As Indian corporations brace to manage multi-generational workforce, one of the key challenge is managing different expectations that arise out of different needs. Each person depending on their life stage and generation would expect different things from organization. More and more companies are becoming aware of this reality and looking to build flexibility in all aspect of employee experience and benefits.

One of the key aspect of this process is compensation and benefit as this is the most hygiene factor and in Indian context still figures in top 3 reasons why employees stay with an organization.

So if you are looking to develop and administer flexible benefit plan,  you not only have to consider the Income tax implications but also allow employees the flexibility to choose benefits or components of their salary based on their needs. You have to ensure that while doing this the resulting compensation is compliant to all legislations and yet delivers value to both organization and employee.

Given Indian tax structure, companies define the fundamental components like Basic, DA, HRA and others and then offer a certain amount to be distributed over a bouquet of flexible benefits. The employee is expected to select the most relevant and appropriate benefits from the available choices to suit his or her needs at that particular moment.

The key aspects to note here are the resultant tax liability and the frequency of such changes employee can do their flexible benefit plan. (FBP)

Typically most organizations stick to once a year or twice a year change to FBP purely to keep the administrative burden lower on their backend. However with advent of technology this is really just a mindset issue and in reality every employee can modify his or her FBP every month. The system is capable to capture all such changes and present the relevant information for tax computation purpose at the end of the year.

The second and most important aspect is how you enable the employee to select the most appropriate FBP for himself or herself. In this process it primarily will start with the basket of options made available to the employee. This basket will typically include Food Coupons, Gift Vouchers, LTA, Medial Reimbursement, Telephone reimbursement, Fuel reimbursement, Driver salary, and other such benefits. Many of these options are governed by tax treatment, meaning how choosing these components will help employee optimize his or her income tax liability while ensuring that employer is extending these benefits exactly as per provisions of the IT laws.

This aspect has long been a sore point in implementation of FBP. The HR & Finance teams were either not capable to keep a track of all these options which undergo certain change every year. The other biggest challenge was to administer this & ensure that employees are taking informed decisions about FBP while protecting employer interests seemed like a mammoth task. However with technology solutions capable of displaying applicable benefits and also giving a real time feedback on the tax liability as a result of a particular FBP choice, this administration challenge has long been addressed. The real job of HR and Finance team in administrating an FBP is now really to determine which FBP benefits would be offered to what category of employees and let the system take care of the rest.

The last aspect in FBP is the payout; certain benefits can be paid monthly while certain will need the employee to claim while others are paid once in a year. Again the technology solutions have built capabilities to take care of these combinations and also ensuring that employees are reminded to submit their bills or claims as per their unique FBP selection & ensuring that a lot of the administrative burden is taken away from HR & Finance.

In recent past, many of us must have read or heard about AI and Robots taking up jobs. The automation of your flexible benefit plan is a real example of this happening already. A well designed FBP system would take all the administrative challenges and hassles away from your HR and Finance team thus enabling them to focus on more strategic and value added activities.