Employer-Employee Insurance Scheme—a Welfare measure
“If prospecting is where the raw courage is needed in dealing with rejection, it is face to face where our skills really come to play. Skills in dealing with people, skills in assessing the prospect’s needs and wants his motivation. Skills in taking the complex products we deal with and explaining them in a simple of understandable way in order that our prospect can see the benefit” –Tony Gordon. Let us make our approach interesting, impressive and ‘his benefit’.
Employer – Employee Insurance Scheme is a bit complex but if we can place this scheme in front of a selective band of customers or clients, it will definitely create an impression of “His benefit”.
An employer cannot sustain high productivity growth without totally involving the individual who is closest to the work and therefore knows it better than those who manage it. A committed employee is more likely to help retain a customer. Physical capital of an employee is needed for an employer. But the concept of protecting the intellectual capital is as important as protecting physical capital.
Why Employer – Employee scheme:-
1) Welfare Measure: – An illuminated, enlightened and prudent employer may like to make a provision as a welfare measure through life insurance for the dependents of the employee in case of employee’s early premature demise and old age provision for employee himself. This may constitute one of the service benefit provided for the employee.
2) Encouragement for employee: – An employee may hold the life insurance policy as sufficient inducement and encouragement for the employees to continue with him since the employer has to spend considerable amount of money and time to train a new employee. Besides the employer may
lose some of his trade secrets as well as skill gathered over years of experience due to exit of such employees.
3) Reward: – An employer may desire to give certain additional benefits to his select band of employees as a reward for good service of who could not be otherwise compensated.
4) Security:-This scheme provides employee with long term and short term security against premature death, illness, accident or disablement without paying for the same.
5) Employee needs not to face pain about buying and administering the policy.
Under the employer- Employee Insurance scheme, any employer can decide to propose for insurance on the lives of the designated Executives or Employees of his company. Besides the benefits enlisted in term of money, such scheme will generate job-satisfaction for employees’ continuity of services with devotion and personal involvement, especially under the present era of
professional competitiveness. Providing the protection of insurance of the employee will raise the sense of security in the minds of family members of the employee where the security of ancient joint family is missing.
Long term care insurance is not available in our country. But policies under Employer Employee Insurance Scheme are offered as an incentive for committed employees to purchase long term care insurance to some extent. They provide insurance coverage and allow for protection of family that is not available through other long-term service benefits.
Requirements
The proposals from employers on the lives of employees are considered for acceptance provided the following conditions are satisfied:-
(a) The proposals will be treated as individual proposal from the employees concerned, irrespective of whether the proponent is an employer or employee.
(b) The maximum sum assured shall be determined in terms of the rules relating to financial underwriting for individuals assurance taking into account the existing life insurance on the life of the individual.
(c) If the employer is the proponent, the policy shall be assigned to the life assured at the earliest as per the agreement between employer and employee.
(d) The proposal should be signed by a person authorised by resolution preferably by one of the directors of a public or private company.
(e) Moral hazard is a critical area and that needs thorough examination.
(f) Form NI 340 has to be used for this purpose.
(g) The employer should be a well-known reputed commercial organization.
(h) The employer in consultation with this owns legal advisor may prepare the wordings of assignment.
(i) In some instances, employer may like to finance loan towards payment of premium to the employee; proposal form 300 may have to be used in such cases. The policy issued may be assigned to employer as a collateral security and reassigned to the policy holder on redemption of the debt.
(j) It is not necessary that all the insurable employees of the employer be covered under this scheme.
(k) Companies, well-established partnership firms or even proprietary firms, may avail of the scheme. If the firm proposes for insurance on the life of partner, the said partner must not be having substantial share in the capital of the firm.
(l) Shareholding of the employee should be less them 51% and family holding (i.e his/her spouse and minor children) should be less them 71% in the employer company.
Tax implications
1) The insurance premium paid under Employer – Employee Insurance Scheme on the lives of employees is deductible as 100% business expenditure under section 37 (1) of the income Tax Act, 1961.
2) The cover arranged for the benefits of the employee covered and the premium paid will attract the provision under section 17(2)(V). The premium paid by the company is treated as perquisite in the hands of the employee.
3) The premium will be eligible for rebate to the individual employee under section 80C of the income Tax Act.
4) The maturity or death benefit will be exempt from income tax under section 10(10)(d) of the income Tax Act ,1961 .
5) It is essential on the part of employer to commit with their own chartered accountant or Tax advisor.
Plan Allowed:-
Employer – Employee Insurance Scheme is allowed under all the plan of assurance.
Sources for prospecting
1) Internet sites
2) Library
3) Company reports and accounts.
4) Investment analyst report
5) Relevant Govt. departments
6) Trade Journals
7) Local /National News papers
8) Job advertisement
9) Small companies / firms (where group insurance cannot be given).
Prospecting Employer- Employee Insurance scheme through semi- influential
A) Heads of finance (interested in finance only of the company).
B) Secretaries (Having suggestive capacity)
C) Receptionist (as gate keepers and information providers)
D) Influential friend (can work as guides)
The various ways to restrict brain drain is more wages, more incentives , more perks ,more facilities and more promotions . Always a very few employees are excellent workers , so company can honour them by giving promotion , but again it is one time affair . The continuous way of honouring to this selective Employee is by giving them insurances policy as a gift. The benefits to company are tax benefits, employees increasing loyalty, increase in efficiency of employee, retention of good employees and image building in the minds of employees, customers and shareholders.