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.
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.
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.
A personal loan is a loan that is unsecured and is usually provided by financial institutions for those individuals who need funds due to unprecedented circumstances. Unsecured loans are those loans that are granted without the need for any collateral. Since personal loans are granted without any collateral, the rate of interest is quite high.
Personal loan for salaried individuals are granted without asking any questions about the reasons for the loan and are approved based on the credit history of an individual.
Personal loan for salaried individuals is mostly provided for the tenure of 12 months to 60 months.
In the case of personal loans for salaried individuals, the rate of interest is fixed. The “reducing rate method for calculation of interest” is followed for personal loans. It means with every installment that is paid, due to be re-paid keeps on decreasing. This is because the interest will be levied on the remaining principal and not on the original principal amount.
For availing a personal loan, there is no need of much documentation. Only some mandatory documents are needed for the loans to be granted.
Moreover, personal loans can be availed by a salaried employee or a self-employed individual.
When do salaried individuals need a personal loan ?
Employees at times might feel the pinch of cash crunch and personal loans turn out to be saviors in such times. Here are some scenarios where your employees might need the help of a loan
1. Medical emergency
Medical emergencies can come up unexpectedly and the cost of medical facilities is soaring high these days. In such a situation, if an individual does not be having a health insurance policy and also cannot afford to bear the medical expenses by his savings; a personal loan is a savior. A personal loan can help in meeting the unexpected medical expenses. Moreover, the turnaround time of personal loans are quick, which is required for medical emergencies.
2. Wedding expenses
India is famous for its big fat weddings where a lot of money is being spent. In many Indian communities, a big and luxurious wedding is a matter of pride and a status symbol as well. However, there is not always enough savings by salaried individuals to have a luxurious wedding. So, in such a case your employees might want to take a personal loan to meet the huge wedding expenses.
3. Improvements in home
A personal loan can help meet the expenses incurred in the remodeling, renovation or some other improvement work related to the home. An individual can check out the rate of interest and depend upon it can avail of the personal loan.
4. Higher education
Educational loans are available for helping individuals with higher education but they have a very high interest. Moreover, banks usually provide education loans for higher education in prestigious institutions. However, sometimes the education loans are not enough to support the tuition fees, living expenditure, etc. and there will be a need for an additional corpus. This is feasible by a personal loan. A personal loan for salaried individuals will help in meeting the additional expenses associated with higher education like the living costs, the cost involved in relocation, etc.
5. Clearance of a loan with high interest
There might be some urgent situation in which a loan with a high rate of interest might have been taken by an individual. This loan with a high-interest rate can be settled down by taking a personal loan. However, the personal loan should have an interest rate which is less than the interest rate of the previous loan.
How do salaried individuals apply for a personal loan?
To apply for a personal loan, a salaried individual has to meet certain eligibility criteria. On fulfilling the eligibility criterion, a salaried individual can easily apply for the loan online.
The most important step associated with applying a personal loan is to understand the requirements and amount of loan which needs to be applied for. You should have a proper understanding of your requirements and then apply for your loan. By this, you will be able to apply a loan for the exact amount as required by you. Also, you should perform very good research before you apply for the loan.
If you are applying for a personal loan online, you will have to fill the application form and follow a step-by-step procedure.
In the first step, you need to specify your details along with your employment and financial details.
You will obtain the approval online and hence, you need to provide your loan amount and the tenure for which you want to avail the loan.
Then in the next step, the set of necessary documents needs to be submitted. This can be done either by a representative of the bank who will contact you or in many cases the KYC document submission part can be avoided by just providing the Aadhar number.
With this, your procedure for applying for a personal loan is completed and the loan amount is received in your bank account.
However, if you are following the conventional method for applying for a personal loan you will have to visit the nearest branch of your bank. At the bank, you can obtain and duly fill the application form and submit it along with the necessary documents. Then your application would be processed and you can obtain the loan amount.
What are the eligibility criteria for availing a personal loan for salaried employees?
Let us have a look at the basic eligibility criteria which need to be fulfilled by a salaried employee to avail a personal loan. There are a few criteria that are common for all the lenders and there might be some minor differences associated with them.
The applicant of the personal loan must have a minimum salary of Rs. 10,000 for being eligible to avail a personal loan. However, this minimum amount for salary might be higher for those employees who are residing in metropolitan cities.
2. CIBIL score
It is very much necessary for a salaried employee who has applied for a personal loan to have a good CIBIL score. If the applicant does not have a good CIBIL score or has been a defaulter in case of credit payment then his application for a personal loan will be rejected.
CIBIL stands for Credit Information Bureau India Limited and it is the premier agency of India which provides credit scores and credit reports of individuals. CIBIL collects the information of individuals relating to loans and credit cards from various banks and financial institutions. With the help of this information, a CIBIL credit report is being prepared known as CIR i.e. Credit Information Report. The CIBIL Score offered by CIBIL consists of 3 digits and usually lies between 300 and 900. A CIBIL score of 750 and above is considered to be ideal for obtaining a personal loan or a credit card. It is quite necessary to keep your CIBIL Score healthy to get a personal loan approved easily.
You need to be quite disciplined and pay your credit card dues, loan repayments on time. This is the major factor that will have an impact on your CIBIL score. Moreover, you can maintain your credit utilization ratio at a lower value of around 30% to have a good CIBIL score. Also, for a good CIBIL score you can have a combination of a secured and an unsecured debt together. You should keep on monitoring your CIBIL score from time to time and review it regularly. Furthermore, it is suggested to increase your credit limit and review your credit report regularly to have a good CIBIL score.
The age of the employee is another important criterion that should be fulfilled for approval of a personal loan. You must be a minimum of 21 years of age and a maximum of 60 years of age by the time of completion of the tenure of your loan.
4. Loan repayment capability
The loan repayment capability of the employee is the most important criterion which needs to be fulfilled for availing a personal loan. The Loan repayment capability can be defined as your earning, the type of work you are doing, your financial liabilities if any, etc. These aspects determine the capability of loan repayment which is necessary to be fulfilled for a personal loan.
What documents are required for a personal loan application?
There are some major documents for a personal loan to be approved easily. However, the list of necessary documents for a personal loan might vary from one financial institution to another but for the majority of the institutions, they are the same.
1. Residential proof
Photocopy of ration card, electricity bill, telephone bill or a photocopy of the passport will work as an ideal residential proof. It should be kept in mind that the document which is shared must contain the address of the residence where you have been staying since the last 1year-2 years.
2. An identification proof
Photocopy of your passport, Voter ID card, Aadhar card or your valid driving license can be used as an identification proof.
3. Bank statement of the last three months or bank passbook of the last six months
This document is required as proof of your income status and is necessary for validating your financial credentials.
4. Latest salary slip or Form 16 along with current dated salary certificate
These documents help in giving information about your income status. It also helps the financial institution to decide on your financial health and eligibility to obtain a personal loan.
5. Application form for the loan
The application form has to be filled and submitted in the financial institution for the loan in case of applying for the loan in an offline manner. If you are applying for the loan by online means, you can fill in the form on the website of the financial institution.
6. Your photographs
Your self-attested passport-sized photographs are required in the application form for the loan.
Hence, by submitting these necessary documents for personal loan application approval you can avail of a personal loan in minimal time.
How to get personal loan approved quickly?
If you are a salaried employee and have applied for a personal loan, it can get approved quickly without much hassle if some of the conditions are met. Let us have a look at the factors which tell about how to approve personal loan quickly.
1. Eligibility criteria to be met
You should meet all the necessary eligibility criteria to get your loan application approved easily. If you are not aware of the basic eligibility criteria and tend to apply for personal loans, it is quite natural that your application would be rejected. Your loan application would be rejected by the financial institutions due to the non-fulfillment of the necessary criteria. Most importantly, the age limit is the major factor that the financial institutions give utmost importance while approving personal loan applications.
2. Good credit score
Your credit score is another major factor that determines the status of your loan request. If you have a good credit score i.e. around 750 which means you have been quite punctual in re-payment of your old loans and credit card bills, your loan application would be approved soon. However, if you do not have a good credit score you must make efforts on increasing your credit score and then send your loan application form.
3. Avoid new loan while the re-payment of an old one
It is always advisable not to apply for a new personal loan when you are having one in your name. Moreover, it is considered ideal if you leave a gap of 6 months between a new loan and an older one. If you already have a personal loan on your name, your application for another personal loan would be rejected by the financial institution.
4. Avoid sending multiple loan applications
You should not send multiple applications for personal loans at a single point of time. This does not increase your probabilities of obtaining a personal loan but rather it will decrease your possibilities as financial institutions can think that your chance of taking a personal loan from them might be less. So, it is advisable to keep your applications for personal loans limited.
5. Decide your loan amount carefully
You should be quite careful while you are selecting your loan amount. Mostly, the financial institutions consider your income before they grant you a personal loan. If your loan amount is too high, financial institutions might find it difficult for you to re-pay the amount within a specified time limit. As a result, your loan application might get rejected by the financial institution.
When these basic conditions are kept in mind while applying for a personal loan, your loan request would be approved easily.
Hence, salaried employees usually have a fixed income and there can be situations in which the need for an additional expenditure might arise. Scenarios like debt payments, down payments, medical and personal emergencies can arise and the need for extra cash also arises. So, personal loans are the best method by which a salaried employee can face such unexpected situations in life. They are quite helpful and can be availed easily in a hassle-free manner. The only necessary things which should be kept in mind are the eligibility criteria and the credit score for availing a personal loan easily.
EPF is otherwise known as the Employee’s Provident Fund and is a retirement plan available for salaried individuals. This retirement scheme will help your employees to save a portion of their salary every month.
The EPF is an avenue for saving and was introduced under the Employees’ Provident Fund and Miscellaneous Act, 1952. The EPF is managed by a Central Board of Trustees which consists of a representative from the Government, the employers, and the employees. This board of trustees is helped in its work by the Employees Provident Fund Organization (EPFO) which works under the jurisdiction of the Ministry of Labor and Employment. The main objective of the EPF or the Employee Provident Fund is to create a corpus that will be helpful after the retirement of your employees.
EPF is known to enjoy EEE status. EEE status is commonly referred to as exempt-exempt-exempt status of EPF. The contributions made by employees are tax-deductible under Section 80C, the interest that they earn via EPF is also interest-free. And lastly, the maturity benefits of EPF is also tax free. EPF is responsible for promoting savings among salaried individuals. The funds deposited into EPF are contributed by both the employer and the employees regularly. These funds can be used in case of the employees being unable to work or after their retirement.
The Employee Provident Fund (EPF) schemes are administered by mainly three Acts i.e.
Employees’ Provident Fund Scheme, 1952
Employees’ Pension Scheme, 1995
Employees’ Deposit Linked Insurance Scheme, 1976
The Employee Provident Fund is an ideal savings tool by which employees can save a considerable amount from their salary every month. This amount would be of great help to the employees in the future either after retirement or due to being unable to work.
Benefits of Employee Provident Fund
Some of the major benefits and advantages of the Employee Provident fund can be mentioned below.
Under Section 80C of the Income Tax Act, 1961 the contributors to the EPF can avail of the benefits of tax deductions.
According to Section 10(11) and Section 10(12) of the Income Tax Act, 1961 the contribution which has been made by the employer is also eligible for tax exemption.
There is no tax levied on the maturity amount.
The interest which is earned on the savings of EPF is also exempted from Income Tax.
EPF also helps its contributors with loans whenever the necessity arises.
EPF Eligibility Criteria
The basic eligibility criteria to become a member of an EPF are mentioned below.
In general, the employees of an organization are directly eligible for obtaining the benefits of Provident Fund, Insurance, and Pension schemes as soon as they join the organization.
As an employer, you must open an EPF account for employees if their basic salary and dearness allowance amounts to less than Rs. 15,000.
For employees who receive a basic salary plus the dearness allowance more than Rs. 15,000, they can also become a member of the EPF. They can do so by getting consent from you and the Assistant Commissioner of PF.
Those organizations which have employee strength of 20 or more than 20 employees are mandated for registration under the EPF scheme. However, those organizations which have employees less than 20 can voluntarily register under the EPF.
The EPF scheme is not applicable for people who are residing in Jammu and Kashmir.
Contributions of employees and employers towards EPF
An employer and employee both make EPF contributions in the form of a particular part of the salary. This contribution is done every month and the contribution rate depends on the basic salary and the dearness allowance of an employee.
We can state the rate of EPF contribution by both employers and employees in the below-mentioned table.
Must know features about EPF Contributions
1. Rate of Contribution:
a) Generally, the rate of contribution by employees is fixed at 12% but for some exceptional cases, the rate of contribution is 10% like:
i. Those organizations which have employee strength of a maximum of 19 persons have a contribution rate of 10%
ii. Those organizations which have an annual loss which is much more as compared to that of the net value of the organization has a contribution rate of 10%
iii. Industries such as coir, guar, beedi, brick, gum, jute, etc. have been allowed for an employee contribution of 10% towards the EPF
iv. Some industries which have been declared as sick industries by the BIFR have their rate of employee contribution towards EPF as 10%
v. Certain organizations operate under a wage limit of Rs. 6500 and the employees of these organizations can contribute 10% of their salary towards EPF.
b) As said earlier, employers will contribute 12% of the salary into EPF i.e. 12% of Rs. 15,000 which is Rs. 1800. So, both employers and employees will contribute Rs. 1800 in a month towards EPF.
2. Contribution distribution
a) For the Employee
The total percentage of salary which is contributed by the employee goes completely into the employee’s provident fund.
b) For the Employer
The 12% contribution which is being made by the employer includes a contribution of 3.67% towards EPF (Employee Provident Fund) and 8.33% towards the EPS (Employee Pension Scheme).
3. Total Employer Contribution
Some contributions are made towards the administration cost to the EDLI and the EPF at the rate of 1.1% and 0.01%. These contributions are also made by the employer. So, the employer contributes to a total of 13.61% of the salary towards the EPF scheme.
We can illustrate the entire procedure of EPF contribution by both employer and employee by an example.
For example, the monthly salary of Mr. Kumar is Rs. 40,000 in a month. Then, the contributions which are made into the EPF can be summarized as below.
1.Contribution by employee=12% of Rs. 40,000=Rs. 4,800
2.Contribution made by employer towards EPF=3.67% of Rs. 40,000=Rs. 1,468
3.Contribution made by employer towards EPS=8.33% of Rs. 40,000=Rs. 3,332
4.Total contribution=Rs. 9600
Hence, a contribution of Rs. 9600 is made from the salary of Mr. Kumar towards EPF.
As an employer, you would have to contribute to EPF on the Basic salary along with the DA component. An organization much match the contribution of an employee and an extra 1% contribution towards EDLI (0.5%) and EPF plus EDLI administrative charges (0.5%). Your contribution towards EPF changes slightly depending on the number of employees that you have.
More than 20 employees
The employee’s share in such conditions is 12% and as an employer, you must contribute 3.67% as EPF, 8.33% as EPS, 0.5% as EDLI and 0.5% as EPF+EDLI administrative charges.
Less than 20 employees
The employee’s share in such cases is 10% and as an employer, you must contribute 1.67% as EPF, 8.33% as EPS, 0.5% as EDLI and 0.5% as EPF+EDLI administrative charges.
How to disburse EPF online?
The procedure involved in the disbursal of the Employee Provident Fund payment by online means consists of the below-mentioned steps.
Employees can file for a pay EPF online claim by visiting the EPFO portal. For a pay EPF online claim, employee’s UAN (Universal Account Number) must be activated. Also, their bank details and the KYC details must be present in the EPFO portal.
It is your responsibility to provide employees with UAN and mention the same in the salary slip. If employees have not received their UAN, they can obtain it from the EPFO portal itself. They can select the tab Know your UAN status. Then they will have to fill in their details and a PIN obtained by employees on their phone number. With this, they can easily obtain their UAN. Even after they have received their UAN, the UAN needs to be activated.
For making their UAN active, employees must visit the ‘For Employees’ in the EPFO portal. Next, they will have to select the option ‘Our Services’ and under ‘Our Services’ and they will have the option of ‘Member UAN/Online Services’. Then, they will be directed towards the UAN portal where they will have to select ‘Activate your UAN’ option. Employees will obtain a PIN on their mobile number and they can use that PIN for the final step. With this, their UAN would be activated and they can apply for the disbursal of EPF online.
The steps that are involved in filing an online claim for the withdrawal of the EPF online are listed below.
First, your employees would have to log in to the EPFO portal with the help of their activated UAN and password.
In the next step, they will have to select the ‘Manage’ tab and verify the KYC details.
Now, they can visit the tab titled ‘Our Services’ and then select the option ‘Claim’.
Then, they will be directed to a section which is titled as ‘I want to apply for’ and choose their required type of approval i.e. full or partial or pension withdrawal.
After the selection of the type of withdrawal, your PF disbursal request will be forwarded to you for approval.
After your approval, employees will obtain their money within 10 days of raising the claim.
EPF withdrawal rules
Your employees can choose to withdraw their EPF contributions under certain conditions while adhering to some rules. Here are some of them.
1. Home Loan
Employees can choose to withdraw up to 90% of their contributions to pay off home loans. They must complete at least three years of service to avail the same.
If an employee remains unemployed for more than a month, they can withdraw up to 75% of their EPF.
Employees can withdraw up to 50% of their EPF funds for their marriage, provided they have completed 7 years of service.
The current rules allow employees to withdraw their EPF if they do not have a job after two months of the completion of the previous job. And to avail of this benefit, the subscriber must have worked for at least 10 years.
A recent modification of the rules offers more flexibility for employees. Employees can now withdraw up to 75% of their EPF fund value if they do not have a job for more than a month. This change was introduced to help employees take care of their financial needs at such times.
The interest rate on EPF for the financial year 2018-19 is 8.65%. It has been raised from 8.55% which was the interest rate in the year 2017-18. The fund which is accumulated in the Provident Fund Account is capable of attracting some interest which is completely exempted from tax.
The entire interest which is earned is transferred to EPF Account of employees and this is calculated based on the rate of interest that has been determined by the Government of India along with the Central Board of Trustees.
Let us understand some important aspects related to the interest rate on EPF.
The rate of interest i.e. 8.65 is valid for those EPF deposits which are being made in the financial year of April 2018 to March 2019.
The interest is transferred to the employee’s EPF account once in a year i.e. on 31st March of the current financial year.
For further calculation of interest, the interest which has been transferred to the employee’s EPF Account is summed up with the next month’s balance i.e. the balance of April.
For the inoperative accounts of non-retired employees, interest is offered.
For the inoperative accounts of retired employees, interest is not being offered.
The inoperative accounts earn interest and this interest is taxable under the current income tax slab.
When you contribute to the Employee Pension Scheme (EPS), employees will not be obtaining any interest. But they are eligible to obtain a pension of that specified amount after the age of 58 years.
For EPF, the interest is calculated monthly whereas the interest rate is announced every year. The interest rate can be calculated by division of the interest rate in a year by 12. By this, the interest amount which has to be given to you in a month is derived.
Understand with an example:
Let us consider an example to illustrate the entire concept of interest rates on the Employee Provident Fund.
For example, an employee has started making their contribution to EPF by November 2018. Now, let us note down some of the important points related to the interest on EPF.
The interest rate which applies to the EPF is 8.65%
Now, the monthly rate of interest can be calculated as 8.65/12=0.7208%
Every month, they are transferring 12% of Rs. 15000= Rs. 1800 towards the Employee Provident Fund Account.
This amount of Rs. 1800 will be transferred into their Employee Provident Fund Account at the end of every month.
Now, the contribution made by you is also Rs. 1800 which is divided into
3.67% is contributed towards the employee’s EPF Account
8.33% is contributed towards the employee’s EPS Account
The total contribution made towards EPF Account is Rs. 1800 +3.67% of Rs. 1800=Rs. 1800 + Rs.
So, now the balance which has been carried forward from November 2018= Rs. 2350
The interest which is earned for December 2018=0.7208% of Rs. 2350= Rs. 16.938
Balance at the end of the month December 2018= Rs. 2350 + Rs. 2350=Rs. 4700
How to claim EPF ? Which EPF claim forms to use?
An EPF Form is necessary for performing any activity on the EPF Account. These activities can consist of
Registration for opening an EPF Account
Withdrawal from the EPF Account
Availing a loan against the EPF Account
Transfer of the Employee Provident Fund
There are several EPF Claim forms available and some of them can be listed below.
The government of India has introduced the UMANG app as a unified platform to access various government-based services. The app offers several e-governance services that you can access and avail of. You can use the app to file income taxes, apply for Aadhar, clarify your queries related to provident fund and avail several central governments, state government or local bodies services.
Limitations of EPF
There is no doubt that EPF is a great tool for saving for the future for your employees. However, it has its limitations as well. For example, irrespective of the contributions one cannot reach the magical number of INR 1 crore. Since it allows employees to withdraw funds, a lot of them choose to do so while changing their jobs. Thus, getting back to square one. Also, if you withdraw your EPF before the completion of five years, you must pay taxes on them as well.
Employee Provident Fund Organization (EPFO) Contact Details
In case of any details needed or doubts you can easily contact the Customer Support Cell of EPFO.
The Helpdesk number which can be contacted for queries is 1800118005. Visit the EPFO website for more details.
Moreover, the official address of EPFO for contact is: Bhavishya Nidhi Bhawan, 14, Bhikalji Cama Place, New Delhi-110066