The Continued Relevance Of Employee Benefits In HR Management

Employee morale is a decisive factor in companies. Employee morale, in human resource management is described as the job satisfaction, attitude, and feelings of happiness of a worker in work environment. We are witnessing a dramatic redefinition of the relationship between companies and their employees. Triggered at least in part by the COVID-19 pandemic, some of these shifts in the job market are quite radical and unprecedented – remote/hybrid work arrangements challenging the traditional office concept is an excellent example.

Another major shift that HR departments cannot afford to ignore is the evolution of employee expectations beyond just the basic pay package. If you want to attract top talent these days, you need to offer a compelling bouquet of employee benefits.

When it comes to employee benefits, the Indian regulatory environment has its quirks and nuances. In this article, we will address the central question: are employee benefits really necessary? If yes, what are some must have employee benefits, and why?

What Are Employee Benefits?

Human beings enter employment to fulfill several needs. A central aspect is to secure their basic needs through wages/salary. But they can also have other needs beyond money – health insurance, paid holidays, flexible hours, childcare benefits, housing, transportation are all examples.

Employee benefits include all these tangible or intangible perks given by companies over and above the base salary or wages. Also called ‘benefits in kind’ or ‘fringe benefits’, they play a vital role in the reward management strategy of an organisation.

Reward management or ‘total rewards’ is the set of policies and strategies used by HR departments to provide a fair compensation/remuneration to employees in accordance with their contribution to your organisation.

How Employee Benefits Impact An Organisation

High employee turnover is bad for any organisation – it reduces productivity, affects workplace morale, and increases HR and recruiting costs. Studies dating back to the 1970s have proven that job satisfaction is critical to ensure that an employee does not leave their current position.

In one such study published in the Harvard Business Review, the authors cited employee benefits as a key factor for job satisfaction, along with recognition, achievements, salary, and career growth opportunities. 

A critical aspect of job satisfaction is employee morale and health. If a job is making someone depressed and stressed out, they are more likely to quit, or worse, suffer a burnout. Salary alone cannot improve their situation.

For instance, many Indian workers are forced to travel nearly 120 minutes each day to reach their offices. According to a 2017 study by the University of Cambridge and Vitality Health, such workers are 37% more likely to have financial issues and 33% more likely to suffer depression.

A benefit package that includes either free transportation, accommodation closer to the office, or option for work from home arrangements can help drastically to improve both the health and financial situation of such employees, boosting both productivity and loyalty.

Are Employee Benefits Really Necessary?

In the post-pandemic era, salary has taken a back seat as employees take stock of the larger picture regarding their life and health. The trend of the Great Resignation has already been well-documented, with attrition rates in India staying above 20% since 2020.

If you want to attract the best talent in this era, you need a compelling package that combines a competitive salary with a whole host of employee benefits. A 2022 Indeed survey of jobseekers in India revealed some intriguing insights regarding their expectations from employers:

• Almost 90% wanted an option of hybrid or remote work arrangements at least a few days a week.
• Employee training programmes and other career development opportunities were a priority for 53% of respondents.
• Health insurance, customised loans and financing, partner brand discounts, and paternity/caregiving leave were other benefits that received maximum votes.

The results are quite unambiguous – better work-life balance (through hybrid work), health insurance, career growth, and other perks are almost mandatory if you want to impress jobseekers and improve your current employee turnover figures.

How To Design An Employee Benefits Programme?

When designing a benefits programme in India, you have to keep in mind some ‘must-have employee benefits’. These are statutory benefits you are expected to provide an employer, subjected to either state or national laws. They include:

• Paid maternity leave
• Paid sick leave
• Paid time off, at least 10 – 15 days per year
• Contributions to Employee Provident Fund, Pensions Scheme, and a Linked Insurance Scheme

These benefits should form the foundation of your benefits package. But when it comes to providing additional benefits, there are several critical factors to be taken into consideration:

• Employee Expectations: What are the most in-demand benefits for your employees and prospective jobseekers in various positions?
• Competitor Survey: What benefits are other similar sized businesses in your segment providing to their employees?
• Tax Implications: Can you get tax deductions on any of the proposed benefits? Group health insurance plans are a good example of a fringe benefit with tax deductions.

The abolition of the fringe benefits tax in 2009 gave a major boost to employee benefits in India. Since you no longer have to pay 30% tax on all benefits awarded to your employees, budgeting for employee benefits has become much easier.

At the very least, your budget for employee benefits should be 20% the size of your overall staffing budget. If you want to remain competitive, you may have to increase it to 50%. Regardless of the size of your budget, the ideal benefits package is one that provides at least some tangible improvements to the quality of life and overall health of your employees.