Superannuation Fund
In India
The
superannuation started getting significance as many multinational companies
offered this perquisite which even allows deduction up to 15 % of basic and in
combination with PF, should not go beyond 27 % as per existing rules under the
Income Tax provisions.
Some information on Superannuation Fund:-
a)
Superannuation Fund is a retirement benefit given to employees by the Company.
b) Normally the
Company has a link with agencies like LIC Superannuation Fund or many other
private insurance companies, where their contributions are paid.
c) The Company
pays 15% of basic wages as superannuation contribution. There is no
contribution from the employee.
d) This
contribution is invested by the Fund in various securities as per investment
pattern prescribed.
e) Interest on
contributions is credited to the members account. Normally the rate of interest
is equivalent to the PF interest rate.
f) On attaining
the retirement age, the member is eligible to take 25% of the balance available
in his/her account as a tax free benefit.
g) The balance
75% is put into annuity fund, and the agency (LIC) will pay the member a
monthly/quarterly/periodic annuity returns depending on the option exercised by
the member. This payment received regularly is taxable.
h) In the case
of resignation of the employee, the employee has the option to transfer his
amount to the new employer. If the new employer does not have a Superannuation
scheme, then the employee can withdraw the amount in the account, subject to
deduction of tax and approval of IT department, or retain the amount in the
Fund, till the superannuation age.
Eligibility
Normally
Companies do not extend the Superannuation benefits to all employees- but only
to a specific category of employees - like for example Level-1 of Managers
onwards.
Longevity Bonus
Longevity Bonus
is paid to full-time & permanent employees. The objective of the bonus is
to encourage the employees to stay for a long time in a company. Such offers,
also called the ‘Golden Handcuff’ or
Loyalty Bonus in HR parlance, does not force the employee to stay with the
company, it merely provides an attractive option to continue with the company.
This is one way that the undesired separations (i.e. from the organization’s
perspective) are minimized.
Now a days, this
changing concept of rewarding loyalty is seen in large Indian MNCs.
Usually upon
completion of 10 years of service, each classified employee, excluding any
temporary employee, shall be eligible for longevity bonus pay.
However, the
average loyalty age has reduced and the companies are now rewarding employees
who have completed 2-5 years.
The number of
years of course differs from organization to organization. Companies award their
employees with a trophy/memento and a cash prize as well. The cash prize
differs for the number of years or levels/grades. (10 years of service,
15………20……….etc)
Longevity bonus
pay shall only be issued when a documented performance review rating of
satisfactory or better has occurred in the 12 months immediately preceding the
date the employee is eligible for a longevity bonus payment.
There are no
defined rules for the category of employees for whom longevity bonus can be
given.
This is dependant on multiple factors like:-
1. The industry
in which one is operating in
2. The category
of employees where the turnover or the attrition is the highest/ is high.
3. The category
of employees who are involved in 'business critical' assignments and whose
separation will mean a significant knowledge loss to the organization.
Calculation
The amount is
usually calculated as a percentage of the 'cost of attrition' of an average
employee in that category.
It is either
shown as a part of the "Total Compensation" or "Cost to
Company" of an employee or is shown separately (depending on the
compensation philosophy of the company)
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