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EMPLOYEE VALUE ADDITION

INITIATIVE
COMPENSATION & OTHER BENEFITS DESIGNED TO
OFFER TAX BENEFITS FOR EMPLOYEES
What is Employee Value Addition

• EVA describes the mix of characteristics, benefits, and ways of working in an

organization.

• It is the deal struck between an organization and employee in return for their

contribution and performance. This ‘People Deal’ characterizes an employer and

differentiates it from its competition.


Why A Strong Employee Value Addition
(EVA) Is So Important?
At the core of a successful employer is a clear employee value Addition or EVA .

To be truly successful, an employer needs to reflect who you are as an organization


and be incorporated into every aspect of the employee experience at every level .
And this is why EVAs are so important.

EVA serves to define what the organization would most like to be associated with
as an employer and defines the “give and get” of the employment deal

(the value that employees are expected to contribute with the value ( monetary &
non monetary) that they can expect in return).
Employees To Structure Their Pay To Avail
Tax Benefits

• Flexible Plan is recommended to be introduced for people of Salary above

20000 Rps Per month

• Retaining the Basic and Fixed component

• Flexible benefit plans could be offered asking the employees to allocate amounts under

various segments that they are eligible for as per their job grades.

• Bills accordingly to be submitted for reimbursements & LTA


Recommended Compensation Structuring - Fixed Plan
Entitlement Details / Range

a. Provident Fund
All Grades Or
OR 12% contribution by Employees & Like wise by the
M and . Up to to 15K Basic
b. National Pension Employer
PM
Scheme* ( Slide 10)
Fixed 15000 PA - Applicable only when bills are
Medical Allowance All Grades
submitted

INR 1200 PA Per child ( up to 2 Children )


Education Allowance All Grades INR 3600 PA Per child (Up to 2 Children if they are in a
hostel )

Conveyance Allowance All Grades Up to INR 1600 Per Month

Professional Tax All Grades As Applicable

Food Coupon ( Sodexo/


E1 & Above Up to 2200 Per Month
Ticket )

Gift Voucher All Grades Up to INR 5000 per year is exempted


Recommended Flexible Plan - Grade Wise
LTA - Section
Grade Name Grade Band Range
Directors / CEO/ VPs / Heads 60000 & < INR Up to 40000 PA

M1 A/B 50001-59999 INR Up to 32000 PA

M2 A/B 35000-50000 INR Up to 25000 PA

M3 A/B 25000-34999 INR Up to 18000 PA

E1 A/B 15025-24999 INR Up to 12000 PA

E2 12000-14999
INR Up to 8000 PA
E3 6550-11999

S1 5000 - 6500
INR Up to 4000 PA
S2 > 4999
Current Block - 2014 – 2017
It can be claimed only once in 2 Years .
Allocation is available every year though Tax claim can be submitted only once in 2Years
Benefits Plan
Mobile Phone and Internet Bill reimbursement In Addition to CTC
Telephone / Mobile Allowance
Grade Name Grade Band Range
Directors / CEO/ VPs / Heads 60000 & < INR 3000 PM
M1 A/B 50001-59999 INR 1500 PM
M2 A/B 35000-50000 INR 1500 PM
M3 A/B 25000-34999 INR 1500 PM
E1 A/B 15025-24999 INR 1000 PM

Internet Allowance
Grade Name Grade Band Range
Directors / CEO/ VPs / Heads 60000 & < INR 2000 PM
M1 A/B 50001-59999 INR 1000 PM
M2 A/B 35000-50000 INR 1000 PM
M3 A/B 25000-34999 INR 1000 PM

Company car / Car maintenance allowance


Grade Name Grade Band Range
Directors / CEO/ VPs / Heads 60000 & < INR 3000 PM
M1 A/B 50001-59999 INR 1500 PM
M2 A/B 35000-50000 INR 1500 PM
Flat Provided By Employer

An employer-provided accommodation takes away the hassle of finding a place,


especially in a new town, but it does add up to your taxable perks.
Its perquisite value varies depending on whether the flat is owned by the employer,
has been taken on rent for you, or hotel accommodation has been made available. It
will not exceed 24% of your salary when accommodation is provided in a hotel, and
15% of salary in other cases.

This will be reduced by the amount recovered from you, if any. Where the employer
provides furnished accommodation, another 10% of the cost of furnishing (if owned by
employer) or actual hire charges payable (if leased by employer) is added to the perk
value each year.

Hotel accommodation provided by the employer for the first 15 days when you move
to a new town is not a taxable perquisite
Compensation Restructuring Pay Grade Samples
• Standardizing Basic Pay for all the New Joinees at 50 %

• HRA being allocated as per Metro and Non metro regions of 50% and 40 % of the
basic salary respectively

• The Salary samples as attached below contain break up for employees who have
taken up Food Coupons for a certain month alternatively for employees who don’t
avail the benefit / for the employees other than that month what would their take
home be.

• The Salary Samples have been calculated for 3 Levels

• M1/ M2

• M3 &

• E2
NPS
Offered By Employers In Partnership With The Employees

• Benefits of investing in a Pension Fund

• As an initiative to promote NPS for the employees working with Corporate, PFRDA
launched the NPS Corporate Sector Model in December 2011.

• It facilitates employees working with various organizations to on boards NPS within


in the purview of their employer – employee relationship.

• Unlike EPF where Employer and Employee makes equal contribution towards
employee’s EPF account, NPS offers flexibility as mentioned below

• Equal contribution from Corporate and Employee

• Un – equal contribution from Corporate and Employee


Value Proposition for Corporate
Employees
Corporate can join NPS free of cost
No cost of setup or maintenance of Self Administered Pension Funds
No need to form a Trust
Simple procedure to add or remove employees at any point of time
No account related obligation
Corporate acts merely as facilitator
The Account maintenance responsibility / obligation remains with the employees only
Flexibilities to Corporate
NPS can be rolled out for all on voluntary basis / for select group of employees
Corporate can select a Pension Fund Manager, Asset Allocation and Investment option on behalf of
employees
Corporate can fix the percentage / frequency of contribution
• The Corporate employer registered with the NPS, can claim tax benefits for the amount contributed
towards pension of employees. From 1st April, 2012 up to 10% of the salary (basic and dearness
allowance) of employers Contribution can be deducted as ‘Business Expense’
• The Corporate can save on their expenses incurred on formation of trust, management of funds and
record keeping etc
• Corporate can act as a facilitator to extend benefits of NPS to its employees
• Corporate may select the PF for its employees or leave the option to employees for selecting PF
for themselves.
• Platform to co - contribute for employees’ pension
Value Proposition for Employees
• For Employees

– Offers platform to save tax beyond the 80CCE (1.5L) limit

– Cost effective investment option

– Offers platform for triple tax benefits - Employee’s as well as Employer’s


contribution towards the NPS account of an employee is eligible for tax
exemption as per the Income Tax Act, 1961 as amended from time to time.

– Additionally offers Tier II account which is a voluntary savings facility with


anytime liquidity/withdrawal option
Options Available For EPF & NPS

Making EPF Mandate for all Employees ofkajsdlk.....

Adding LTA, Medical and Food Coupons allowance etc… grade wise as a part of Special allowance
1 Optional NPS ( No Employer Contribution )
asldkjasldkj.......providing Tie up with Bank/s to ease the process of account opening for NPS ( To
avail tax additional benefit )

Making EPF Mandate for Employees drawing up to 40000 Per month


Employee will continue with EPF with an option of opting for NPS with "No Employeer"
contribution ( To avail tax additional benefits ) when the salary increases above 40000/- PM
2
Adding LTA, Medical and Food Coupons etc…. allowance grade wise as a part of Special allowance

For New Employees entering the organization, whose Per Month earning is above 40000 has a
choice of opting for Either EPF or NPS ( choice of any one Employer contribution)
Options Available For EPF & NPS Conti....

Making PF Mandate for All the Employees of ......... ( across Levels)


Adding LTA, Medical and Food Coupons allowance etc…. grade wise as a part of Special allowance
Additional Offering NPS for employees drawing above 50000 /- with employer contribution varying
grade wise( in addition to EPF contribution by employer )
3
For other employees drawing below 50000/- PM , optional NPS with 'No Employer' Contribution.
Kasdlkjasd. providing Tie up with Bank/s to ease the process of account opening for NPS ( To avail tax
additional benefit )

NPS Contribution Details Grade wise as Per Industry Standards


Percentage of Contribution
Grade Band
Employee Employer
8%&<
70000 & < 8 % of Basic
( of basic )
60000 - 69999 7%&< 7 % of Basic
50001 - 59999 6%&< 6 % of Basic
Survey Details & Other Benefits
References
• http://www.npstrust.org.in/images/FAQCopor
ate.pdf
• http://www.aon.com/india