road, New Delhi - 30
011-65095476, 9811825077
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Content
Employee Benefits Solutions in the Market
Group Term Insurance
Group Gratuity
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Employee Benefit Scenario In
India
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Group Life Insurance
Group Life insurance can be a great incentive in recruiting and
retaining talent
Increases motivation and employee loyalty
Provides financial freedom to your employees
Group Life Insurance is single policy which covers the lives of the employees /
members of an organization
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Benefits for Employer
Provides financial security to the employees at a minimal cost
Serves as a strong retention tool and as a loyalty building measure
Hassle free administration and enrollment Free Cover Limit
Premium payable is an approved business expense under the
current Income Tax laws.#
Allows for uniform business expense to cover fluctuating mortality
risk
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Benefits for Employee
Provides financial security to the family and dependents of the
employee
Hassle free enrollment
The Face Amount is not taxable in the hands of the beneficiary
Cheaper than individual coverage
Option available to convert from Group to Individual policy whileleaving the company
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Some GTL Concepts
Actively at Work clause
Free cover limit
Medical Underwriting
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Service Delivery
Claim
Turn-around Time
Documentation advice
Addition & Deletion of Members
Customer Service
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Details Required to Generate
Quote
Employee Name
Number
Gender
Date of birth
Designation
Salary
Past death experience for 3 years
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Employee Benefit
Mandatory
P F / EDLI Gratuity
Voluntary
Group TermLife
SuperAnnuation
LeaveEncashment
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What is Gratuity ?
Gratuity is
A gratuitous payment
A parting gift
Supreme Court on Gratuity:
Gratuity is one of the efficiency devices meant for orderly and humane
elimination of superannuated and disabled employees whose retention in
service would be detrimental to efficiency.
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What is Gratuity
Gratuity to be paid on retirement, termination, superannuation, death
and disability of an employee
Liability accrues every year of service put in by the employee
Gratuity liability will be proportional to changes in salary
Formula for calculation = 15/26*last drawn salary*no. of years
served
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Why pay Gratuity
Statutory obligation for employers
Retirement benefit for the employees
Tax free in the hands of employee till Rs.350000
Good HR initiative (Gratuity can be bettered by the employer)
Employee motivation to stay in the Company for a considerable time
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When should an employer pay
gratuity
Obligatory for an employer having 10 or more
employees
Gratuity payable to an employee :
On termination, superannuation, retirement, death and disability
After the employee has rendered continuous service for not less than 5 years *
* (Service of 5 years not necessary in case of death and disability)
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Options to meet your Gratuity Liability
Create anInternal Reserve
Fund
Gratuity Liability
Insurance Managed
Gratuity Plan
CompanyCompany
Pay as you go
Self managed
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Need to fund for Gratuity
Bulk recruitments lead to bulk retirements
There may by large payments in certain years
Death / Accidents / Industry slump
Avoid overstated profits in books
In accord with the latest accounting standards
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Gratuity Solutions
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Gratuity Features
Scheme will be administered through the creation of a Trust
Guaranteed Investment options
Investment in two Investment Fund options - Debt and Balanced
Switching between investment fund options allowed
Scientific actuarial estimation of past service gratuity liability
Future service gratuity can be covered through a group term insurance plan
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Service
Mutually agreed Service Level Agreements
Agreed Turn Around Times for various deliverables
Focused service:
Separate Relationship Manager for handling the accounts
Service Delivery Team for Post Sale servicing
Assistance in formation of Trust
Facilitation for transfer of funds from your existing Insurer etc
Panel for AS-15 certification
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Investment Pattern
Two Fund Options
Debt
To earn regular income by investing in high quality Fixed Income
securities
Balanced
To generate Capital appreciation and current income, through a
judicious mix of investments in equities and Fixed securities.
Conservative Long Term approach
No outsourcing of investments
Investment Committee Seven Member team
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Process
Member information to be given with benefit structure
Actuarial estimation of funding rate will be provided by MetLife
Board Resolution for the formation of a trust and complete other
documentation
Application Form to be Completed
Collection of premium
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Details Required to Generate
Quote
Employee Name
Number
Gender
Date of birth
Designation
Salary
Past death experience for 3 years
Definition of gratuity with regards to the specific trust
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PAY AS YOU GO METHOD
Characteristics:
Pay gratuity liability as and when it arises
There is no creation of any reserve or provision in the books of
accounts
Disadvantages:
Not a systematic way of paying off gratuity liability
Overstatement of profits leading to Higher taxes and Dividends
Unexpected deaths/disabilities will impact the P&L to a large extent
Not compliant with AS 15
BACKBACK
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Internal Reserve
Characteristics:
Provision is made in books of accounts
There is a reflection of accrued liability
Profits are not overstated
Disadvantages:
The provision is notional and not actual
Money can get invested in the business
No tax benefit
Creditors have claim to the reserve
Unexpected deaths/disabilities will impact the P&L to a large extent
BACKBACK
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Self Managed Gratuity Fund
Characteristics:
Set up an irrevocable trust
Trustees will invest the funds and make gratuity payments
Tax benefits for the Company ( Claim as business
expenditure)
Trustees will have control over the investments
Investments can be made in accord with Companys risk
appetite.
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Self Managed Gratuity Fund
Disadvantages:
Investment options are limited
Trustees do have a business role to play
Trustees are responsible for administration and investment of funds in addition to their
busy business roles
Liquid funds to be maintained to pay immediate gratuity requirement
Actuarial valuation complexities
Securities will be bought in small amounts which leads to increased
costs
BACKBACK
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Characteristic of a Well Managed
Gratuity Fund
Wider Investment Options
Optimum returns for the investments
Better returns will lead to lesser costs of funding for gratuity liability
Tax benefits for the Company ( Claim as business expenditure)
Pooling of various gratuity funds will reduce the costs
Saves time for Company Officials
Control of funds remain with the trust
Liquidity management is very efficient
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Thank You