Page 174 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Unit 10: Compensation and Benefits

Next morning he received a phone call from the Chairman, who asked him to indicate his Notes
feelings when he met him in person during the afternoon. In between, Nikhil did a
detailed computation in consultation with his Chartered Accountant and found that he
cannot get him absolved from tax burden from this gift amount as he has to show this in
'other income category' and pay about 33 per cent towards tax. A visibly perturbed Nikhil
decides to quit. He loses all hopes for re-negotiation and sends his three months' notice to
the Chairman.
Questions
1. Do you think Nikhil is right in his stand?
2. What could be the alternatives for the organisation to reduce the pay gap?

3. Should the Chairman initiate any action to retain Nikhil considering his outstanding
contributions.

10.7 Employee Benefits and Services

The term 'benefits' refers to the extra benefits provided to employees in addition to the normal
compensation paid in the form of wage or salary. Many years ago, benefits and services were
labeled 'fringe' benefits because they were relatively insignificant or fringe components of
compensation. However, the situation now is different, as these have, more or less, become
important components of a comprehensive compensation package offered by employers to
employees.

10.7.1 Employee Services

These services are those which are provided by the organisations, in addition to the usual fringe
benefits, either at no cost to the employee or at highly subsidised rate. Such services include
eating facilities, transportation facilities, child care facilities, educational services, flexible
working hours, etc.
10.7.2 Features

The main features of benefits and services, as they stand today, may be stated thus:
 They are supplementary forms of compensation.
 They are paid to all employees based on their membership in the organisation.
 They are indirect compensation because they are usually extended as a condition of
employment and are not directly related to performance.
 They help raise the living conditions of employees.
 They may be statutory or voluntary.

10.7.3 Need for Employees Benefit and Services

Most organisations in India have been extending fringe benefits to their employees, year after
year, due to the following reasons:
1. Employee demands: Employees demand more and varied types of fringe benefits rather
than pay hike because of reduction in tax burden on the part of employees and in view of
the galloping price index and cost of living.

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