Tax filing is one of the most important things your employees need to do. However, at times, this proves to be a confusing and intimidating task for some of them. This is where you need to step up as an employer and ensure your employees pay their taxes diligently and on time there are a few ways in which you can assist them. Take a look at this article to know more.
Income Tax in India can be filed by submitting seven types of forms. The Income Tax Return (ITR) files are classified under forms one to seven. The first four are for salaried individuals, while the last three are for corporates. The first four forms have sub-divisions among them:
In most cases, your employees will have to fill and submit ITR-1, as it is for persons who earn a maximum salary of Rs 50 lacs per annum.
Tax filing for your salaried employees
As stated, filing the income tax returns is of utmost importance. If you wish to assist your employees in the process, here are some handy tips for you:
Start with a detailed explanation of the entire process. To begin with, the employee needs to log in to the ITR website and enter his personal details such as his name, date of birth and PAN. Then, he needs to enter his salary details, including the amount of salary earned, the type of salary earned and the source of the salary. Next, he needs to provide data on the TDS deducted. Form 16 details need to be entered at this step. In the TDS DETAILS section, the TAN of the employer needs to be entered. Next, your employee needs to provide information about his applicable tax deductions, such as investments where he can claim an IT benefit. Next, the employee needs to enter his bank details and opt for the E-FILING option. The employee will then see a REFUND, NO TAX DUE or TAX DUE option and he needs to choose the option correctly.
To file the income tax, a set of documents need to be kept handy. Every employee must have the following papers ready:
a. PAN Card
b. Aadhaar Card
c. Bank account details
d. Form 16
e. Tax Saving Investments details
It is important for you to explain the process and documentation clearly to your employees. Most people will be able to file their taxes on their own but have an assistance cell ready for those who need some help. This will ensure all your employees file their taxes on time.
Offer your employees all the possible assistance to help them file their taxes accurately and on time.
Tax Deducted at Source, or TDS is a common financial term. It refers to the tax amount an employer deducts from the employee’s salary before it is paid out to the latter. The employer submits the TDS to the IT department. At the time of filing taxes, the employee can claim a TDS refund, if applicable. Listed below are some important pointers related to TDS:
The TDS rates are not uniform and depend on the type of income you have. For instance, an income received as a lottery win will have a much higher TDS than a monthly salary. The TDS rates in India range between 5% to 30%. Employees who earn less than Rs 2.5 lacs will not have to pay TDS. However, as an employer, you have to deduct the TDS every month and deposit it with the IT department every quarter. The employees can then ask for a refund at the end of the financial year when they file their taxes.
2. Reason for TDS deduction
So why is the TDS deducted by the employers? TDS, also known as the tax deducted at source, is deducted mainly to ensure there is minimal tax evasion in the country. Sadly, a lot of people do not pay their taxes and this leads to huge losses for the government. To ensure this does not happen, the tax is deducted when the employee gets paid so that there is no reliance on him for the payment of the tax later on.
3. How TDS is deducted
TDS is deducted when the income is paid out to the person. Employers deduct 10% (or the rate applicable as per the slab) of the employee’s salary as TDS and pay the remaining sum to him. Let us assume a person’s salary is Rs 20,000 a month. You have to then deduct Rs 2,000 (at the rate of 10% TDS) and pay him a salary of Rs 18,000. Banks also do the same when paying out interests on fixed deposits, etc.
4. Importance of matching TDS with Form 26AS
Form 26AS is a credit statement issued by the Income Tax department. It is a document of all the taxes deducted from a person by his employer, his bank, his tenant, etc. Form 26AS is an extremely important document that needs thorough scanning. The TDS deducted from a person should be properly deposited to the IT department. Sadly, at times employers do not do so and even after deducting a worker’s TDS, the amount is not sent to the IT department. It is used for the betterment of the organisation. The employee should, therefore, check Form 26AS and match the TDS accurately.
5. Mismatch rectification
If an employee notices a mismatch between forms 16 and 26AS, he can take some definitive measures to rectify the issue. To begin with, the source of the dispute needs to be identified. If you, the employer, have made an error, you need to rectify it at your end and issue a new Form 16 to the employee. If the error is due to a mistake on the part of the IT department, the employee needs to visit the income tax website and correct the error.
6. How to check Form 26AS?
It is a very simple process to check Form 26AS. The employee simply needs to visit the IT portal and view his form. Every form is password protected. The date of birth is the password to access the form online. The form can be downloaded from the TRACES website or from the net banking section of select banks.
TDS is a very important tax component. Make sure the TDS collected from your employees are properly deposited to the IT department.
Responsibility of a company
As stated, every employer needs to be responsible for TDS deducted and deposited. Here are the two main duties of an employer:
1. TDS Deduction
Taxes are crucial for a country’s growth and economic development. This is why everyone who is eligible to pay tax should do so without fail. Unfortunately, a large number of people try to evade taxes. This is a crime and must be curbed at all costs. As an employer, it is your duty to ensure your employees pay their taxes. A good way to reinforce this is to deduct the TDS before you pay the salaries to your workers. By doing so, you are helping the government to minimise tax evasion to a great degree.
2. TDS Return
The tax you deduct from your employees needs to be filed and deposited diligently and on time. You need to make a deposit every quarter. It can be done online in just a few minutes. It is a huge responsibility of yours, as an employer, to ensure the entire tax money is deposited. Under no circumstances can you use the money for your own benefit. Sadly, many organisations use the employees’ tax money for their own growth and development. This is a fraud as both the employees as well as the tax authorities are cheated. Doing such a thing is ethically and legally incorrect and so you must avoid it at all costs.
How to help your employees file their taxes?
It is intimidating and difficult for some people to file their taxes. For this reason, they do not file their taxes or even initiate a refund. This is harmful and needs prevention. As an employer, you can make the process simple for your employees. You can give them a consolidated platform so that each employee can file their own taxes themselves and have control over their portfolio. Design the platform with the help of your in-house experts or hire a third-party for the job.
Why is it important to help?
As mentioned above, the tax filing process can be cumbersome for some of your employees. Your help is thus greatly needed to ensure every employee’s tax is properly filed. Without your intervention and help, the employee may get voluntarily or involuntarily involved in tax evasion. Not only will this cause problems for the employee in question, but it will also put a black mark upon your organisation.
When is Form 16 given?
Form 16 is an important tax document given by the employers to the employees. It is a record of the tax deducted by the employer in the form of TDS. It documents the total salary the employer pays the employee and the tax deducted in that regard. The employee can use his Form 16 to file his taxes and get the refunds if any.
Form 16 is usually given by the employer on or before the 15th of June of the specific financial year on which the taxes need to be filed. As an employer, it is your duty to issue Form 16 to all your workers who can then verify it and use it to their benefit.
Employee benefit taxation norms
There are certain employee benefits taxation norms. With the help of these, you can help your employees to save tax. Here are some effective ways in which you can do so:
1. EPF –
When you deduct a percentage of an employee’s salary and invest it in a provident fund account, the employee can claim a tax benefit of up to Rs 1.5 lacs in a year. This is a good and effective way in which you can help your workers to save tax.
2. LTA –
By offering a leave and travel allowance, or LTA as it is better known, you can help your employees to save tax. They can claim a tax rebate on the amount they spent travelling with their family in a year, within India. This is another effective employee taxation benefit from that you can implement in your organisation.
3. HRA –
The house rent allowance (HRA) is another area in which your workers can get a tax benefit. The Amount paid to pay the rent of the premises he or she resides in can be tax exempted, provided it is a part of the salary. Up to 50% of the salary earned can be used towards HR expenses and the employees can get a tax benefit thereby.
4. Food coupons –
You can pay a part of the salary to your employees in food coupons. Food coupons can be redeemed at supermarkets, restaurants, cafes and so on. Amounts of more than Rs 25,000 can be claimed as tax rebates with the use of such coupons.
5. Child education –
If an employee pays part of his salary as his child’s school fee, he can claim a tax discount. A maximum of Rs 1200 a year can be deducted from a person’s taxable income when the salary is used in this effect.
These are some of the easiest ways in which you can help your employees save tax. Introduce these in your organisation and help your workers to save tax in a legal and safe manner.
Latest Budget Update 2020
In the new Union Budget 2020, the Finance Minister introduced a new tax slab which has lower tax rates compared to the existing tax slab.
The new tax slab would be applicable from the financial year 2020-21, i.e. from 1st April 2020. The slab is as follows –
Applicable tax rate
Up to INR 250,000
INR 250,001 to INR 500,000
INR 500,001 to INR 750,000
INR 750,001 to INR 10,00,000
INR 10,00,001 to INR 12,50,000
INR 12,50,001 to INR 15,00,000
INR 15,00,001 and above
If your employees use the new tax slab to calculate their tax liability, they would not be allowed any deductions (under Chapter VI A of the Income Tax Act, 1961 and other Sections) or exemptions (mentioned above) from their taxable income. Only if you contribute towards the National Pension Scheme (NPS) on behalf of your employees, such contributions would be allowed as a deduction under Section 80CCD (2) up to a maximum of 10% of your employee’s salary. However, the new tax regime is optional and your employees can use the old tax slabs ton calculate their income tax liability. The old tax slabs would also allow all eligible deductions and exemptions and might help your employees to reduce their tax liability. So, educate your employees to use both the tax regimes at the time of tax computation and then choose the regime which results in the lowest tax liability.
To wrap it up
Paying tax is one of the biggest and most important obligations a person has. As an employer, it is also your obligation to ensure your employees are paying their taxes properly. Help them to understand the taxation norms, the importance and needs of paying their taxes. Also, provide them with all the assistance they need to ensure they can pay their taxes smoothly. Offer platforms through which this can be done, as mentioned above. As for the TDS, you need to be very alert and mindful both with the deduction as well as the deposits. There should not be any slips or discrepancies from your end. You need to find which tax slab would work best for your employees and then deduct TDS as per the tax liability computed using that tax slab. You also need to offer the best possible employee tax benefits norms to help your workers save tax. Document all the tax and salary-related financial statements in Form 16 and furnish the forms to your employees on time. All these measures will ensure there is no taxation default from anyone associated with your company. This, in the long run, will bring lots of wellness to the reputation and the financial health of your organisation.
Group health insurance plans are offered by employers to their employees as an employment benefit. As an employer, it is your duty to offer this coverage to all your employees. There are many advantages you get when you offer group health insurance. What exactly are these why should you offer group insurance? Read on to know more.
Understanding Group Health Insurance
Let us begin by understanding what a group health insurance coverage is. As the name suggests, a group health plan is a type of health insurance that is offered to a group, which in most cases, is a group of employees. The employer buys the cover and jointly offers the mediclaim benefits to all the employees. The employees get health insurance as an employment benefit. In most cases, the immediate family members of the employees, including their spouses, children and parents, are also covered under the plan. The employees receive the cover as soon as they begin their work contract with the employer. The coverage stays valid for as long as they remain employed. If the employment ceases due to termination, retirement or resignation, the group health insurance coverage coves to an end as well.
Group health insurance offers an indemnity cover as well as a personal accident cover. An indemnity cover offers protection against all regular medical needs such as in-patient care, OPD covers, domiciliary care, pre and post-hospital care, diagnostic checks, daycare expenses and so on. A personal accident cover offers protection when you have an accident. If there is a permanent or temporary disability due to the accident, special compensation is given. The nominees of the policyholder are also compensated if the policyholder dies in an accident.
A group plan is available to a group that is already in force. This means a new group cannot be formed just to get the benefits of a group health insurance cover. If you are a new company buying a group plan, the coverage will only act as an employment benefit, it will not be the reason your company is formed.
The group health insurance cover is not as expensive as an individual health insurance cover. This is because the risk is spread out over a large number of people. The insurance company understands and acknowledges the fact that not every member of the workforce will make large claims. While some will do so, others will make smaller claims and yet another set will hardly even make a claim. This is why the risk is balanced and the health insurance cover is offered at a lower price.
Differences between an individual health cover and a group health cover
How is a group health cover different from an individual health cover? Let us find out:
Getting the cover – In an individual health insurance policy, the proposer gets to choose and buy the plan for himself. In the case of a group cover, the company buys the plan and the policyholder, who is the employee, has to accept the cover he is offered.
Sum insured – In an individual health insurance policy, the proposer can select a sum insured that is suitable for him. There isn’t any particular limit on this. However, in the case of a group cover, the sum insured is limited.
Premium – The premium has to be paid by the policyholder in an individual cover. The premium is high and depends on the scope of the cover. In a group health insurance cover, the insured doesn’t have to pay the premium as the cover is bought and maintained by the employer.
Flexibility – The individual health plans can be customized in any way the policyholder wishes. They are very flexible in this regard. A group health insurance policy cannot be customized. The employees have to use the cover that is given to them by the employer.
Policy period – The individual health plans can be renewed for as long as the policyholder lives. The plans simply need to be renewed on time for the coverage to be continuous. A group health cover is valid for as long as a person remains employed. If he quits the job, gets fired, or retires, he will lose his group health insurance coverage.
Pre-policy screening – For most of the individual health plans, the proposer will be asked to get a pre-policy health check-up done. However, for group health covers, pre-policy health tests are not required.
What is included in a group health insurance plan?
Now that we know more about the group health plans, let us find out what such a cover includes:
In-patient care – The employee and his dependent family members will receive compensation for in-patient expenses resulting from an illness, a surgery or an accident.
Pre and post-hospitalization covers – At times, pre or post-hospitalisation care is needed for certain medical conditions. Such expenses are normally covered under a group health plan.
Domiciliary care – Most group plans cover home health care expenses, also known as domiciliary care expenses.
OPD expenses – An insured person can get his OPD bills reimbursed under the group health coverage.
Daycare expenses – More than 150 daycare procedures are included in most of the top-rated group health insurance policies.
Alternative medical care – Certain alternative treatments, such as Ayush and homoeopathy are included in selected group health plans. Do note that not every group plan covers alternative medicine, so read the policy wordings carefully before you file a claim.
Dental care – Dental expenses are also covered in some plans, but not in all plans so be aware of the inclusions when you get the cover.
What are the exclusions of a group health plan?
Here is a list of the common exclusions:
Injuries related to attempted suicide/self-harm
Any complication related to HIV AIDS
Cosmetic treatments or surgeries
Why an employer should offer group health insurance
As a business owner, it is highly advisable for you to offer a group health insurance coverage to all your employees. There are some benefits that you get when you do so. Here are some logical reasons why you should offer group insurance:
The employees, without a single doubt, form the backbone of an organisation. You cannot function unless you have the best people working for you. As a result, you always look to recruit the best candidates. But these candidates are much sought after and you need to ensure they choose to work for you. To do this, you simply need to make the workplace ambience positive and along with that, offer all the employee benefits you can. A very handy employee benefit is health coverage. If your best employees get the best benefits they won’t even consider quitting and would happily report to work every day. One of the biggest reasons for a change of job is always the perks. If an employee is offered a similar salary at another company but has more perks to get, he may consider switching jobs. So to retain talent, you need to offer important employee benefits such as the group health insurance covers.
To make the employees feel secure
A worker who receives a strong employee benefit like health insurance feels secure in his job. He realises that he is of value to his employer. This makes him more loyal to his company and also increases his productivity. A workforce that puts in its best efforts helps to increase the profits of the business in the long run and this benefits the employer directly.
For the overall wellness of the organisation
When employees fall ill regularly, they stay home and miss out on completing their work commitments. Many a time, your employees may not even seek treatment because they lack a health insurance cover and paying the medical bills out of their pocket is a huge liability. At such times, the presence of a group health insurance coverage works as a blessing. The employees seek timely medical attention and recover sooner. This enables them to get back to work at a quicker pace and that works positively for the wellness of the organisation.
To avail a tax benefit
The employees who receive a group health cover as an employment benefit do not pay the premium. As an employer, you pay the premium. This payment can be shown as a business expense and you can claim a tax benefit on it. As an employer, this is a big advantage you get when you provide a group health insurance policy.
The above-mentioned points clearly show just how beneficial the group health insurance plans are for employers. If you haven’t started offering the cover to your employees, do so without any further delay.
Handy tips related to group health insurance
Many times, a small business owner stays away from offering group health insurance because he feels the costs would be too high. However, as we saw in the points mentioned above, offering this benefit can be of great advantage to you as well. You just need to pick the right cover and stick to your budget. Here are some more tips for you to remember:
Designate someone for the job – Rather than doing everything on your own, designate someone for the job. The person you hire should be able to understand the clauses of the health cover. He or she should be able to make correct calculations and get a plan that is comprehensive as well as economical.
Offer the cover to everyone – Offer the health cover to everyone, including your part-time employees. This will create a sense of loyalty and well-being among your workforce and you will see an improvement in the performance.
Explain the clauses to the employees – A new employee should have a proper understanding of the health insurance cover he or she is entitled to. Explain the clauses of the health cover to your workers clearly. This will prevent future disputes and disagreements from taking place.
Keep these tips in mind you will find it easier to manage the group health insurance policy.
Benefits received by the employees
A group health plan offers many benefits to the employer, but it offers some handy benefits to the employees as well:
Affordable health insurance – An individual health plan is not affordable for everyone. This is especially true for those who work in low-wage jobs. The availability of health insurance as an employment benefit thus proves to be extremely beneficial.
Coverage for the entire family – Not just the employees, their dependent family members also get a health insurance cover. This is another benefit as many people struggle to get health insurance for their loved ones.
Coverage from day 1 – In practically every single individual health insurance plan, waiting periods are associated with certain health conditions. For example, if you have diabetes, you have to wait for about three years before you can make any claim for an ailment related to diabetes. Waiting periods are also associated with other health areas including maternity and childbirth. But when you get covered under a group mediclaim cover, you do not have to worry about the waiting period, as there is no such clause here.
This is quite a comprehensive set of advantages that the employees get out of their group health cover.
Pros and Cons of a Group Health Plan
Let us quickly glance over the pros and cons of a group cover:
No waiting period
Maternity and newborn covers available
Affordable health insurance
Health insurance for dependents as well
The cover cannot be customized
The coverage is lost as soon as the employment ends
The premium can go up if there are too many claims and this can become a liability for the employer
The group health policy can be cancelled altogether if there are too many claims in a year
Keep the list of pros and cons in mind when you offer group health insurance to your workers.
Risks involved in group health insurance
While a group health insurance policy is beneficial for both the employee and the employer, there are some risks involved:
Fraudulent usage by employees – It is often seen that employees unfairly use their health insurance coverage to pay for the medical expenses of people not related to them. This is unfortunate and can cause many issues for the employer.
Gets too expensive for small businesses – A small business may not find it affordable to offer this benefit to its employees. It is, therefore, advisable for you to compare various options and then settle for the plan that is the most economical option for you.
Coverage may be insufficient – In most cases, the coverage offered to all employees is uniform. An employee cannot modify the group health cover to suit his needs, He may feel the cover is insufficient and may become unhappy with it. Make sure you negotiate with the insurance provider when buying the plan and include as many health covers as possible, albeit within your budget.
These are some of the unfortunate risks you may come across when you offer group health insurance to your employees. Be mindful of these and try to work your way around them.
The final word
Keep all the points mentioned above in mind and you will not regret your decision of offering a group health insurance coverage to your employees. Health insurance is a big requirement and when your employees get it from you, they become happier in their jobs and that works out well for your business.
Besides getting paid well and looking forward to benefits, employees often want to be treated fairly and appreciated for their work. It motivates them to contribute substantially to the growth of the organisation. Many organisations are already having their employee recognition programs in place to thank employees for various achievements. A recent survey conducted by the Society for Human Resource Management (SHRM) and Globoforce revealed that almost 80 per cent of the organisations have an employee recognition program.
What is employee gifting, rewards and recognition?
There are several programs that have been framed to recognize the contributions of the employees. Some of the notable ones are the length of the tenure in the organisation, five-year increments, one-time commendable achievements, remarkable performance over a period of time. The subsequent rewards for such performance would range from simple handwritten thank-you notes, an on-the-spot cash award, paid time off and gift cards for retailers or restaurants. Taking rewarding a bit further, there are organisations that also offer vacation packages for exemplary achievements. There could be public recognition as well as employee appreciation events to thank the employees for their efforts.
The employee appreciation program of an organisation must be designed in a manner that gels well with the overall culture, values and mission. Overall, it must a holistic idea which could have better participation and benefits for the employees. Employee gifting and rewards and recognition are also very helpful for improving engagement and loyalty towards the brand and organisation. The human resources policies must be crafted in a manner that promotes frequent recognition of employees through performance awards. These gestures often help create a positive company culture and also improve the employer-employee relationship.
Importance of employee gifting, rewards and recognition
Appreciation from employers can have a tangible impact on the minds of employees. An employee’s wellness can get a boost, stress can be lessened, and metabolism and sleep can be increased if employers show gratitude, according to an Emergenetics International article. Employee wellness will have a direct impact on productivity and subsequent work results. Employee’s well-being and health will get boosted which is very important as there is a lot of stress that people already face in their lives. Here are some of the benefits:
Improves employee wellness
Employees need constant motivation and confidence to perform at their best capabilities and acknowledgement helps a lot. It will also help foster loyalty and better working relationships. A workplace must always positive vibes and a culture of constructive feedback and regular appreciation. Happy employees are productive which directly affects their performance.
The leadership of an organisation must play an important role in employee motivation. Some of the most valuable assets of the organisation can be always motivated by letting them know that leadership is recognising their hard work.
Promotes self-awareness and self-improvement
Employee gifting, rewards and recognition can also play a vital role in helping employees realize self-awareness and work towards self-improvement. There will be a great opportunity to provide employees with opportunities to learn and grow. This learning process can be incentivised which could also motivate other employees to do the same.
Help in employee retention and talent attraction
Retaining the existing workforce can be best achieved through employee gifting and recognition. Apart from retaining the best employees, a good rewards and recognition program will also help in attracting the best talent that is available in the market. Employee retention has several facets like employee appreciation, emotional intelligence of the management, job satisfaction and security, etc. If any of these areas lack, there is a good chance that the organisation will have a high turnover rate.
Employee gifting, rewards and recognition
Many organisations have realized that employee gifting and recognition programs have the power to shape the direction of any business and employees. Engagement, productivity, morale and retention are a few factors that readily get affected through such programs. The Indian work scene is not far behind as many of the country’s businesses have realized the importance of employee gifting and recognition. According to a dipstick survey conducted by Zeta, 92 per cent of employees want rewards and recognition during special occasions. On the contrary, only 55 per cent of employees received rewards during special occasions or completion of a milestone. It points out to the fact that there is a wide gap in what employees seek from their employers and how much the employers actually give back to their employees.
Challenges related to Employee gifting, rewards and recognition
The importance of employee gifting and recognition cannot be challenged. However, still many organisations have not been able to implement such programs holistically, which could be due to several reasons. There can be several logistical challenges that could prevent many small and medium-sized businesses from implementing employee gifting and recognition programs. The 2013 Power of Employee Recognition report by Aberdeen Group stated that only 14 per cent of the organisations offer managers the necessary support required to implement such programs. For businesses that have their operations spread across different regions, it could also mean increased costs, which affects the implementation of such programs. Here are some of the reasons that prevent the implementation of employee gifting and recognition programs.
Logistics and procurement
If heavy logistics and heavy procurement support are required, it becomes very difficult for human resource teams to procure rewards and gifts for employees. Placing orders, tracking them and the final receipt could be an overwhelming task that needs a lot of time.
If the budget assigned for employee gifting and rewarding is not used transparently, implementation of such programs will be tough. Many businesses find it tough managing the finances and documenting the spending.
Misappropriation of funds and resources
There will be always a concern among the organizers as employee gifts have a monetary value. Chances of these being stolen are very likely which could affect the overall program.
Coordinating with several vendors for different requirements can be a tough task which could delay the overall process of gifting and rewarding. Many things need to be considered and adhered to like the timelines, pricing, delivery, etc. Also, the receipt of products from the vendors according to the expectations could be a concern.
It is important to reward and recognize employees when their achievements are accomplished. On many occasions, there will be a need for unplanned rewards maintaining an inventory of gift vouchers is very important, which could not be possible at all times.
When should employers gift their employees?
Reasons and occasions to celebrate and gift the employees can be many. It could be performance-based rewards, celebratory rewards or annual bonus. It is important to gift the employees at the right time to improve the effectiveness of the rewards. While it could be a challenge maintaining the timelines as procurement has a major role to play in the entire exercise, none the less having fixed timelines is important. Timely rewards will give the employees a lot of happiness and the gratitude will be unmatched. To celebrate the achievements of employees, timely rewards are essential to realizing the essence of such programs.
What gifts employers give to their employees?
There have been several surveys conducted to identify the trends in the employee gifting and recognition segment and there are some interesting insights on offer. Gift cards and vouchers remain a preferred choice for many organisations when it comes to offering rewards during festive occasions, birthdays, etc. Sweet boxes are the second most popular items that are generally distributed in most Indian companies during Diwali. Some of the other most popular gift items include home decor items, kitchenware and cash incentives.
It is but natural that employees do look forward to receiving gifts and rewards from their employers during festivities and other special occasions. However, most of the employees don’t appreciate the gifts they receive. A box of sweets which is very offered by most companies during Diwali is also one of the least-appreciated gifts by employees. There is a similar feeling for other eatable gift items like chocolate boxes and dry fruit boxes. Frustrated due to this, many employees pass these gift boxes to someone else.
Gift cards and vouchers remain the most preferred rewards for the employees. Cash handouts are also preferred by many employees as it gives them the freedom to buy a product of their choice with the gift card or cash they receive from their employers.
The future of employee gifting, rewards and recognition
Organisations that are looking to develop a comprehensive rewards and recognition program must understand the needs of their employees to make the program a success. While designing the program, answering important questions like what employees want and when they want is crucial. There are several resources available online that can offer good insights into the psyche of employees. The current workforce comprises of two generations, Gen X and millennials, and catering to their individual needs becomes important. Thus, it becomes very vital to have a balanced program that can appeal to both the generation of the employees. Finalizing gifts that will be liked by everyone can be a tough task but it is required. While a box of sweets can be appreciated by the Gen X employees, it might not find many takers among the millennials. Similarly, millennials might like gadgets or other products related to technology, which might not be liked by Gen X employees. This might complicate the situation and make it tough for employers to finalize an ideal gift that will be appreciated by both the generations.
A rewards and recognition program can be a comprehensive one with regular gifts being given to employees. There can be more than one reason to celebrate and frequent rewards can have positive results on employees and the overall organisation. Employee recognition events can also be a great way of breaking free from the monotony and boosting productivity levels. No doubt the rewards and recognition program can require a lot of investment in terms of money, time and efforts, but they are important. Employers can look for sustainability and make the program a rewarding experience for everyone by considering ways to reduce the costs and the time spent on the exercise. There can be tools and resources that can help employers simplify the program and its various modules.
Research can reveal the rewards and recognition programs of other organisations which can offer valuable insights. Special care must be taken to ensure that the program has a human element at its heart, while at the same time making sure it has all the modern aspects to it. The challenges related to logistics and procurement must be looked at innovatively to make the process simplified for all the stakeholders. Remember, the rewards and recognition programs should be all-inclusive and everyone must be covered for the rewards. If everyone is not eligible for the rewards, it could negatively affect the overall program. It doesn’t take much to appreciate or reward someone’s performance and it all depends on setting the right context and company culture. A good employee recognition program will have the best elements of the culture of the organisation, which can lay a strong foundation for better staff engagement, continuous growth and development of employees, and a solid employee retention strategy. There can’t be a better time to introduce comprehensive employee gifting and rewards programs. Organisations that offer smarter programs will have happy and productive employees, who will lead the businesses towards new heights of success.
Startups in India are on the rise, with many earning accolades of praise and appreciation all over the world and growing to become unicorns and decacorns even within a few months of being founded at times.
With so many startups and the demography of the youth in India being at an all-time high, choosing whom to work for and deciding where they might find their peak and continuous growth as well can be a bit confusing. To make this process easier, we have created a compilation of the fastest growing startups in India.
What are some of the best startups to work for in India?
1. OYO homes and hotels
One of the world’s largest hotel chain, OYO homes and hotels was founded by Rishabh Agarwal as an 18 year old in 2013. Amongst several such awards, OYO has also received Startup of the Year, Financial Express, 2015. OYO has come a long way, from being a start-up, to becoming a unicorn and to now being a decacorn. It is aiming to become the world’s largest hotel chain by 2023. It currently manages 515,000 rooms in 10 countries.
OYO offers a range of employee benefits for a satisfactory work experience, such as –
Competitive Market Compensation
Employee Stock Options
A mobile app, Cure. Fit, has brought together the various aspects of healthy living – from physical fitness to nutrition and home delivering food to mental well-being on a single platform in a manner that makes it fun and practical.
Cure. Fit has adopted a revolutionary work system that makes working there a unique, and fantastic experience. Some of those are –
No hierarchy – their belief in action instead of position creates a work environment that affords a satisfactory amount of freedom to employees to work and lead on projects that drive them.
No ‘leave policy’ – because mental and physical wellness is their mantra above all
Perks such as food allowance and certain privileges over their own services and products for all employees.
Flexible working hours – employees have the freedom to decide time and duration for their working hours as best suited to them.
This is a system to empower professionals to interact and learn from experts in their domain. They can also work with businesses and organizations across the world and aggregate their personal brand online. It is a simpler and more effective way to network, work and learn online.
Employment perks at TapChief
Unlimited vacation days
Pet-friendly HQ and an open to all pantry to boot
Growth and learning opportunities with skilling sessions and monthly meetings with experts from TapChief community.
Founded in 2014, Razorpay is a payment gateway in India integrating several payment modes like debit cards, credit cards, net banking, UPI and prepaid digital wallets.
Employee benefits –
Flexible working hours
MacBooks for everyone
Food and snacks
10 lakhs accident insurance (employee)
5 lakhs medical insurance (family floater)
Based in Bengaluru, a bike renting app, Bounce is the perfect app for the introverts, the recluses and the ones feeling generally non sociable for it has done away with the keys as well as the interaction with humans. Download the app, pick a location and a bike, ride to your destination and move on. No keys. No responsibility. No communication. Within a few months of launching dockless scooters in Bengaluru, the firm has completed over five million rides, covering 30 million km. The founders of Bounce – HR Vivekananda, Varun Agni and G Anil – who started with bikes, bicycles and kick scooters are now looking to convert their entire fleet of vehicles into electronic vehicles.
According to employee reviews, Bounce is a fun place to work at offering free healthcare, pension and mentorship
Founded by IIT KGP/Guwahati 2013 grads, Playment is a data labeling platform which helps machine learning engineers build high quality ground truth datasets for training and validating machine learning models.
Of the perks of working at Playment, some of them are –
Flexible working hours
Rivigo provides express surface logistics all over the country. The startup was founded in 2014. Logistics unicorn Rivigo was recently granted patent rights by the United States Patent and Trademark Office for its relay truck model, which allows truckers to drive 4-5 hours at a stretch and return home the same day.
Benefits at Rivigo according to employee (current and former) reviews –
Health care and Insurance
Stock options or equity
Maternity and Paternity leave
Job Training and Tuition
Founded in 2016, ACKO is India’s first InsurTech company. ACKO makes buying and using insurance a seamless, safe and hassle-free process.
Employee reviews acclaim benefits such as free lunch and breakfast, work from home options and great working environment.
This startup is an AI powered online doctor platform that provides instant online access to doctors from the best hospitals. Employee reviews attribute great learning experience to working here.
This is a platform that teaches you most of everything you need to know for a technological job. It is one of the leading interview preparation websites. Some of the many employee attested benefits of working at InterviewBit are – Healthcare and life insurance, sick leave, free lunch or snacks and reduced or flexible working hours with work from home option as well.
This startup is a network centric business that brings buyers and sellers from across the country easily accessible on a single platform. Some of the job benefits according to several employee reviews are –
Healthcare and Insurance, pension plan, stock or equity options, performance bonus, maternity and paternity leave, work from home options, child care facilities, sick leave, bereavement leave and free lunch or snacks.
12. Little Black Book
It is India’s biggest platform to shop and discover independent brands and retailers. Based in Delhi, there workforce is 65% women, and 60% of the leadership is constituted by women. Media, Communication, Marketing and sales form their largest job functions with digital marketing, social media marketing and creative writing as their most common skills.
Client reviews have attributed benefits such as free coffee and the opportunities to learn, grow and meet high end clientele.
This Bengaluru based, google backed concierge service platform prides itself in its super quick deliveries, from groceries and pet food to medicines and most of whatever else you may need delivered. Programming languages such as SQL, C ++ and C form its core skills in operations, engineering and sales. They offer wellness camps, medical coverage, monthly Dunzo cash on the app, Parental leave for mothers (6 months) as well as fathers (15 days).
A further education online platform especially curated for working individuals, upGrad with its expanding business, is on the lookout currently to hire more than 150 employees. It is focusing on education, engineering and business development. The skills most likely to get picked up are SQL, JAVA, Analytics for jobs in sales, marketing and career support.
Employee reviews suggest job benefits such as – work from options, flexible environment, learning opportunities, great company culture and work-life balance, Healthcare and Insurance, free snacks and maternity and paternity leave.
Meesho is one of the fastest growing e-commerce companies in India. From homemakers, teachers, and students to boutique owners, professionals and businessmen and women can resell on Meesho. Resellers get the opportunity to earn margins more than 25,000 monthly, get bonus upto 6000 weekly and earn commission upto 5000 per referral. They also cover various insurance plans, offer maternity and paternity leave, work from home options as well as a free lunch or snacks.
18. Digit Insurance
They call themselves ‘the simplifiers’ for how easy and user friendly they make the process of getting an insurance. Their largest job functions are in business development, finance and engineering. Their most common skills are SQL, Business Analysis and Java.
Employee reviews attribute benefits such as onsite parking, gym and creche, coverage of brokerage/relocation costs if moving to job location, healthcare and life insurance, pension plan and performance bonus, employee discount as well as free lunch or snacks.
19. Karza Technologies
Based in Mumbai, Karza Technologies specializes in Banking Applications, Credit Assessment, Loan Monitoring, Fraud Analytics, Big Data Analytics, Business Intelligence. They have no fixed time for their employees nor a minimum number of days to clock in just as long as they get their job done. Their required employee skills are most commonly Python, SQL and Java with largest job functions in engineering, research and business development. Employee review has avouched working at the start up to be a great learning experience.
A privately held company in the financial services, StashFin is a digital lending venture with its headquarters in New Delhi. The company’s most common skills are SQL, MySQL and Web Development with their largest job function in Engineering, Information Technology and Business Development. They offer perks such as Job training and tuition and performance bonus.
Accreditation and Awards for best companies to work for
The merits of a company and their standard of quality are accredited every year through the means of several professional awards decided by a panel of experienced businessmen and big wig companies of the corporate world. These awards are especially bolstering for start ups since it can raise their credibility and also earn them visibility in the corporate world of corporate function. They also serve as morale boosters for the employees and affords individual recognition to the exceptional workers. Mentioned below are few such nationally and internationally acclaimed awards.
A List of awards that identify good companies to work at
1. Best Company Award by Small Business BC Awards
This is given to the company that displays applaudable leadership. One that empowers its employees, motivating them and making them efficient with innovative HR practices, as well as showing a proven track record of growth profitability for at least the last to fiscal years and must have less than 50 employees.
2. Employees’ Choice Award
Winners for the 2019 Top CEOs and Top CEOs at Small & Medium Companies determined using Glassdoor’s algorithm indicate how good a business is to work for an employee by displaying the approval ratings of existing employees of the company on their CEO.
3. 50 best workplaces in India.
Identified by Global management consulting and research firm Great place this compilation represents the 50 best places to work for in India. The businesses taken into consideration constitute between 100 to 500 employees
4. LinkedIn Top Companies
Where India wants to work now. They take into consideration three things – job application, engagement and employee retention.
5. 100 Best Companies for Women in India
The AVTAR Group and Working Mother joined forces to select the 100 best companies that are facilitating women in thriving at both, work as well as home life. workforce profile, flexible work, women’s recruitment and retention, benefits, paid-time off, company culture and safety and security, as provided by the applicant companies.
6. SHRM India HR Excellence Awards
This award recognizes businesses that put people first. Businesses that recognize the importance of employees in the achievement of their goals.
7. Mercer-NDTV Employer Excellence Awards
Award introduced in collaboration with Mercer and NDTV, this award recognizes the businesses that put considerable effort in making their workplaces diversity friendly, encourages a healthy work life balance and puts their people first. This award is given out in 10 categories – Excellence In Work Life Balance, Employee Recognition, Capability Building, Digital HR, Workplace Diversity, Connected Organization, Career Development, Innovative Hiring, Employee Well-Being, Innovative Benefits
8. Employer Branding Awards
Businesses that realize the importance of creating a proper brand experience for the employees just as much as the customers are the ones recognized through this award. Companies that are contributing to the ‘Talent Management, Talent Development and Talent Innovation’ are who form part of the employer branding status.
9. India’s Best Companies To Work For
Several companies apply to Great Place to Work® Institute in order to get their companies assessed and benchmarked for their workplace culture. They also recognize – Best Companies To Work In Employee Wellness, Best Companies To Work In Employer Branding, Best Companies In Utilizing Analytics To Drive Great Place To Work® Initiative, Best Companies in Workplace Transformation Case Study Competition and Developing People Managers etc.
10. The Aon Best Employers Study and Award
This is one of the most prestigious awards in the corporate world. The companies are finalized on the basis of characteristics – Engagement, Leadership, Performance Culture, and Employer Brand.
The Christmas holidays are the best time to appreciate your employees for their hard work and dedication over the year and end it on a happy note. Even if not all of your employees celebrate Christmas, celebrating the end of a calendar year is a significant event. But sometimes it is best to look beyond the ‘traditional’ Christmas incentives such as yearly bonuses or an office party. Traditional Christmas rewards like food and wine no longer hold value to employees. A research done on their choice of gift shows that they prefer to be offered monetary benefits and feel motivated by items that are personalized or technological.
Mentioned below are some tips for spreading some festive cheer
1.Set the ‘Stage’
Come November end and flocks of people are seen shopping in anticipation of Christmas and New Years. The HR departments get busy trying to figure how to go about the celebrations this year around. Nothing screams Christmas like a well decorated Christmas tree. You can also surprise them with an office decoration competition – whatever you do, just make sure you put the effort in. This encourages your staff to get involved with putting up decorations and get into the Christmas spirit.
2.High Incentives- High Spirits
Another technique of kicking up your sales and the employees spirits is offering incentives to your employees. Employers can offer great sales incentives in December to encourage a good year end push to meet sales targets. This could be anything that goes a little further than what you’d provide during the rest of the year. Rather than something that employees can redeem instantly – which will be forgotten by the time the holidays are over – consider using something a little more long-term as an incentive. Something that is memorable and meaningful to employees. Travel vouchers, hotel stays or passes to events to use in the new year will be a great motivator that continues to inspire staff loyalty in the future.
3.Their choice matters
It is proving to be a good idea these days to give employees a gift voucher. This not only lets them choose the incentive, but it also opens up a wide range of choice as to which retailer or service provider the employer will decide to offer the employees. An increase in trend towards gift vouchers from e-stores that allows the customers to choose from options such as supermarkets, department stores, multiple stores or even experiential vouchers. Traditional gifts such as turkeys, Christmas puddings and hampers were popular a while ago, but there has been a recent shift in trend of gifting in the past few years.
Another added benefit of employees being involved in the choice of Christmas gifting is letting them know that you care about them and their preferences. This is the new trend, to give staff something with more flexibility to choose what they really want.
Personalizing gift vouchers for employees from one store shows you’ve taken the time to choose a gift for him/her. It is extremely important for the employer to let his employees know that they are valued.
The gift of time is a popular way of rewarding staff at Christmas with a number of employers giving a day or half-day as holiday to staff, to spend time with friends or family, or even to prepare for their Christmas feast. Social interaction at outings organized for the team members with various activities can prove to be a great way of boosting team morale as well.
A great example of a company that respects and celebrates its employee’s would be Raheja Constructions. To keep their employees engaged and happy they have adopted the motto of keeping the happiness of their employees at the top. They organize team lunches during important festivals, and the families of all the team members are also invited to these events. This allows the employees to enjoy the festivities along with their family.
The festival of Christmas is about getting together and celebrating whatever the age or religion of the employee. Employee demographic across all spectrum should be recognized and their needs should be considered.
A reasonable way to incentivize the employees during Christmas is handing out cash. But it loses value if given along with the salary as it doesn’t have as much as an impact and can become taxable too. Employers need to be giving their workers something that’s a little bit more of a memorable treat rather than an event that is forgotten very quickly.
Though few employers still want to treat their staff to the traditional Christmas party or a team lunch to save money. Parties during Christmas need not be heavily budgeted. Simple innovative ideas and clever organization of these events goes a long way in bringing festive cheer to the employees. A small gesture, a simple gift is a great motivational incentive that any employee would expect from his higher ups.
According to research done regarding gifts for employee’s , the popularity of the seasonal soirée is depleting among them. A whopping 92% of employees would rather receive a cash bonus at Christmas than have a party.
An employer does not always have the budget nor the resources to offer bonuses or gifts at Christmas. It is therefore important to keep up communications to help dispel any assumptions or expectations employees might have in this case. It can be really counterproductive to them if that anticipated bonus check never comes thus making it necessary to keep employees in the loop.
To promote motivation levels of the employees sometimes during the holiday period it is great to personalize the greetings of the season. It doesn’t have to be anything that costs money. A simple but heartfelt thank you to the employees for their hard work and dedication through the holiday season can go a long way in boosting their morale. A face to face interaction helps in giving a personal touch and gets your appreciation across to the employees.
For many employers Christmas can be the busiest time of the year even though it is generally considered as a time of giving.
Therefore asking the staff what they would like, instead of wasting time and money on gifts that would not be memorable to them and will be forgotten as soon as the festivities are over, is a better solution.
Asking the employees to write down their own Christmas wish list let’s them know that we as a company will listen to your needs. We’re not talking about gifts necessarily, but rather let them have their say on what would be most beneficial to them over the festive period. A unified decision regarding shortened work hours or an extra day off if they manage to meet deadlines is a key to gain the confidence and trust of the employees and make them realize that the management listens and cares about them. Employers need not be always motivated by cash incentives. Instead they can be motivated by being recognized for their work and appreciation for a job well done, flexible work schedule and of course promotions!
Rather than trying to impose their decisions regarding the festive celebrations on their employees, bosses can take a back seat and let the employees lead the way thus making them feel responsible and in the process prescribe a Christmas reward that everybody wants. Not only will this raise morale simply from the perspective that you took the time to think about what people would like – it also ultimately provides staff with a Christmas reward that they prefer.
7.Let them let off steam!
Everyone may not celebrate Christmas and some might not even enjoy the festivities. At the same time some go overboard and all out thus spreading the festive bug. It could be a personal choice or due to religious beliefs, some people would not want to join you to celebrate. And that is completely okay. Forcing someone who isn’t keen on being a part of a Christmas lunch or party is not the right way to celebrate. But one would not hesitate to say that festive fever is contagious too. Seeing someone enthusiastic can send the onlooker into the same mode. Make sure you keep their preferences in mind before planning group activities.
Understand that no two people are the same and respect everyone’s personal preferences and beliefs around the end of the year.
8.Goodies and sweets
Enjoying the christmas day with a best possible and well laid exotic dishes is the all awaited event. People do tend to over-indulge a bit traditionally during Christmas, and a great way to get on the good side of your employees is by giving them the best gift there is to give, chocolates and pies! Feed them all the mince pies and tarts you can as this is a great way of spreading some Christmas cheer. Exchange of well thought of gifts and surprises and best of all receiving a gift that you always were dreaming of, is god sent. Bringing a smile on the employees face is a joy to watch.
9.Use of technology
The advancement of technological resources has brought about a revolution in the gifting world. Employers are using digital resources to incentivise staff at Christmas such as e-coupons or online gift cards. Incentives that are web-based are great because people are more into buying things digitally these days.
The use of technology has become more prevalent across the board. A decade ago nobody would have thought that paper voucher-orientated gifts would be taken over by the e-gift and e-cards to reflect a similar solution to how people like to shop.
Even though e-mails or e-vouchers are not as effective as employers may believe. They may seem comparatively easier to personalized notes and gift cards but the overall outcome is less effective to charm the employees. Seeing their elated faces is the ultimate goal of any organization.
To summarize it is essential to let employees know that you know them and their preferences. So Christmas gifting can become a menial task and an expensive one at that, especially for an organization with a large number of employees. But if done correctly, gifting can become the best way to lift the spirit of your employees and make the most of the opportunity. Knowing the preferences of employees for example some who like coffee can be given vouchers to their favorite coffee outlets. Or if someone likes books he/she can be given vouchers for bookstores.If employers are not sure what to gift their employees it is better to let them choose as nobody likes getting a gift they can’t use. Prepaid debit cards and voucher cheques are a very simple way to provide your staff with a spending limit that they can use anywhere they please. In this way without disappointing anyone everyone can get something they love.
Do your employees ask you for a loan or a salary advance? Should you be lending a helping hand?Would you as a company benefit from extending a loan to your employees? There would be many questions that come to your mind related to employee loans. This article will put them to rest.
Employee loan can be defined as the money which is paid in advance by an organization to its employees in the form of financial assistance. It can be also said that a loan for an employee is the money that can be advanced by the organization for assisting in case of any emergencies.
Like all other loans, employee loans also have an interest rate and should be repaid as per the repayment schedule. The interest rates for employee loans are quite low which comprises small cost for loan administration and any tax liabilities if incurred by the employer.
When to give your employee a loan?
While providing loans to your employees, the policies and procedures should be very clear. Before you issue a loan for your employee, it is quite necessary to have a promissory note signed by your employees. This note would mention the payment amount, the frequency of payment, rate of interest, consequences in case of loan defaulters, etc.
Some of the major considerations which are important while lending an employee loan are mentioned below.
1. The situation in which the loan has been granted
The various circumstances in which loan has been granted is quite an important consideration. The loan was being granted for any specific reason or financial assistance? Are there any specific terms and conditions which are to be considered while granting an employee loan? Some of these questions are to be kept in mind while granting loans to employees.
2. The amount granted as loan
When you are going to grant employee loans, it is necessary to set the amount that will be granted to your employees as a loan. Certain considerations like how much amount would be granted a loan to employees, will the amount be fixed for all employees or it will depend on the salary of the employee, etc. should be decided on before granting loans to employees.
3. The term of the loan
Most of the employers usually offer loans to their employees for a shorter period such as two years or three years. This is because several complications can arise if the loan is being repaid for a longer period. If the loan is being repaid for a longer period, the maintenance of funds for granting loans becomes difficult. Also, the situation becomes critical if the employees plan to leave the organization without the loan being repaid.
4. Method of repayment
Usually, employers set the method of employee loan repayment to be by deductions made from the employee’s payroll.
What are the benefits of offering employee loans ?
Some of the major benefits which can be obtained by offering employee loans are mentioned below.
1. Method to reduce the financial stress of employees
By offering loans to your employees, you are helping your employees to get rid of their financial stress which can be a major reason for the low focus on work, absenteeism at the workplace and low productivity. So, by offering employee loans you are making a strategy for increasing the productivity of your organization in turn.
Offering loans to employees is a very good retention strategy by which you will be able to reduce the turnover in your organization. When you are helping your employees with their financial issues, they will want to remain with you for a longer period rather than leaving the organization.
By granting employee loans, you are taking care of your employee’s well-being and this will be a factor enhancing your reputation in the competitive market.
4. Build an atmosphere of loyalty at the office
By the policy of granting loans to employees, your employees will remain loyal to you and will put in more effort into their work which will create a motivational atmosphere in the workplace.
3 Things to consider while offering employee loans
Granting loans to employees can be a problem in some cases as it might lead to some unprecedented situations in the business.
1. Multiple loan requests
When you are granting a loan to one of your employees, it is quite obvious that other employees would also put forward their requests for loans and you will have to consider them as well failing which can de-motivate the employees.
2. Repayment Issue
If you are granting loans for employees and your employees are not able to repay it on time, then it would become a critical situation for the organization. They might be facing financial struggles and will keep on extending the tenure of the loan. Some employees even might request for lowering of the interest rate. This type of negotiation and delays can affect your business and organization.
3. Loan Criteria
When you are offering loans to employees, you will check the financial condition of the employee before you grant the loan. If one of your employees has stable financial health, you can easily grant a loan for him and at the same time if you are refusing an employee loan to another employee who is not so financially stable; this will lead to discrimination issues at the workplace. This is not good for the overall well-being of your organization.
To avoid such major problems that can be associated with the granting of loans to employees, some basic precautions can be taken by you or some basic points can be kept in mind before granting a loan for employees.
You should find out what is the cause behind your employee borrowing the money or applying for the loan. There can be some situations of emergency such as a medical emergency or any other personal emergency in which taking a loan is quite considerable.
You should have a very clear employee loan program that must clarify the eligibility criteria and conditions under which granting loans for employees are feasible.
You should remember about the promissory note which contains details about the loan re-payment and must get it signed by employees before granting them loans.
Do companies give loans to employees?
Companies give loans to their employees a certain rate of interest levied on the loan amount and with a commitment of repayment of the loan by the scheduled time. According to the Companies Act, 2013 there have been relaxations into the interest rates of the loan. In many cases, the need for approval from the company’s shareholders for granting loans for employees has also been removed.
In early times, the rate of interest levied in case of loans for employees was fixed to the yield from the Government securities. However, as per the guidelines of the new Act, the overall limit for loans to employees has been fixed and if there are any deviations then approval from the shareholders of the company is required. Moreover, it is also necessary for the companies to provide complete details about the loans for employees in their financial statements.
As an organization, this can turn out to be a good employment engagement mechanism. Data collected by the CPA shows that 80% of the employees would rather stick to an existing job with benefits rather than taking up a new job with more pay but no benefits. Similarly, more than 55% of employees are likely to opt for job that offers less pay but has a very sturdy benefits package. Should you choose to offer loan to your employees, you would be employing an engagement methods in a very subtle way.
Are employee loans taxable?
Loans to employees are taxable for the employees as a perquisite. A perquisite is defined as a benefit that can be offered by you as an employer to your employee based on the job designation of the employee. These benefits, when obtained by the employees, are taxable under the “Salary” head of the Income Tax norms. So, you should deduct the TDS (tax deducted at source) on the interest which is charged on this loan. In the case of interest-free loans to employees, they are even taxable as a “perquisite”.
For this tax calculation, the outstanding balance of the loan is calculated at the end of each month.
Then, the interest rate which will be applied would be the rate charged by SBI on the 1st of April of the year in which the loan was taken.
Then the interest applicable to the loan amount for each month of the year would be calculated.
From the total interest that has been calculated, the interest which has been recovered by the employer has to be deducted.
The balance which is left out or the remaining balance will be the taxable amount as perquisite.
Employee loans can also be tax exempted under certain cases such as mentioned below.
In case of the loan has been taken by the employee for the treatment of any of the diseases which have been listed under Rule 3A of the Income Tax Act, 1961. But, if the money has been received as a medical reimbursement under a health insurance plan of the employee.
In case the loan amount which is granted is within Rs. 20,000 then it is not taxable.
In the case of an employee who is having the voting power of 10% or more in the organization, then any loan which is taken by such an employee will be considered as a deemed dividend as per Section 2(22)(e). But, in these types of categories, even the interest which is levied on these types of payments is taxable as perquisite.
Obligations of an employer to provide loans
As far as employee loans are concerned, an employer doesn’t have much obligations from tax point of view. The Companies Act of 2013 governs such conditions and the amendment made on March 10, 2015 it allows companies to design policies under which they can offer loans and the details can be mentioned in the offer letter or job letter. However, the act prevents offering similar loans to the directors or shareholders. As an employer, it is also your responsibility to deduct applicable taxes on perquisite and deposit the TDS amount to the government.
Some organizations are known to offer interest free loans to their employees. Should you plan to offer anything similar, it is essential that you deduct taxes on the perquisite value of the loan that is interest-free. Failing to do so will attract penalties for the employees from the income tax department.
What is the difference between employee loans and salary advance?
Salary advance can be defined as a process by which a portion of the employee’s salary is being paid to the employee in advance. This can be illustrated with the help of an example.
For example, an employee in your organization is having a medical emergency and needs the salary of the current month in advance. You can pay a portion of his salary to him as salary advance and the remaining portion would be paid as per the pay dates of your organization. Mostly, the salary advances are re-paid in installments and these salary advances are interest-free.
Loans to an employee mean providing financial assistance to your employees at a minimal interest rate with a promissory note of loan repayment to be done on time. Loans for employees can be of a huge amount but since the interest rate is less as compared to the market rate this is a better and economical option for employees.
How to create employee loans and salary advance policy?
A written agreement or policy for loans to employees, salary advances and loans to employees’ interest rates is necessary.
Loans and advance salary policy should consist of the terms and conditions associated with the loan and advance salary.
The policy should clearly describe the eligibility criteria of the employees for obtaining an employee loan or a salary advance such as the employees should have completed their probation period, the employees should not have asked for a salary advance in the last 3 months, etc.
A policy on employee loans and salary advance would also clearly mention the process involved in the granting of loan and salary advance such as filling up of the form for this purpose, provide the necessary details and submit the form with the HR.
Moreover, this policy should also ensure that both employer and employee have the same understanding of the procedure involved in granting loans, salary advance and also the repayment of the loan.
Your policy should also state the reasons or circumstances under which an employee can apply for a loan or for a salary advance such as any personal emergency, medical emergency, etc.Read more details about personal loans for salaried employees
Can a company give interest free loans to employees?
Interest-free loans are mostly provided by those organizations which have very good financial health and are thus are quite helpful in understanding the financial issues faced by their employees. If the organization is not sound financial and it is giving interest-free loans to its employees, then it is using its working capital for this purpose. Moreover, a lot of time and money of the organization would also be involved in the activities associated with the administration of the loan. Such circumstances are not good for the business of an organization.
Interest-free loans help the employees to sort their financial issues without the stress of interest being charged upon the loan amount. However, in case of charging interest fees on loans provided to employees the rate of interest is quite concessional or minimal. Both of these strategies will make your employees feel your concern towards them and would increase their loyalty towards your organization.
Moreover, interest-free loans when given to employees will lead to an increase in the brand value of the organization. It would enhance the reputation and the image of the organization in the market. Similarly, by granting loans for employees at concessional interest rates the reputation and brand value of the organization will also increase by some considerable amount. In both cases, there will be an increase in the goodwill of the organization.
Moreover, as said earlier interest-free loans and loans at minimal interest rates both are taxable. Both these categories of loans are taxable as a perquisite for an employee who is obtaining the loan.
Hence, when you are concerned about your employees and their well-being; you tend to understand their financial problems and grant them loans. However, while offering loans to employees you should think wisely about your actions, loans to employees interest rate, the impact of these actions on your business, how your actions will affect the work environment and your employees as well.