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WEEK 11 : Benefits and Services

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Students who successfully complete this top will be able to:

  1. Explain the types of Employee Benefits and categories of Fringe Benefits.
  2. Discuss on the retirement benefits and insurance benefits.
  3. Outline the main employees’ services benefits.
  4. Discuss on the employees’ services benefits and flexible benefit programs.

The term ‘benefits’ refers to the extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary. Many years ago, benefits and services were labelled ‘fringe’ benefits because they were relatively insignificant or fringe components of compensation. However, the situation now is different, as these have, more or less, become important components of a comprehensive compensation package offered by employers to employees. The main features of Employees Benefits and services, as they stand today, may be stated thus:

  1. They are supplementary forms of compensation.
  2. They are paid to all employees based on their membership in the organisation.
  3. They are indirect compensation because they are usually extended as a condition of
    employment and are not directly related to performance.
    Need for Employees Benefit and Services
    Most organisations in India have been extending fringe Employees Benefits to their employees, year after year, due to the following reasons:
  4. Employee demands: Employees demand more and varied types of fringe benefits rather than pay hike because of reduction in the tax burden on the part of employees and in view of the galloping price index and cost of living.
  5. Trade union demands: Trade unions compete with each other for getting more and newer varieties of fringe benefits to their members. If one union succeeds in getting one benefit, the other union persuades management to provide a new one. Thus, the competition among trade unions within an organisation results in more and varied benefits.
  6. Employer’s preference: Employers also prefer fringe benefits to pay-hike, as fringe benefits motivate employees to give their best to the organisation. It improves morale and works as an effective advertisement.
  7. As a social security: Social security is a security that society furnishes through appropriate organisation against certain risks to which its members are exposed. These risks are contingencies of life like accidents and occupational diseases. The employer has to provide various benefits like safety measures, compensation in case of involvement of workers in accidents, medical facilities, etc., with a view to providing security to his employees against various contingencies.
  8. To improve human relations: Human relations are maintained when the employees are satisfied economically, socially and psychologically. Fringe benefits satisfy the worker’s economic, social and psychological needs. Consumer stores, credit facilities, canteen, recreational facilities, etc., satisfy the worker’s social needs, whereas retirement benefits satisfy some of the psychological problems about the post-retirement life. However, most of the benefits minimise economic problems of the employee.
    Types of Employees Benefits
    The fringe benefits offered by various organisations in India may be broadly classified into different categories. These are discussed below:
  9. Payment for time is not worked: This category includes (a) hours of work (b) paid holidays, (c) shift premium, (d) holiday pay and (e) paid vacation.
  10. Employee security: Physical and job security to the employee should also be provided with a view to ensuring security to the employee and his family members. When the employee’s services get confirmed, his job becomes secure. The Industrial Disputes Act, 1947, provides for the payment of compensation in case of lay off and retrenchment this provides income security to the employee.
  11. Safety and health: Employee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect the worker’s productive capacity. In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to providing safe working environment.
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  12. Workmen’s compensation: In addition to safety and health measures, provision for the payment of compensation has also been made under Workmen’s Compensation Act, 1923. The Act is intended to meet the contingency of invalidity and death of a worker due to an employment injury or an occupational disease specified under the Act at the sole responsibility of the employer.
  13. Health benefits: Today, various medical services like hospital, clinical and dispensary facilities are provided by organisations not only to employees but also to their family members. Such as sickness benefit, maternity benefit, disablement benefit, dependent’s benefit and medical benefit.
  14. Voluntary arrangements: However, most of the large organisations provide health services over and above the legal requirements to their employees free of cost by setting up hospitals, clinics, dispensaries and homoeopathic dispensaries.
  15. Welfare and recreational facilities: Welfare and recreational benefits include: (a) canteens, (b) consumer societies, (c) credit societies, (d) housing, (e) legal aid, (f) employee counselling, (g) welfare organisations, (h) holidays homes, (i) educational facilities, (j) transportation, (k) parties and picnics and (l) miscellaneous.
  16. Old age and retirement benefits: Industrial life generally breaks the joint family system. The saving capacity of the employees is very low due to lower wages, high living cost and increasing aspirations of the employees and his family members. As such, employers provide some benefits to the employees, after retirement and during old age, with a view to creating a feeling of security about the old age. These benefits are called old age and retirement benefits.
    These benefits include:
    (a) provident fund,
    (b) pension,
    (c) deposit linked insurance,
    (d) gratuity and (e) medical benefit.