Tax Saving Reimbursements -Fuel Reimbursement-Zeta

1. Rethink | Revise | Retain The 3Rs of Employee Motivation and Retention

2. Introduction What started off as a workforce management mechanism for organisations is now making waves in strategic partnerships. Human Resources has come a long way. But, no matter how pivotal a role HR plays in driving business and profitability for an organisation, it’s always the employees that remain the centre of its universe. If there’s a concern that bothers the HR community, it’s the never-ending challenge of keeping employees engaged and retaining them at the workplace. Essentially, small changes and initiatives can impact employees in a big way. For instance, rewards and recognition (R&R) works wonders in boosting the morale of the employee. In the same vein, offering tax-saving employee benefits can also prove to be an effective way of engaging and retaining employees. However, not all companies understand the underlying benefits of offering tax-saving allowances and reimbursements to their employees. To enable the HR community understand employee benefits better, we bring you a forward-looking strategy, backed with the findings from the Zeta Employee Benefits Study, a comprehensive study on employee benefits, that can help shape important decisions. https://www.zeta.in/employee-benefits-study/ https://www.youtube.com/watch?v=RfNNjK9cCx4&feature=youtu.be We are happy to share with you the 3 Rs of Employee Motivation and Retention — Rethink, Revise, Retain — that can aid decision-making for your overall employee engagement plan.

3. Rethink It’s not everyday that an HR manager revisits employee salary structures, but it is inevitable when major policy changes take place. One such change in Income Tax provisions is the introduction of Standard Deduction in Annual Budget 2018. This component allows a flat deduction of 40,000 for salaried employees in lieu of medical reimbursements and conveyance allowance. www.blog.zeta.in/income-tax-returns-itr-filing-heres-how-employees-can-get-higher-salary-now-eea40ac49976 It’s definitely a welcome move as it takes away the need to submit any paper bills to claim the benefit. However, the million-dollar question is: Are employees benefiting from this move? Well, not really. Their take-home is not seeing any marked difference, thanks to the additional 1% education cess that was also introduced in the Budget. So, what do you need to RETHINK? Standard deduction is now a standard component across salaries across companies. While the standard deduction adds 5,800 every year to an employee’s tax-exempt salary component, it translates to a yearly savings of at most 290 for the 5% salary bracket, which is further diluted by the increase in education cess. Let’s understand the net benefit of an employee who falls under the 5% tax slab and earns 5 lakh bags a net benefit of 194 annually, whereas someone who falls under the 30% tax slab and earns 15 lakh has to pay 713 more to the government. Let’s face it. All taxpayers in the higher tax bracket will end up paying more tax. Here’s a table that shows how Standard Deduction will impact the take-home (or not) of employees falling under all the three brackets.

4. (Pre-budget) (Post budget) (Post budget) (Post budget) -19200 -15000 Net-net, Standard Deduction is doing little or nothing for your employees. But you can play an effective role in making salary structures lucrative again. Your employees and their performance are the building blocks on which your company is built. Introducing some new tax benefits within the salary structure you can help increase the take-home component for your employees, thereby, making your salary offers more lucrative. And the best part is, you do not need to change the cost to company (CTC) of an employee. It can even be used an effective negotiation tool while hiring new talent. The aim should be to introduce the right mix of benefits that can enhance your overall employee benefits offering. Let’s understand: https://blog.zeta.in/how-does-your-employee-benefits-plan-look-now-d9e8d599f296 What are some other benefits available for employees? Income Tax provides for 51 allowances and perquisites that can help employees save tax. There are several useful tax benefits that can be introduced as part of the pay structure and does not require major alterations to the CTC. Some of the popular tax-saving benefits across industries are as follows: Source: Zeta Employee Benefits Study commissioned to Nielsen India

5. As an HR manager, you need to assess what is the benefit that is most suited for your employees and your organisation. You can also use tax benefits to amplify your existing employee benefits policies. For e.g.: If your organisation has a work-from-home policy for employees, introducing reimbursements towards internet data usage for work may help compliment your policy. If you have a culture of knowledge building, introducing reimbursements for books and periodicals can encourage employees to purchase more books that can enhance their skill set at work. Introducing the right mix of benefits can amplify your overall employee benefits offering. Examine your reimbursements management mechanism Let’s now take a moment to take a retrospective look at how we manage employee benefits. If your company considers reimbursement management a cumbersome task, it is time to rethink what is it that you can do better. The study has revealed that India Inc is yet to catch onto the digital wave of managing reimbursements with 94% companies still using either a fully paper-based process or a partly paper and partly digital process and a mere 6% having gone fully digital. If you belong to the former group, you should be wary of how time-consuming and complicated a process it can be. From managing paper bills submitted for reimbursement to storing them, manual work needs to be eliminated to make way for a digitally-managed, transparent and efficient reimbursement programme.

6. Revise Once you’ve identified the employee tax benefits you would like to introduce, you must apply the next ‘R’ in the 3R strategy that stands for “Revise”. Maintaining the fine balance of employee motivation sometimes needs a company to tip the scales a bit more. Now that you have decided to Rethink your employee benefits, it is important to consider how you implement or Revise it. A good place to start is the way you manage your reimbursements process. Simplify the reimbursements procedure According to the Zeta Employee Benefits Study, one in two employees believe the reimbursement process is too complex and 51% of employees said they opted out of reimbursements citing the same reason. A staggering 41% employees said they were required to submit one form for every claim they submitted. What’s more; 82% employees said they needed 2 or more approvals to complete the process. Storing bills, time taken for approvals as well as submissions and tracking status on claims were the biggest challenges for employees, the study reveals. Employee education on these policies is another important aspect to consider. The study reveals that 1 in every 4 employees does not understand the saving possibilities that tax benefits offer and given the cumbersome processes of making reimbursements claims, 56% of those who opt out of these benefits do so for a higher in-hand salary. It’s disappointing that employees do not have a clear understanding of tax-saving benefits. https://www.youtube.com/watch?v=RfNNjK9cCx4&feature=youtu.be

7. While you may go the extra mile and introduce several benefits for your employees, if they do not understand and see the actual benefit, the policy falls flat. Because reimbursements are first deducted from salary (before being credited upon bill-verification) there’s a sense of loss employees perceive. Those who have opted out of employee benefits thinking they’ll get a higher in-hand salary are, therefore, forgoing an actual profit in the future for a notional benefit in the present. But the notional benefit is in fact a real loss. We can put this down to a very human tendency of valuing instant gratification over having to wait out an uncertain future. This is the paradox of preferring to opt-out of receiving benefits for more in-hand salary. Hence, education is indispensable. Save time and costs, go digital Another key fact you must consider is claiming reimbursements for benefits should not eat into an employee’s productive work time. As per the findings of the study, 23 minutes is the average time taken by an employee to submit one single claim. And this is only one claim, multiply this with the number of claims an employee submits for every benefit and the total number of employees and it will give you a sense of the collective productive time lost in just submitting claims. Add to this, the effort you and your team will have to take to manage the paperwork and logistics. The study claimed that 81% companies have a dedicated in-house team to manage reimbursements and the average size of this team was around 6 employees. This was irrespective of the size of the organisation. Hence, going digital is the only logical solution that solves almost all these problems at once. When asked about their preferred mode of reimbursement claims, 90% employees said they prefer a fully digital reimbursements process. This is a call to action for companies that haven’t switched to digital tax benefits yet. When the majority workforce in India prefers a digital process, then there’s no good reason to not follow through, considering such services and platforms do exist in the market. Meanwhile, the cost of running a digital programme is substantially lower than running a paper-based process. Going digital also helps cut overheads and logistical nightmares and the best part is that there is zero or little paperwork.

8. Retain When you take the effort to devise a strategy that aims at keeping employees happy and motivated, it is bound to yield results. The last “R” in the 3R strategy stands for “Retain”. Once you can execute “Rethink” and “Revise” successfully, you’ll be able to Retain your employees for a longer period of time. On one hand, educating employees on tax benefits will instill a sense of trust among them, and on the other, making the process simpler and less tedious will help your employees reap the full potential of these benefits. Let’s delve deeper into how a digital employee tax benefits programme will contribute towards employee retention: Understanding the pulse of millennials Every HR manager and decision-maker knows that good talent is hard to find and harder to retain. Cost of salaries is increasing as millennials want more too. Tax benefits can provide employers with a good margin to operate with. It can be used as a negotiating tool during hiring as well. Reap the benefits of going digital As per the study, 9 in 10 employees prefer going digital primarily for these three reasons: it’s less time-consuming, doesn’t require paperwork and tracking the status of the claims is easy and convenient. In fact, adopting user-centric design for workplace processes fosters employee engagement and improves their productivity.

9. As for the HR team, digitisation will facilitate faster verifications, which in turn means employees get their reimbursements much faster. It will also release the pressure of managing extensive paperwork and free up teams to focus on other areas of employee engagement. Going fully digital with employee benefits will ensure greater convenience for your employees as well as your organisation. Also, e-assessment of income tax is going to be a reality this tax-filing season. Hence, going digital will be a good idea. The ‘wow’ factor Technology always brings in a cool quotient to every company. It also means that your organisation is prepared for the future and is in sync with the current times. Introducing new age digital processes at the workplace demonstrates that your company is modern in its approach and is not afraid to bring about change in its culture. This also creates a “wow” factor among employees within the organisation and becomes an attractive feature while recruiting new talent. Boost the morale of your employees It’ll be too unrealistic to say that offering employee benefits alone can help you retain your valued employees. It can never be the case. There are a lot of factors that affect an employee at the organisation. However, digitised employee benefits can be a step forward that shows how much you really care. This reflects not only your clear intention to help them save taxes and take more home annually, but also how you want to reduce time wasted on claiming reimbursements and simplify the entire process holistically. This is just one of the many ways you can boost the morale of your employees at the workplace.

10. Conclusion To any organisation, customers are king, but a new school of thought is emerging where organisations are treating their employees as customers. Much like when customer happiness is treated as a key goal, when employee happiness is prioritised, the impact is reflected in the company’s bottom line. Happy employees are more engaged, more loyal and more productive. One of the key factors influencing employee engagement is the kind of benefits available to employees. It is also important to take a convenience-first approach to redefine employee benefits. Convenience for both — employees and companies offering the benefits. It is time companies pay heed to what employees want and in the process help themselves manage their process better. Employees need to be educated on how tax-saving benefits can actually help them take more home annually. And after education, comes revision of salary structures. Administering employee benefits is just one of the ways to show that you care and that you’re making an effort to keep your employees happy and engaged at work. After all, employee engagement and employee retention are two sides of the same coin. If you’re ready to administer digitised employee benefits in your organisation, now is the right time to put the 3R strategy — Rethink, Revise, Retain - to work for you.

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