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Flexible Benefit Plan (FBP), a part of employee’s Cost-to-Company (CTC), is one of the best ways to make employees feel valued in an organisation. With changing times, companies understand and are mindful of the efforts and expenses incurred by employees and use flexible benefits for personalising the salary structure, offering tax benefits to the employees and also maintaining a healthy employee-employer relationship.
What is FBP in salary?
A Flexible Benefit Plan is termed ‘flexible’ because the company can fix or regulate packages as per Govt compliances, company norms, and the employee’s position. Although the organisation/HR generally allocates salary components, companies should also consult employees when allocating FBP in salaries. The modifications are, however, protected by checks and balances to prevent its misuse.
Components of FBP
Food and Beverage costs
The income tax department considers meals and non-alcoholic beverages offered by the company during office time as a benefit for the employee.
The company may issue food bills such as meal or grocery coupons (Sodexo coupons or meal vouchers) to its employees ranging from Rs 2200 to Rs 3000. Such bills are is tax-free for the employees and can be reimbursed.
Employees who commute to work every day are ready to go the distance, even if it means significant travel time and daily costs, provided the expenses are covered.
Hence, some employers compensate for the travel expenses. The expense in the FBP is capped by the employer and may differ from company to company.
The FBP facilitates covering the expenses of employees related to conveyance in the following cases:
- Fuel bills: Employees may claim the cost of petrol or diesel against submitting bills for the same. FBP allow the inclusion of this essential requirement for funding fuel costs within the salary structure of the employees. While some companies have a minimum amount for claiming the bill, some offer a complete waiver on fuel bills.
- Employer’s Vehicle (Car): Sometimes the company provides few employees with a car that can be used only for official purposes. In such cases, the employee has to produce a certificate that claims that the vehicle was indeed used for business use only along with the fuel bills for the journey. However, if the car provided by the employer is used for both business and personal purposes, then a part of the expenses are met by the employer whereas the rest is paid by the employee themself.
- Employee’s Personal Vehicle (Car): While some companies provide a select few employees with a car, most companies offer compensation to some employees who use a personal car for office purposes. A separate provision is made in the CTC of such employees.
- Chauffeur service: For employees in executive positions, some companies offer a flexible benefit of covering the cost of a driver. This component is mentioned in the FBP declaration of the employee’s salary structure.
Workplace communication is of utmost importance to most organisations. Employers understand the need for mobile connections/internet service to fulfil official tasks. Therefore, most companies include postpaid mobile service bills and broadband connection bills as part of the flexible benefits plan in the salary.
Benefits of FBP for employees
Tax saving: Easy restructuring helps employees reduce their tax burden. For example, food bills, mobile phone bills, and travel allowance are not taxable. Factoring in these components can help the employee separate this on the payslip from their basic salary on which tax is calculated. Thus, by doing this, take-home salary is not affected.
|Flexi Component||Maximum Limit in Rs. (Yearly)|
|Health and Fitness||24000|
|Phone bills, internet bills||36000|
|Learning and Development||30000|
Monthly Expenditure Planning: Knowing that the company offers compensation towards certain expenses as part of the monthly salary, the employees budget and plan for their expenditure for the entire year accordingly.
Benefits of FBP for employers
Employee retention: Implementing FBP displays the company’s employee-friendly sentiment. The flexibility factor makes the employee feel valued and boosts employee retention.
Better recruitment: Companies stand the chance of attracting better talent when they offer compensation with various flexible benefits.
Increases productivity: By offering a range of choices for FBP in salary, employers make a healthy and happy workforce, leading to higher productivity.
How to ensure easy implementation of FBP
FBP is a part of the CTC for the well-being of the employees. Hence, the allocation must be reflective of an employee’s needs and HR professionals must ensure speedy implementation to enhance employee satisfaction.
RazorpayX Payroll is one of the best payroll software which automates the process and manages all the complexities seamlessly. It helps the HR team to manage the FBP components with a comprehensive set of features at affordable pricing.
Policies of FBP
Mutual Exclusion Policy: Under this policy, the employer and the employee may mutually decide what components are supposed to be excluded from the FBP.
Quantity-based policy: It governs all components whose specific base value is declared by the employer. The employee may have the option of deciding the quantity of the component based on the base value.
Opt-in Policy: As the name suggests, by implementing an Opt-in policy, the components are declared ‘opt-in’ by the employer, and the employee cannot modify the amount for that component as the employer has chosen to make that a fixed pay.
Dependent policy: This is when one component is declared as dependent on another component. Hence, when the employee makes an FBP declaration, they must do so for both components.
It all comes down to this
The flexible benefit plan helps employers draft a salary structure tailored to include a range of components that may otherwise be categorised as reimbursements. Enabling the employee to have access to the funds beforehand, as part of the salary structure, helps improve trust and productivity. Companies can also decide the threshold for compensation for each element as per an employee’s position in the company. By implementing FBP, companies can foster a healthy employee-employer relationship and enable a productive work environment.
Why choose RazorpayX Payroll to implement FBP?
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