Cos sweeten retirement sops for Gen Y staff
Mumbai: People seldom enquire about post-retirement schemes or defined benefit plans (DBP) such as gratuity, when taking on a new job. While these essential details are either taken for granted or overlooked, it is interesting to note that some companies actually go beyond the statutory requirements for the benefit of employees. Besides, some companies are now moving from DBP to defined contribution plans (DCP), where the employer’s contribution is defined. And it’s all designed to offer a hook to entry-level employees, who don’t give too much importance to retirement benefits.
Gratuity and provident fund (PF) are schemes typically designed to benefit employees in the private sector. While in PF, a fixed part of an employee’s salary is deducted and deposited with the Employee Provident Fund Organisation, which is received on retirement, gratuity is a benefit an employee becomes eligible to after completing five years with an organization.
While most companies stick to the legal limits prescribed under such schemes, companies such as Mahindra & Mahindra (M&M) and IDFC have gone beyond it.
On gratuity, the act provides for 15 days of pay for every completed year of service or part thereof post five years of service subject to a maximum of Rs 10 lakh. At Mahindra & Mahindra (M&M), if a management staffer completes 10 years of service, they are entitled to two-thirds of salary for every completed year of service or part thereof in excess of six months and there is no ceiling on the limit of gratuity.
Employees are also allowed to increase their PF contribution if they so wish. An employee who does not participate in the superannuation scheme could take the benefit in his salary as an ad hoc allowance, making the compensation structure at M&M flexible. “It’s a point to reflect and ponder whether the life of ‘here and now’ should be given a reconsideration so as not to jeopardize the future. Savings at younger years create a safety net for the future and I think it is high time Gen Y realizes that a balanced spend and savings portfolio makes the future safe and secure,” said Prince Augustin, executive VP, group human capital & leadership development, M&M.
At IDFC, on the other hand, an employee becomes eligible for gratuity from day one of his joining the company. “We offer the benefit beyond the legal limit on all three counts (on gratuity). There is no minimum cap of five years continuous service required and we pay 30 days wages instead of 15 days and there is also no upper cap of Rs 10 lakh on total payout,” said Ramakrishna V, senior VP, HR, IDFC.
The objective is to benefit all employees irrespective of the tenure in the organization. “There is a higher amount of attrition in the bracket of 3-5 years tenure with organizations and hence a lot of employees will not see value in the benefit if it has a lot of strings attached, like a tenure lock-in and amount being minimal,” said Ramakrishna.
Cummins, at one point, used to offer 30 days wages to employees eligible to get gratuity. But the company later reverted to the legal limit of 15 days.
Experts believe DBP schemes need to be redefined and simplified to benefit Gen Y. Uncertain market conditions have also forced many companies to move towards defined contribution plans (DCP), which essentially is a defined contribution by a company and based on this, the employee receives the accrued benefits. Marico provides for retirement benefits such as gratuity or superannuation, but on DCP basis.
“Companies have been moving away from DBP to DCP to manage their liabilities and as a risk mitigation measure. While there has been a move towards providing more cash in hand for the “here and now” millennial generation that is coming into the workforce, some employers still look at offering a salary structure that has elements of long term saving,” said Poornima Muniswamy, senior manager, PwC India.
People’s perspective on employment and related remuneration has narrowed down over time. “I recollect that when I started my career in the ’80’s, employers would highlight the retirement money that employees were scheduled to get on their superannuation. Such a pitch by today’s employer would sound like a cruel joke, as the Gen Y may not look beyond 3 or 5 years,” said Milind Sarwate, group CFO, Marico.
Most organizations, therefore, focus on short-term benefit plans that could be realized in the foreseeable future.
NEVER TOO EARLY TO PLAN
äSome companies have removed the thresholds of time and savings for employees to benefi t from schemes like gratuity
äThey believe that such caps become irrelevant for those who do not look beyond three to fi ve years
äExperts believe defi ned contribution plans need to be reworked and simplifi ed to benefit Gen Y
äThe ‘here and now’ millennial generation has to be educated about the benefi ts of long-term saving options
Namrata
Singh TOI130121
No comments:
Post a Comment