Employees Benefits Landscape in India and Flexible Work Arrangements

FLEXIBLE BENEFITS Chitra Jayasimha 11thAugust 2017 13thSeminar on Current Issues in Retirement Benefits

Employee Benefits Landscape in India Employee Benefits Coverage Retirement & Leave Benefits Risk Based Benefits Others Wellness Lifestyle Benefits Gratuity Health Rewards & Health Check Up Company Car Provident Fund Insurance Recognition Dental/Optical Housing Assistance Superannuation Life Insurance Notice Period Employee National Pension Disability Reimbursement Assistance Plans Loans System Critical Illness Domestic Travel Health promotion Post Retirement Employee Assistance EAPs Domiciliary Medical Benefits Family Benefit Domestic Benefits Higher Education Assistance Leaves scheme Relocation Counselling - Privilege Leave Assistance Health risk Transport Facility - Sick Leave Alternative work assessment Childcare Support - Casual Leave arrangements Gym/Fitness - Maternity Leave (Shift & Overtime) reimbursements - Other Leaves

What do employees have to say? Gen Y Gen X Baby Boomers Work-life balance & financial incentives are important to me I am getting older & closer to retirement. Please help me plan & save for my retirement Give me what I need to manage my work-life balance Cash is not my ONLY need I am young and have two children. Will my organization help me with school fees? Monitoring my health is important to me and so are all health & insurance programs I am young, single and care about transportation programs, on-site health programs and professional development I am willing to spend my own money for family medical care

Flexible is Incredible! Employees rank Flexible Work Arrangements amongst Top 3 benefits while considering to join an organization 31% Employees Want flexibility in Benefits with a Menu Option 81% 20% 30% 10% 40% 60% 100% 50% 80% 70% 90% Employees value Flexible Work Arrangements as the top 2 rewards in recognition of high performance 35% Employees willing to make voluntary contribution to get access to certain additional benefits 61% Source: Aon Hewitt Study Employees Listening

Typical Flex Framework Align with Company s Philosophy Staff Grade Family Status Length of Service Performance . Flex Credits Based on current benefit investment Basic Life, AD&D and Medical Insurance Core Benefits Sample Insurance Family care Housing Employee to make selection during annual enrolment Optional Benefits Work-life Health Retirement Depending on the overall funding and available credits, employees may have left over credits, employer can choose to: Employee to submit reimbursement Flexible Spending Account Allow employee to cash it out Carry over to next year 5

Flexible Benefits : Case Study Benefits Design: Flex Credits Benefit Pre-Flex Benefit Offering Cost to Company INR 300,000 for self + spouse + 2 kids + parents - Health Insurance INR 15,000 Life Insurance INR 20,000,000 SA for Self INR 10,000 In this sample design, we see that all employees have been moved from their existing benefits plan to the default minimum core benefits plan. Benefit Core Benefit Cost to Company Health Insurance INR 200,000 for self only INR 5,000 Life Insurance INR 10,000,000 SA for Self = INR 6,000 Initial Flex Credit Grants by the employer Credits transferred to employee s FSA Benefit = Total FSA : INR 24,000 + Health Insurance INR 10,000 Life Insurance INR 4,000 INR 10,000

Flexible Benefits Case Study Choices made by the employee from the Benefits Menu Health Insurance Annual Leaves Credits Transferred to Employee s FSA Total Leaves Available Credits Transferred to Employee s FSA Sum Assured Coverage Cost Leave Days INR 200,000 Self only INR 5,000 Nil Sell 3 days 22 days INR 25,000 Sell 2 days 23 days INR 16,000 INR 400,000 Self only INR 10,000 (INR 4,000) Sell 1 day 24 days INR 8,000 Self +Spouse + 2 kids + 2 parents INR 300,000 INR 15,000 (INR 11,000) Do Nothing 25 days Nil Self +Spouse + 2 kids + 2 parents Buy 1 day 26 days (INR 21,000) INR 600,000 INR 25,000 (INR 20,000) Buy 2 days 27 days (INR 42,000) Buy 3 days 28 days (INR 63,000) Life Insurance Cover Annual Health Check up Plan Credits Transferred to Employee s FSA Credits Transferred to FSA Check up Plan Total Cost Sum Assured Coverage Cost Self only INR 8,500 Nil INR 10,000,000 Self only INR 6,800 Nil Self + Spouse INR 17,000 (INR 9,000) INR 10,000,000 pp Self + Spouse INR 13,600 (INR 6,000) Self + Spouse + 2 kids INR 25,500 (INR 17,000) INR 20,000,000 Self INR 10,000 (INR 4,000) Self + Spouse + 2 parents INR 20,000,000 pp Self +Spouse INR 27,200 (INR 20,400) INR 34,000 (INR 25,500) INR 30,000,000 Self INR 20,400 (INR 13,600) Self + Spouse + 2 kids + 2 parents INR 42,500 (INR34,000) INR 30,000,000 pp Self +Spouse INR 40,800 (INR 34,000) Choice made by the employee

Flexible Benefits Case Study Employees Final Order FSA Opening balance INR 24,000 Credits Transferred to Employee s FSA Benefit Benefit Chosen INR 600,000 Health Insurance (INR 20,000) Self + Spouse +2 Kids + 2 Parents Life Insurance INR 20,000,000 for Self Only (INR 4,000) Health check up Self + Spouse (INR 9,000) Annual Leaves Sell 3 days INR 24,000 INR 15,000 (Carry Forward) FSA Closing balance

Flex Opportunities : Benefits in India Benefit Opportunity to flex Comments Retirement Gratuity Statutory benefit Provident Fund Statutory benefit Attractive to middle age employees NPS Expensive so may involve salary sacrifice Paid Time off Most common flexible benefit Possibility of Buy and Sell Privilege Leave Could be designed to be cost neutral to company Utilization & Needs varies across employees Sick/Casual/Other Leaves Event based hence not rational Risk Benefits Group Hospitalization Most common flexible benefit Group Life/ADD Possibility of top up and top-down Opportunity to share costs with employees Critical illness/Any other group insurance Utilization& Needs varies across employees Access to discounted group rates

Flex Opportunities : Benefits in India Benefit Opportunity to flex Comments Health and Wellness Health Check up Domiciliary treatment Wellness vouchers/equipment Employer costs Personalized Coaching on Fitness/Gym Lifestyle Utilization& Needs varies across employees Access to discounted group rates Expensive to trade Car Accessories Tax disadvantages/considerations Mobile & Laptop Administration Vacations Vendor buy-in Hard/Soft Furnishings Concierge Services Meals Creche/Childcare

Flex Opportunities : Benefits in India Other Potential Flex Benefits Opportunity to flex Comments Clothing Parking Financial Planning Employer costs Dental Utilization& Needs varies across employees Optical Access to discounted group rates Expensive to trade Educational Courses Tax disadvantages/considerations Broadband/Internet Administration Books/Journals Vendor buy-in Retail Vouchers Household Insurance Movie Tickets Social Causes

Flex Benefits Approach 8-9 weeks 8-10 weeks 10-12 weeks 4-6 weeks Feasibility Study Plan Design Implementation Communication Assessment of organization s readiness for Flex Ben; review of existing benefit plans; inputs from leadership & employees, costings, utilizations, demographics, benchmarking, vendor buy-in On Going Flex Administration Detailed design including core/optional benefits, flex credit allocation formula, benefits budget & cost impact projections. Communication strategy & roadmap; definition of target audience; preparation of material; train the trainer Configuration of system requirements; user testing; design of administration process; initiation of enrolment 12 Timelines mentioned are indicative only