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Group Benefit and Insurance policies

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NetSet is a fast growing start up company, dealing in ‘Business to Customer’ apps designing. The employees are very passionate about their work and love the culture of the organisation.

In the past few months, the company has been facing few personnel related challenges, in terms of retaining its high performance employees.

The CFO consulted few of his industry acquaintances and realised that providing deferred benefits and coverage for the unforeseen expenses, helps in motivating the employees to focus all their energies on the work front.

Organisations, big and small use many monetary and non monetary means to retain their valued employees. Such schemes come under the broad category of employer employee relationship management.

Difference between Key insurance and Group insurance

Key man insurance policies are term policies and the beneficiary is the organisation. They are usually taken on the life of the key person whose absence can majorly affect the organisations earnings. The benefits of key man are taxable in the hands of the company whereas . group policy benefits are only for the employees.

Type of Group Plans – They include Group Life Insurance, Group Health Insurance, Group Gratuity plans and other customised products. These provide Life cover, Health cover and Fund management services.

Group Insurance usually has one master policy created in the name of the employer. All employees are listed down under a single policy.

In case of a Group Life Insurance policy, the employer in order to claim tax benefit has to assign the policy individually in the name of the employee. The employee, in turn has to appoint a nominee on his policy.

What are the benefits to the employer?

Premiums – Paid by the employer are shown as business expenses under section 37(1) of the IT act 1961. The coverage for each employee is based on their grade and level in the organisation. So a managing director can have a Rs.50 Lac medical cover and a assistant manager can have a Rs. 1 lac cover.

Retaining employees – It’s a great motivation tool for retaining high paid employees as the premiums don’t count as part of the employee’s remuneration.

Training new employees – Since employee retention levels are high, the corporate saves on training new people who would have replaced the old ones.

Financial support – The life cover, health cover and gratuity cover helps the organisation in providing the employee and his family with due financial support at the time of need.

Organisations – Corporate, legal firms, institutions, boards and trusts can insure their employees. In case of promoter run companies, the promoter can be shown as an employee, for insurance purpose, provided he doesn’t have majority ownership.

Benefit for the Employee

Assured Gratuity – Received by the employee as and when he leaves the organisation, after completing the minimum years of service.

Coverage for family including parents – Under the group health policy, medical requirements are usually waived off even for the parents. The same amount of medical cover for parents would have been difficult, had he approached a health company as an individual.

Financial future – Life insurance cover ensures that his family’s financial future is taken care of. In case he leaves the organisation, he has the option to convert it into an individual policy, provided the master policy has an option to convert.

Valued resource – It gives the employee a sense of belonging and peace of mind thus ensuring increased productivity.

Tax free – All benefits are tax free in the hands of the employee under sanction 10(10) (D) of it act.

Group Insurance Policies are a win all deal for the organisation as well as the employee and go a long way in creating a sustained healthy work culture.

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