Benefits and Services Chapter 13 Md. Al-Amin (Mli)

Basic Factors Employee compensation Direct financial payments All forms of pay or rewards going to employees and arising from their employment. Direct financial payments Pay in the form of wages, salaries, incentives, commissions, and bonuses. Pay for performance programmes Indirect financial payments Pay in the form of financial benefits such as insurance.

Benefits Benefits Indirect financial and nonfinancial payments employees receive for continuing their employment with the company.

The Benefits Picture Today Most full-time employees in Bangladesh receive benefits. Benefit is a major expense (about one-third of wages and salaries) for employers.

Private-Sector Employer Compensation Costs

Types of Employee Benefits Supplementary benefits Insurance benefits Retirement benefits Services

Supplementary Benefits Benefits for time not worked The most costly benefit Large amount of time off that most employees receive

Supplementary Benefits (cont.) Vacations and holidays Number of paid vacation days varies by employer. Number of holidays varies by employer. Premium pay for work on holidays. 10 days in Japan, 25 days in Sweden, 25 in France 33 in Denmark. What about your research organization?

Supplementary Benefits (cont.) Sick leave Provides pay to an employee when he or she is out of work because of illness. Usually up to 12 days per year Some people misuse of sick leave Research reveals that illness accounted for only 45% on unscheduled sick absences, family issues (27%), personal needs (13%), and a mentality of entitlement (9%). Research also reveals that the average cost of absenteeism per employee per year was $789

Supplementary Benefits (cont.) Leave Cost Reduction Tactics Repurchase unused sick leave at the end of the year by paying their employees a sum for each sick leave day not used Holding monthly lotteries in which employees with perfect attendance are eligible for a cash prize

Supplementary Benefits (cont.) Parental leave Parental leave is granted for family purpose Women workers are eligible for parental leave during the period of pregnancy Furthermore, women and men who have single-parent households often tend to enjoy the parental benefit Up to 12 weeks of unpaid leave within a one-year period Employees must take unused paid leave first. Employees on leave retain their health benefits. Employees have the right to return to their job or equivalent position.

Supplementary Benefits (cont.) Severance pay A one-time payment when terminating an employee. Reasons for granting severance pay: Acts as a humanitarian gesture and good public relations. Mirrors employee’s two week quit notice. Avoids litigation from disgruntled former employees.

Insurance Benefits Workers’ compensation Provides income and medical benefits to work-related accident victims or their dependents, regardless of fault. Death or disability: a cash benefit based on earnings per week of employment. Specific loss injuries: statutory list of losses

Insurance Benefits Controlling worker compensation costs Screen out accident-prone workers. Train up people. Make the workplace safer. Thoroughly investigate accident claims.

Insurance Benefits (cont.) Hospitalization, health, and disability insurance Health insurance looms large in many people’s choice of employer, because it is so expensive. 75% of the employees in one recent survey called it their most important benefit Provide for loss of income protection and group-rate coverage of basic and major medical expenses for off-the-job accidents and illnesses. Accidental death and dismemberment Disability insurance

Retirement Benefits (cont.) Pension plans – They are financial programs that provide income to individual employees in their retirement Types Contributory: employees contribute to the plan. Noncontributory plans: employer makes all contributions to the plan. Qualified plans: plans that meet requirements for tax benefits for employer contributions. Nonqualified plans: plans not meeting requirements for favorable tax treatment.

Personal Services Credit unions Separate businesses established with the employer’s assistance to help employees with their borrowing and saving needs. Employees usually become a member by buying a share of the trade union’s stock for a small fee Members can then deposit savings that accurate interest at a rate determined by the credit union’s directors Loan eligibility and loan’s rate of interest are usually more favorable than banks and financial companies

Personal Services Employee assistance programs (EAPs) Provide counseling and advisory services: Personal legal and financial services Child and elder care referrals Adoption assistance Mental health counseling Life event planning

Family-Friendly (Work-Life) Benefits Subsidized Child Care Most working people make private provisions to take care of their children Employers who want to reduce the distraction associated with finding reliable child care can help various ways Company sponsored and subsidized day care facilities can attract employees, reduce absenteeism, reduce turnover rate and increase productivity of the employees.

Family-Friendly (Work-Life) Benefits Sick Child benefits What would you do when your children are sick and you need to get to work? You are less likely to turn up. If you turn up, you performance level might not meet the requirements Study shows that unexpected absences climbed to about 2.4% and children sickness is one of the major reasons Today, more organizations are offering sick children benefits along with regular children benefits

Family-Friendly (Work-Life) Benefits Elder Care The responsibility for caring an aging relative can effect employees’ performance at work Study shows to care for an older relative, 64% of the employees took sick leave or vacation time, 33% decreased work hours, 22% took leaves of absence, 22% changed their job status from full- to part-time, 16% quit their jobs and 13% retired jobs So, it is strategic imperative that employers provide elder care services

Special Benefits Provident Fund (PF) This is a special retirement saving scheme sponsored by the employer which allows an employee to save certain percentage (5%-10%) out of their basic income every month. The saving will be matched by the employer with 100% contribution. The total savings will be due to the employee upon his/her retirement or resignation or termination. ** Sometimes employer doesn’t pay his or her portion of PF contribution during termination, only employee’s contribution is paid back. For instance, the employee contribution is TK 500 per month, the employer would also contribute TK 500 per month. The total contribution to PF would be: (Employee’s TK 500+ Employer’s TK 500)= Contribution to PF is TK 1,000

Provident Fund (cont’d) PF Calculation Total Salary TK. 70,000 Basic TK 40,000 House Rent TK 20,000 Telephone TK 2,000 Medical TK 5,000 Miscellaneous TK 3,000 Provident Fund @ 5% of Basic Employee’s contribution (5% of 40,000) = TK 2,000 Employer’s contribution (5% of 40,000) = TK 2,000 Total contribution to PF per month = Tk 4,000 Total contribution to PF (TK. 4000*12) = Tk 48,000

Provident Fund (cont’d) Assuming that the employee gets an increment of 10% every year over his/her basic salary. Year Basic Salary (TK.) Employee’s Contribution (5%) (TK) Employer’s Contribution (5%) PF/ Month PF / 1st 40,000 2000 2000+2000=4000 12*4000= 48,000 2nd (10 increase) 44,000 2200 2200+2200= 4400 4400*12= 52800 3rd (10% increase) 48,400 2420 2420+2420= 4840 4840*12= 58080

Provident Fund (cont’d) If you have served for an unbroken period with clean record, then you will get employer’s contribution. For example, if you have served for more tan or equal to 5 years, you are entitled for the entire amount of employer’s contribution. Usually, there is a schedule that organization follows. It is given below: Vested Schedule: Q: After 3rd year, the employee decides to quit. How much PF s/he will get? No. of years served Proportion of employer’s contribution 5 years and above 100% match 4 years 80% match 3 years 60% match 2 years 20% match Less than 2 years 0% match

Provident Fund (cont’d) Year Basic Salary (TK) Employee’s Contribution (5%) (TK) Total (TK) Employer’s Contribution (5%) (TK) Employer’s Contribution Total (TK) 1st 40,000 2000 2000*2= 24,000 2nd (10 increase) 44,000 2200 2200*12= 26400 3rd (10% increase) 48,400 2420 2420*12= 29040 Total 79440 Now, as schedule, for PF calculation after 3rd year, employee would get his entire contribution and employer will pay 60%. Hence, PF would be: TK 79,440+ (60% of TK 79,440) = Tk. 127,104 Employers usually put the money in the banks and get returns. For example, a big company like Beximco can pool the money received from employees for PF and invest/ save that in the banks to earn returns.

Special Benefits: Gratuity Gratuity: It is a onetime lump-sump payment given to the employees on the last day of their employment as a gift of their valuable service to the organization. Usually, employees are eligible between 5 to 10 years of continuous employment. It is one of the retirement benefits offered by the employer to the employee upon leaving his/her job. If an employee quits after 10 years: Gratuity amount= (5*5th year’s basic salary) + (5*10th year’s basic salary) If an employee quits after 8 years: Gratuity amount = (5*5th year’s basic salary) + (3*8th year’s basic salary) If an employee quits after 20 years: Gratuity amount: (5*5th year’s basic salary) + (5*20th year’s basic salary) ** If the employee leaves before 5 years of service, he is not entitled for gratuity.

Thank you!