Insurance, Compliance & Benefits-India Chapter.

Hey Everyone!

I wanted to focus on the compliances and insurance regulations along with benefits practice in this article.

This will focus on practices by organizations in India.

Mandatory employee benefits in India include:

1. The Employees’ State Insurance Scheme (ESIC)
2. Employee provident fund (P. F) which includes the Employees’ Pension Fund and Employees’ Deposit Linked Insurance.
3. Statutory leaves
4. Gratuity
5. Maternity Leave.
6. Statutory Paid Leave

Supplementary employee benefits include:

Medical, accident, life, retirement, business travel insurance, and EAP.

Common employee perks offered include:

vehicle?or?transport?allowance,?meal vouchers?or?subsidized cafeteria, and?reimbursement of internet and mobile phone charges - with recent Pandemic structuring became more common.

Following the above, we take a deeper dive now:

Mandatory Employee Benefits in India

• Employees’ Provident Fund, Employees’ Pension Scheme, and Employees’ Deposit Linked Insurance?come under the purview of Employees’ Provident Funds and Miscellaneous Provisions Acts, 1952. Matching employer and employee contributions fund these.
• Employee State Insurance Scheme?is mandatory for employees earning up to INR 21,000 per month (or INR 25,000 p.m. for employees with disabilities). This is a comprehensive benefits scheme covering medical costs for the family, including parents and dependent siblings, disability compensation, short-term disability?(STD) and Long-term disability (LTD) benefits, widow’s and children’s pension, and other benefits. Employer and employee contributions and Government contributions fund it.
• Each State’s Shops & Establishments Act regulated statutory leaves?or by the Factories Act (depending on which Act the company has registered under). These cover sick leave, casual leave, privilege/earned leave, national holidays, State Founding Day, and other leaves such as bereavement leave.
• Gratuity?is a gratuitous payment because of an employee after 4 years, 8 months of continuous years of service, on termination, resignation, or retirement, or earlier in case of death or Permanent Total Disability (PTD).
• Paid maternity leave?of 26 weeks is mandatory. In addition, the Maternity Benefits (Amendment) Act, 2017, requires employers having over 50 employees to give a paid creche for children up to the age of 6 years.
• Labour laws?offer for compensatory days off for working on holidays and overtime pay off at least two (2) times wages.

Supplementary Benefits in India

Employee benefits in India include medical, accidental death & disability, term life, business travel accident insurance, and a pension.

Group Medical Insurance:?provides hospitalization coverage with a waiver for waiting periods and pre-existing diseases exclusions, maternity benefits, newborn baby cover, and add-on hospitalization benefits such as new types of treatment for cancer, cyber-knife or robotic treatment, and infertility or fertility treatment. The extended group medical plan includes dependent spouse/domestic partner, children, parents or in-laws, and sometimes dependent siblings. Most employers fund employee, spouse, and child/ren or sibling coverage, but may need full or partial employee contribution towards parental coverage.

A typical Group Medical plan covers:

• A family floater Sum Insured, an annual aggregate limit per family
• In-patient hospitalization on a 24-hour basis for any disease/illness/accident, except excluded treatment and Day Care Procedures across India
• Waive a 9-month waiting period for maternity; Maternity coverage with a defined limit for a normal and C-section delivery.
• Waiver of 9-month waiting period for newborn baby
• Waiver of pre-existing diseases exclusion clause and other waiting periods
• Room rent subject to a defined limit
• Dental treatment arising from injury which requires hospitalization
• Ambulance services
• 30 days pre-and 60 days post-hospitalization expenses incurred on an outpatient basis
• Psychiatric treatment on an in-patient basis

Add-on “New Age” hospitalization covers can include oral chemotherapy, Avastin/Lucentis/margin injections, Robotic surgery, Bariatric surgery, and Lasik surgery, among many others.

Employers with Diversity & Inclusion goals can have a domestic partner included in the plan. They can include benefits such as surrogate coverage, fertility/infertility treatment, gender reassignment surgery, and HIV/AIDS treatment.

Less than 10 per cent of employers offer outpatient, dental, and vision benefits.

Outpatient benefits can include consultations, prescription medicines, diagnostics, vaccinations for adults and children, annual health check-ups, physiotherapy, and outpatient mental health counselling. This benefit can be customized.

Dental benefits usually include filling, scaling, and root canal. This benefit can be customized and expanded to include preventative as well as orthodontic treatment.

Vision benefits include examination by an ophthalmologist and the cost of either spectacle lenses or contact lenses. Frames are not covered. A few leading employers also cover corrective Lasik surgery.

Group Personal Accident Insurance

Over 80 per cent of employers provide a fully funded group personal accident policy. The plan covers accidental death, permanent total disability (TPD), permanent partial disability (PPD), double dismemberment (DM), temporary total disability (TTD: weekly partial income replacement up to 104 weeks), accident-related medical expenses, home and vehicle modification, child education expenses, funeral expenses, and other benefits.

This benefit is offered either as a fixed amount, on a graded basis, or as a multiple of salary, usually 2x to 3x annual salary.

Group Term Life Insurance

Over 80 per cent of employers offer a fully-funded group term life policy. They provide this benefit either as a fixed amount, on a graded basis, or as a multiple of salary, usually 2x to 3x annual salary. Some add Critical Illness (CI) as a rider. This benefit can be given either on an Accelerated basis which reduces the Sum Assured (SA) available for the death benefit or on an additional basis as a separate limit over the GTL SA.

Pensions/Retirement

The Pension system in India has two pillars.

The first pillar is the Employees’ Pension Fund (1st Pillar), which is funded through the mandatory employer contribution to the Employees’ Provident Fund: 8.33 per cent (INR 1,249.50) of the 12 per cent employer contribution, subject to a Basic salary cap of INR 15,000 per month, is allocated to the Employees’ Pension and the remainder to the Employees’ Provident Fund.

The second pillar is purely voluntary and is comprised of Superannuation Funds, which the employer sets up through the establishment of a Trust with Trust Deed and Rules. The second pillar also includes the National Pension Scheme, which requires an employer to set up a Tier 1 account under NPS but does not require Trust formation to facilitate employer and employee contributions. An employer can set up either or both.

Superannuation funds usually restrict membership to senior employees, but some companies may provide this benefit for other grades of staff depending on defined factors. Employers may contribute up to 15% of Basic Salary + Dearness Allowance to a Superannuation Fund. Employer contribution above INR 150,000 is taxable to the employee. Employees typically do not contribute to Superannuation. Due to the ease of participating in the National Pension Scheme and the better tax treatment, this new program has become the preferred way for employers to facilitate pension savings.

The National Pension Scheme (NPS) is a voluntary, portable scheme that permits employees to contribute up to 10 per cent of their monthly Basic Salary to the NPS Tier 1 account, with no cap. Employee contributions are tax-exempt at the time of contribution, on returns, and 60% of withdrawal at retirement; early withdrawals are not permitted with some exceptions. Employees may contribute another INR 50,000 per month towards the Tier 1 account and claim an additional exemption under Section 80 C of the Income Tax Act. However, employee contributions to their individual Tier 2 accounts, which permit discretionary withdrawals, are not tax-exempt.

Business Travel Accident

Group Business Travel Accident policies provide accidental medical, death, personal liability, and travel inconvenience benefits to employees travelling on business. A Certificates of Insurance is issued to each employee for each trip, the duration of which must not exceed 180 days. These policies are a must to obtain a visa from some embassies and are one means of carrying out the duty of care obligations towards employees.

Employee Perks

Employers offer various fringe employee benefits in India to the staff since the labour market is quite competitive.

The IT industry, Banking, Financial Services, and Consulting, where talent competition can be fierce, tend to constantly innovate by upping the ante on perks.

We head the list below with some of the most common perks:

Subsidized transportation?is offered in cities that now have better connectivity with the new metros; before the metro system having been built, employers had to provide cabs to bring employees to work and take them back home. Last-mile connectivity is still a problem in most cities, and employers in the BPO and tech sectors usually provide some transport, especially for women working the night shift.

They provide company cars?to employees by about two-thirds of employers. This benefit is usually offered to senior management or employees in a sales role. It is also common to provide a paid chauffeur.

Subsidized cafeterias?have long been a part of employers’ offerings. Subsidized cafeterias and free snacks ensure employees have everything they need to get through long workdays without worrying about at least one meal a day.?This benefit is common with larger employers and particularly in industrial facilities and BPOs and tech companies. They provide food at a subsidized rate and can include two meals or a meal and a snack. Employers may also offer meal vouchers instead of a canteen.

Meal Allowance?is a typical benefit due to its tax advantages to the employee. The current tax-free limit is up to INR 50 per day if the employee chooses to continue with allowances as per the old tax regime. No?meal allowance?is available if an employee chooses a flat deduction under the new tax regime. Where an employee can provide a subsidized cafeteria, meal vouchers may be less common.

Education Assistance?Partial or full education reimbursement after completing a course/program, especially if it is related to one’s work, is provided by some employers.

Internet and Mobile Phone Reimbursement?Tech and other white-collar employees may be offered a specified internet or mobile phone reimbursement if they work from home or use their device for professional calls. About two-thirds of employers provide mobile connections, and about half pay for a handset.

Voluntary Benefits?Large and mid-sized employers will often provide employees with a range of voluntary insurance benefits such as health, life, accident, or homeowner's insurance that can be provided at rates negotiated by the employer.

Flexible Benefits?Employees can select several types of benefits from a menu. About 29% of employers offer modular flex or flexible benefits to accommodate employees’ need for individualized benefits.

Marketplace?Employers are providing online marketplaces which offer discounted products and services to employees. These can be part of a flexible benefits program or can be offered on a stand-alone basis.

Loans?About 20% of employers offer loans for housing, automobile purchase, education, marriage, medical expenses, and other necessities. However, changes in tax structure and easier market access to loans may make these less attractive.

Recognition & Awards?Most employers offer rewards and recognition programs to recognize star performers.

Service Awards?Employers offer jubilee awards on designated tenure anniversaries and upon retirement.

Company credit cards?Corporate credit cards may be offered to senior management, especially those who travel extensively on business.

Well-being?Wellness encompasses many support systems provided by the employer. The list is continually expanding to include:

• Mental Health Support
• Financial Literacy
• Spiritual Growth
• On-site health check-ups and vaccination camps?are typical among over 50% of our clients.
• Health coaches?for high-risk employees and family members (e.g., remind them to take medicines or exercise or stick to a diet) are critical to the success of wellness initiatives.
• Preventative health programs?have become more common, with more employers providing on-site annual flu vaccinations and vaccination coverage for children. Around Women’s Day, many employers organize programs on cervical cancer, including discounts on cervical cancer vaccinations.?Healthy Mother/Pregnancy Programs?are offered to support mothers-to-be in maintaining good health throughout their pregnancy and be better prepared to choose a natural delivery over a scheduled Caesarian delivery, which can lead to more complications.
• Sleeping and meditation rooms, desk-side neck, and shoulder massage?to support employees in getting needed rest.
• Recreational areas?within the office/campus–indoor and outdoor sports facilities, including a gym, computer gaming rooms, table tennis, pool/billiards–are standard offerings.
• Subsidized gym membership?is aligned with wellness goals. New national fitness chains have emerged all over the country. They provide electronic ID cards that track attendance; thus, employers can easily track utilization to see whether their benefit is being used.
• EAPs?have been in the market for many years. Both MNC and Indian EAP vendors provide a wide range of services through personal consultations and online modes. Employers consider it essential to support their employees’ access to mental and emotional health programs.
• Telemedicine?The pandemic has forced most employers to consider offering telemedicine, as employees wish to avoid going to hospitals or other healthcare providers.

Fun Activities–Discount movie tickets, shopping vouchers, and dining cards keep employees engaged outside working hours. If those aren’t enough, special screenings of Hollywood and Bollywood movies, theme days, rock band performances, and team outings to major sports events all add excitement to an employee’s life.

Various in-house clubs–Includes LGBTQ+ clubs and opportunities to engage in hobbies during working hours at the office, allowing employees to pursue their passions and other life purposes.?The employee is seen as a whole person with multiple interests whose pursuits nourish her soul and enable her to devote herself to her work fully.

Additional paid leaves–For birthdays, anniversaries, and other special days gifts such as paid dinner are seen as a “best in class” practice. Bereavement leave can also be included.

Parental Leave–Outside of mandatory Maternity Leave, parental leave is not prevalent, but some leading employers provide up to 6 months of parental leave. A Paternity Benefits Bill, 2017, proposes to offer 15 days of paternity leave. Close to 50% of organizations offer some paternity leave.

Family Care Leave–About 29% of employers provide paid family care leave; 43 provide unpaid leave; and 29% provide a combination of paid and unpaid leaves (Source: Mercer Global Parent Leave India 2018)

Additional paid leaves?– For birthdays, anniversaries, and other special days with gifts such as paid dinner thrown in are seen as a “best in class” practice.

Housing?Senior executives may be given paid housing, especially in major metros like Mumbai, where housing is scarce and expensive.

Relocation Allowance?The cost of moving household goods, train or airfare for the employee and family, and temporary stay in a hotel are reimbursed up to a specified amount

Parent Day Care?Leading employers offer parent daycare or home visits by health care workers to support parents who need medical attention.

Various in-house clubs, including LGBTQ+ clubs, and opportunities to engage in hobbies during working hours at the office allow employees to pursue their passions.

In-house crèche?for children up to age 6 years is mandatory under the Maternity Benefits (Amendment) Act and state-level guidelines about it. The Paternity Benefits Bill proposes the same benefit for working fathers. Leading employers will probably make this facility (either on-site or off-site) available to both female and male staff, even if the Paternity Bill is not enacted. Doing so will tick off the statutory compliance box and the “best in class” employer box. It will also be non-discriminatory and nudge equality in parenting responsibilities.

Retiree health insurance policy, paid for by the employee, is valued by the older population because obtaining comprehensive coverage that includes pre-existing conditions post-middle-age is challenging.

Surrogacy and adoption benefits/infertility counselling?are becoming more important to employees who have postponed having children in part to focus on their careers. These benefits are increasingly being offered by leading employers who offer these benefits at the Corporate Office level.

Work from Home?COVID-19 has accelerated the option of telecommuting or working from home. Employers provide various WFH enablers such as Internet reimbursement, office desks and chairs, occasional pick-me-up gift hampers, ergonomics consultations, and other benefits.

Flexible working arrangements: working hours, place of work, type of work, and intensity (how much work is to be done) are all new experiments to accommodate a workforce that wants and needs the flexibility to fulfil other responsibilities, such as child and parental care.

The trend is for employers to consider every request from employees as a potential opportunity to stand out as a market leader by offering innovative benefits. They are more willing to invest time with their consultant to understand whether and how a particular new benefit could be offered.

Thank you for the Read.