Salary reimbursement a big headache? 2 out of 3 SMEs claim cost of managing employee benefits outweighs actual value

By: | Published: August 6, 2018 12:32 AM

The study states that the high cost of administering these benefits is the primary reason for discontinuation of reimbursement programmes for many SMEs.

The Zeta Employee Benefits study, commissioned to Nielsen India, which covers 194 corporates and 1,233 employees across seven cities, takes a look into the current state of employee tax benefits across industries, including SMEs. (Representational photo)

According to a new study, two out of every three SMEs in India feel the cost of running an employee benefit programme, such as reimbursements for fuel, phone bills, outweighs actual value of benefits.
The Zeta Employee Benefits study, commissioned to Nielsen India, which covers 194 corporates and 1,233 employees across seven cities, takes a look into the current state of employee tax benefits across industries, including SMEs. The study states that the high cost of administering these benefits is the primary reason for discontinuation of reimbursement programmes for many SMEs.

Employee tax benefits or reimbursement claims are tax saving benefits offered by companies to salaried employees as part of their salary package. These include reimbursements for fuel, mobile, LTA, gift vouchers, meal vouchers and so on. SMEs in the survey refer to companies with an employee size of less than 500.

According to the report, 82% SMEs have a dedicated team to manage tax benefits or reimbursements. Despite this, 43% SMEs have discontinued at least one or more of these benefits, citing high costs. This figure is higher for SMEs as compared to large and medium sized companies with employee size upwards of 500.

An overwhelming 91% SMEs continue to depend on a paper-based process when it comes to processing reimbursement for employees. The process typically requires employees to fill in claim forms, either physically or digitally, and submit these along with paper bills as proofs of spends for the said benefit. Given the high reliance on a paper process, it comes as no surprise that most SMEs claim to struggle with the paper work, with 46% citing invalid or illegible bills, followed by problems like bill verification (18%) and bill storage (14%). Bills submitted need to be verified for processing the reimbursement and stored for audit purposes for a period of seven years.

Bhavin Turakhia, the CEO & co-founder of Zeta, said, “Only 9% SMEs use digital processes to handle reimbursements. Automation is critical for these companies as it will help them reduce costs significantly and enable them to offer more lucrative benefits to employees.”

The report shows that 61% employees do not opt for these benefits because they find the process of claim submission time-consuming, and 50% employees prefer to opt out of these benefits for a perceived higher in-hand salary. This highlights the amount of productive time wasted in mundane tasks in the absence of automation and the lack of employee education on tax-saving possibilities.

Ramki Gaddipati, the CTO & co-founder of Zeta, added that 88% employees from the SME sector prefer digital claims over a paper-based process. “With India going digital, the way we run our organisations also needs to change. When the majority workforce prefers and has access to automation, there’s no reason why SMEs shouldn’t embrace it. Importantly, digital transitions ensure faster processes, significant cost savings for companies and transparent functioning.”

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