Chapter 08

Benefits and Services

Faculty: Muzdalifa Anzum

Basic Factors
 Employee compensation
– All forms of pay or rewards going to employees
and arising from their employment.
 Direct financial payments
– Pay in the form of wages, salaries, incentives,
commissions, and bonuses.
– Pay for performance programmes
 Indirect financial payments
– Pay in the form of financial benefits such as
insurance.
Benefits
 Benefits
– Indirect financial and nonfinancial payments
employees receive for continuing their
employment with the company.
The Benefits Picture Today
 Employees are entitled for benefits in light of
Bangladesh Labor Act, 2006.
 Benefit is a major expense (about one-third of
wages and salaries) for the employers.
Private-Sector Employer
Compensation Costs
Types of Employee Benefits
 Supplementary benefits
 Insurance benefits
 Retirement benefits
 Services

13–6
Supplementary Benefits

 Benefits for time not worked

 The most costly benefit
 Large amount of time off that most employees
receive
Supplementary Benefits (cont.)

 Paid Vacation (Annual Leave)

Section 117 of Labour Act, 2006 deals with annual leave.

Normally, a worker, who completes one year of continuous service in an

establishment, are allowed during the subsequent period of twelve
months leave with Wages for a number of days calculated at a certain
rate.
(a) in case of a shop or commercial or industrial establishment or factory
or road transport service, for every eighteen days of work
(b) In the case of tea plantation, for every twenty two days of work;
(c) In case of a newspaper worker, for every eleven days of work
performed by him during the previous period of twelve months.
Supplementary Benefits (cont.)

 Casual leave
– Casual leave: it is availed under section 115 of
Labor Act, 2006. It is given with full wages for 10
days in a year and will not be carried forward to
the succeeding year.
Supplementary Benefits (cont.)
 Sick leave
– Provides pay to an employee when he or she is
out of work because of illness.
• Usually up to 14 days per year
• According to Section 116 of the Labour Act, 2006, no
such leave shall be allowed unless a registered medical
practitioner certifies the illness.
• Some people misuse of sick leave
• Research reveals that illness accounted for only 45% on
unscheduled sick absences, family issues (27%),
personal needs (13%), and a mentality of entitlement
(9%).
• Research also reveals that the average cost of
absenteeism per employee per year was $789
Supplementary Benefits (cont.)
 Leave Cost Reduction Tactics
- Repurchase unused sick leave at the end of the year by
paying their employees a sum for each sick leave day not
used
- Holding monthly lotteries in which employees with perfect
attendance are eligible for a cash prize
Supplementary Benefits (cont.)

 Maternity Leave
• Women workers are eligible for parental leave during the
period of pregnancy
• At present the women workers account for one-fourth,
that is 12.1 million, of the total labor force of 49.5 million
in Bangladesh.
• Section 46 of the Labor Act provisions have been made
for maternity leave of 16 weeks (8 weeks before and 8
weeks after the delivery).
• It has also made the provision that this benefit shall only
be available to workers who have served under the
owner for a minimum period of 6-months prior to the
notice of the probability of the delivery.
Supplementary Benefits (cont.)

 Festival Leave

Section 118 of the Bangladesh Labour Act, 2006 prescribes that every worker
shall be allowed in a calendar year eleven days of paid festival holidays. The
days and dates for such festivals shall be fixed by the employer in such
manner as may be prescribed.
Supplementary Benefits (cont.)
 Severance pay
– A one-time payment when terminating an employee.
Severance package in the context of Bangladesh Labor
Act, 2006
 Employees may be terminated for reasons of physical or mental
incapacity or continued ill-health as certified by a medical practitioner. If
the employee has served at least one year, s/he is entitled to 30 days
of wages for each year of service.
 Employees who have been convicted of a criminal offense or found
guilty of misconduct are not owed notice or severance.
 Termination of employment in Bangladesh for other reasons generally
requires the employer to provide written notice of 120 days for monthly
rated workers or 60 days for other workers, or equivalent pay in lieu.
The worker is also entitled to 30 days of pay for every year worked.
Supplementary Benefits (cont.)
 Severance pay
– Reasons for granting severance pay:
• Acts as a humanitarian gesture and good public
relations.
• Mirrors employee’s one month quit notice.
• Avoids litigation from disgruntled former employees.
Insurance Benefits
 Workers’ compensation
Labor Act 2006, 150- Employer’s Liability for
compensation : (1) If personal injury is caused to a
worker by accident arising out of and in the course of his
employment, his employer shall be liable to pay
compensation in accordance with the provisions of this
chapter.
• Specific loss injuries: statutory list of losses
Exception- in respect of any injury which does not result in
the total or partial disablement of the worker for a period
exceeding three days
Insurance Benefits
 Workers’ compensation
Death or disability: a cash benefit based on earnings per month
of employment.

 the worker having been at the time thereof under the influence
of drink or drugs,
 or the wilful disobedience of the worker to an order expressly
given, or to a rule expressly framed, for the purpose of securing
the safety of worker,
 or the wilful removal or disregard by the worker of any safety
guard or other
 device which he knew to have been provided for the purpose of
securing the safety or worker.
Insurance Benefits
 Controlling worker compensation costs
• Screen out accident-prone workers.
• Train up people.
• Make the workplace safer.
• Thoroughly investigate accident claims.
Insurance Benefits (cont.)
 Hospitalization, health, and disability
insurance
– Health insurance looms large in many people’s
choice of employer, because it is so expensive.
– 75% of the employees in one recent survey called
it their most important benefit
– Provide for loss of income protection and group-
rate coverage of basic and major medical
expenses for off-the-job accidents and illnesses.
• Accidental death and dismemberment
• Disability insurance
Retirement Benefits (cont.)
 Pension plans – They are financial programs
that provide income to individual employees in
their retirement
 Types
– Contributory: employees contribute to the plan.
– Noncontributory plans: employer makes all
contributions to the plan.
– Qualified plans: plans that meet requirements for tax
benefits for employer contributions.
– Nonqualified plans: plans not meeting requirements
for favorable tax treatment.
 Provident Fund (PF)
- This is a special retirement saving scheme sponsored by the
employer which allows an employee to save certain percentage
(5%-10%) out of their basic income every month. The saving will
be matched by the employer with 100% contribution.
- The total savings will be due to the employee upon his/her
retirement or resignation or termination.
** Sometimes employer doesn’t pay his or her portion of PF contribution during
termination, only employee’s contribution is paid back.
- For instance, the employee contribution is TK 500 per month,
the employer would also contribute TK 500 per month. The total
contribution to PF would be:
(Employee’s TK 500+ Employer’s TK 500)= Contribution to PF is
TK 1,000
Provident Fund (cont’d)
 PF Calculation

Total Salary TK. 70,000

Basic TK 40,000
House Rent TK 20,000
Telephone TK 2,000
Medical TK 5,000
Miscellaneous TK 3,000
Provident Fund @ 5% of Basic
Employee’s contribution (5% of 40,000) = TK 2,000
Employer’s contribution (5% of 40,000) = TK 2,000

Total contribution to PF per month = Tk 4,000

Total contribution to PF (TK. 4000*12) = Tk 48,000
Provident Fund (cont’d)
 Assuming that the employee gets an increment of 10% every
year over his/her basic salary.

Year Basic Employee’s Employer’s PF/ PF /

Salary Contribution Contribution Month Year
(TK.) (5%) (5%) (TK) (TK)
(TK) (TK)

1st 40,000 2000 2000 2000+20 12*4000

00=4000 =
48,000
2nd 44,000 2200 2200 2200+22 4400*12
(10 00= = 52800
increase) 4400
3rd 48,400 2420 2420 2420+24 4840*12
(10% 20= = 58080
increase) 4840
Provident Fund (cont’d)
 If you have served for an unbroken period with clean record, then
you will get employer’s contribution. For example, if you have served
for more tan or equal to 5 years, you are entitled for the entire
amount of employer’s contribution. Usually, there is a schedule that
organization follows. It is given below:
 Vested Schedule:

No. of years served Proportion of employer’s

contribution
5 years and above 100% match
4 years 80% match
3 years 60% match
2 years 20% match
Less than 2 years 0% match
Q: After 3 year, the employee decides to quit. How much PF s/he will
rd

get?
 Provident Fund (cont’d)
Year Basic Employee’s Employee’s Employer’s Employer’s
Salary Contribution Contribution Contribution Contribution
(TK) (5%) (TK) Total (TK) (5%) Total (TK)
(TK)

1st 40,000 2000 2000*2= 2000 2000*12=

24,000 24,000
2nd 44,000 2200 2200*12= 2200 2200*12=
(10 26400 26400
increase)
3rd 48,400 2420 2420*12= 2420 2420*12=
(10% 29040 29040
increase)
Total 79440 Total 79440

Now, as schedule, for PF calculation after 3rd year, employee would get his
entire contribution and employer will pay 60%.
Hence, PF would be: TK 79,440+ (60% of TK 79,440) = Tk. 127,104

Employers usually put the money in the banks and get returns. For example, a
big company like Beximco can pool the money received from employees for PF
and invest/ save that in the banks to earn returns.
Gratuity
 It is a onetime lump-sump payment given to the employees on the
last day of their employment as a gift of their valuable service to the
organization. Usually, employees are eligible between 5 to 10 years
of continuous employment. It is one of the retirement benefits offered
by the employer to the employee upon leaving his/her job.
• If an employee quits after 10 years:
Gratuity amount= (5*5th year’s basic salary) + (5*10th year’s basic salary)
• If an employee quits after 8 years:
Gratuity amount = (5*5th year’s basic salary) + (3*8th year’s basic salary)
• If an employee quits after 20 years:
Gratuity amount: (5*5th year’s basic salary) + (5*20th year’s basic salary)
** If the employee leaves before 5 years of service, he is not entitled for
gratuity.
Personal Services

 Employee assistance programs (EAPs)

– Provide counseling and advisory services:
• Personal legal and financial services
• Child and elder care referrals
• Adoption assistance
• Mental health counseling
• Life event planning
 Family-Friendly (Work-Life) Benefits
 Subsidized Child Care
- Most working people make private provisions to take care of
their children
- Employers who want to reduce the distraction associated with
finding reliable child care can help various ways
- Labor Act 2006, Section 94- Rooms for children : In every
establishment, wherein forty or more workers are ordinarily
employed, thee shall be provided and maintained a suitable
room or rooms for the use of children under the age of six years
of such women.
- Company sponsored and subsidized day care facilities can
attract employees, reduce absenteeism, reduce turnover rate
and increase productivity of the employees.
 Family-Friendly (Work-Life) Benefits
 Sick Child benefits

- Bangladesh Labour Law Act 2006 doesn’t cover this benefit.

However, contemporary organizations are concerned with that.
- What would you do when your children are sick and you need to
get to work?
- You are less likely to turn up. If you turn up, you performance
level might not meet the requirements
- Study shows that unexpected absences climbed to about 2.4%
and children sickness is one of the major reasons
- Today, more organizations are offering sick children benefits
along with regular children benefits
 Family-Friendly (Work-Life) Benefits
 Elder Care
- Bangladesh Labour Law Act 2006 doesn’t cover this benefit as
well. However, contemporary organizations are concerned with
that.

- The responsibility for caring an aging relative can effect

employees’ performance at work

- Study shows to care for an older relative, 64% of the employees

took sick leave or vacation time, 33% decreased work hours, 22%
took leaves of absence, 22% changed their job status from full- to
part-time, 16% quit their jobs and 13% retired jobs

- So, it is strategic imperative that employers provide elder care

services
. “To win in the marketplace you must first win in
the workplace.” – Doug Conant, CEO of
Campbell’s Soup
Thank you!