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BW Businessworld

Sharing Benefits

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Within companies, “HR management (has) become a target of discretionary spending cuts,” says David Bartlett, economic advisor at London-based accounting consultancy RSM International. “And companies risk losing their long-term competitiveness since factors (such as globalisation and demographics) underpinning the war for talent remain intact even now.”
But companies don’t have to shed jobs to cut costs if they can rely on the concept of flexible benefits (Flex). The concept was introduced by multinational companies (MNCs) in emerging markets and is especially relevant in today’s circumstances. “Currently, the options provided by companies around taxable allowances is perceived as Flex in India,” says Kulin Patel, head, benefits at Watson Wyatt Worldwide, a global consulting firm. “True Flex addresses the varied needs of different employees.”
The most suitable option is to share benefits such as insurance premium with the employee instead of withdrawing the benefit entirely. Based on employee profile, Flex also allows one to choose the mix of health insurance and other benefits that suit individual needs and life stage along with co-sharing costs. While the cost-shifting aspect of Flex can reduce employer expenditure, it also lets an employee choose what is more valuable to him.
For example, many homes with dual incomes have overlapping insurance coverage, an unnecessary cost borne by companies at a time when medical inflation is rising in double digits. Companies are giving the spouses an option that one of them takes the insurance cover, while the other takes the benefits in any other form. Though this may not reduce the company’s overheads, it may make an employee happier. By providing other options — of similar costs — to the employee that “are designed according to the local fringe benefit taxes, you provide the employee with what he appreciates more,” says Rosaline Cho Koo, Asia Pacific Health & Benefits Leader, Mercer Consulting.
Inarguably, Flex is neither known or widely practised yet. The Marsh/Mercer India Flexible Benefits Survey (conducted over Nov-Dec 2008 on 102 companies) says only 51 per cent of the respondents were aware of Flex (presumably MNCs). Owing to the current market scenario, or otherwise, 41 per cent felt they need to derive greater value from their existing benefits.
Such value addition eases talent retention challenges for a firm. Thirty per cent of those surveyed cited the same as a driving factor to implement Flex. Respondents from the BPO sector, however, showed a sharp contrast. Owing to the inherent high attrition rates at BPOs, the administrative complexities outweigh advantages of Flex.
Though many HR managers BW spoke to are trying Flex in small measures — encashable monthly awards and vacation leaves — most still consider (non-optional) provision of mediclaim, transport reimbursement and food vouchers as manna.
So, does it make sense to transition into this new structure during such turbulent times? Forty-nine per cent of the respondents were willing to implement Flex within a year. Koo believes companies can break-even in a year if Flex is deployed on a co-share basis with employees, accounting for transition costs. Patel reasons that though a highly effective practice, the Indian labour market has not yet matured enough, “No one wants to be first.”
manashwi dot banerjee at abp dot in
(Businessworld Issue Dated 10-16 March 2009)

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