Employee Benefits and their important objectives

Employee benefit is different from employee benefit liability insurance ("EBLI"). However, often times, EBLI goes hand in hand with employee benefit, which even though not covered within the realm of employment agreement are still included in the terms of "commercial general liability policy".

The intention of EBLI is to protect the employee whereas the intention of employee benefits is to handle the "humane" parameters of an employee's work life, where they spend a majority part of their life, which starts from the moment they are given ____ until the time when they retire.

The philosophy behind employee benefit is not centered around the idea that, employees have to be "compensated" by providing them with benefits. Rather, the idea of "compensation in the form of damages" to the employees, payable by the employers, when they do a mistake in their enrollment process or do not pursue an "equal treatment" policy when it comes to employee benefits.

EBLI is a preventive mechanism. This means that, employers purchase "insurance packages", so that they are excluded and saved from allegation on misconduct from their end. A range of employment relations suits range from sexual harassment, wrongful discipline, negligent evaluation, discrimination, defamation or emotional stress, breach of employment contract, wrongful termination, failure to promote and failure to hire.

It is important to understand the characteristics of employee benefits. Its characteristics is different from meaning. Employee benefits refer to the beneficial measures that are provided by the management so that its employees develop physical, mental, social and spiritual health & happiness that is commitment for success.

It is to be noted that characteristics or the constituents of benefits include the different forces that act together, that may or may not lead to societal equilibrium that would eventually lead to the creation of a strong or weak value system.

These forces are as follows:

1. Social force;
2. Economic force;
3. Cultural force;
4. Religious force; and
5. Political Influence on "organizational climate".

Often times, there is a confusion between compensation package and employee benefit. However, it is to be clarified that, compensation package and compensation benefit. It is reiterated that, compensation package is a broader subset and employee benefit is a subset of this package.

The following paragraph lists down the different employee benefits and describe their objectives in detail. These are:

a. Group life and health insurance program

The main objective is to retain employees in office. Eventually, this will help in strengthening the work force of an organization, so that they can grow in all aspects. It protects employees that suffer in an organization.

b. Retirement Program

This includes planning for retirement wherein income goals are set for retirement. The two main schemes in India that govern retirement benefits for employees are the pension scheme and the contributory provident fund. The main objective is to :

1. Fix the retirement wage of employees by taking into account life expectancy health and morbidity, labor market conditions, the stage of economic development in a specific country, financial implications and social dimensions;
2. To look after the retired employees once they are not in a position to work, or rather reach an age, wherein the productivity, efficiency and health of an employee begins to decline.

c. Group Life and Health Insurance Program

The aim of this program is to enable employees understand that, group life and insurance program is a cheaper option in comparison to purchasing individually from local insurance agents. Moreover, the insurance rates of a group are lower and since the employer is Government, the administrative costs are subsidized.

d. Vacations and holidays

The objective is to pay the employees even when they are not working, i.e., voting, vacations and holidays.

e. Prepaid legal plan

The objective is to provide services that would relate to the concerns of the employees that are not immediate. These benefits are called as "contingent and deferred benefits". For eg, bankruptcy and employment issue.

f. Dental and optical insurance coverage

The objective is to ensure that employees have a good dental condition and reduce ways to spend money in vision care.

To conclude, employee benefits form an important part of the salary system. Such benefits take care of the present and future needs of the employees. Overall, they raise productivity of employees. Since the presence of these benefits keep employees motivated as they feel relaxed and secure.

Note : This note is a part of the Viral Note Series ("VNS") that is authored by me.