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• Flexible benefits plans are gaining popularity in India as the typical employee demographic evolves.
• Leased company cars are popular, with tax incentives available.
• Training and education have become a key benefit provided by Indian employers.
• End-of-service perks are generous, including provident funds, gratuity,and superannuation/pension plans.
• Health insurance is often extended to a worker’s spouse and children, as well as to dependent adults.
As India’s working population gets younger, flexible benefits and leased cars are among the benefits gaining popularity, says Jennifer Paterson
With the average employee age falling and a rapid move away from a cash-only culture, staff reward in India is changing.
Flexible benefits plans are gaining popularity. Sandeep Chaudhary, regional practice leader for compensation consulting across Asia Pacific at Aon Hewitt, says: “We are having a lot of conversations with large employers that really want to get into flex.”
The reasons for this are threefold. Firstly, salaries are rising rapidly in India; as is the cost of providing benefits.†
Flex is seen as a way of capping that growth. Secondly, the perceived value of traditional perks is diminishing, so employers are keen to offer more flexible options. Thirdly, the demographics in India’s workplaces are changing, and the country is keen to update its benefits.
Chaudhary says: “Most organisations have an average employee age between 27 and 34, but their benefits were created almost 20 years ago, when the average age was early or mid-40s. A lot has changed in the last year and a half. The prosperity that has come into the young Indian’s life has changed expectations of how they want to be compensated.”
Company cars are still offered by many older organisations, but newer employers are moving towards leased cars, which offer tax incentives for the employee. “Organisations are providing these benefits as an effective way to make the compensation structure more tax-efficient,” says Chaudhary.
Workplace training and education are also gaining popularity, especially in the technology sector, which has a high percentage of young staff. Options include education within the workplace or a subsidised loan towards courses.
Generous end-of-service benefits
When it comes to retirement, India offers generous end-of-service benefits. All employers with more than 20 staff have to provide a provident fund, mandated by the Employees’ Provident Fund Organisation. James Berkeley, director at Berkeley Burke International, says: “It is similar to the central provident fund in Singapore, a state-driven retirement fund that is established to pay a benefit upon retirement.”
Chaudhary adds: “Basic salary is 20-40% of the total fixed compensation. The provident fund is calculated as a percentage of that. There is a 12% employee contribution and a 12% employer contribution.”
By law, employers must provide a gratuity payment at retirement for staff with more than five years’ service, but some will do so after three years. This equates to 15 days of basic salary for every completed year of service, up to a cap of one million rupees (about £12,600), tax-free.
Superannuation or pension funds are typically found in older organisations. These are structured like a defined contribution plan, providing a pension and a lump sum at retirement, which typically takes place between the ages of 55 and 65.
In India, most staff have access to basic health insurance through their employer. Eligibility for healthcare schemes is often extended to spouses and children, as well as dependent adults, such as elderly parents.
Read also Benefits in Singapore†
Read more about international flexible benefits