How Does the Group Gratuity Scheme Benefit You?

There are many kinds of group insurance plans offering a variety of coverage options. You may have already heard of group life insurance. What is group life insurance? It is a kind of life insurance plan that provides life coverage to multiple people under a single plan, often managed by a single policyholder. However, the offerings under group plans have widened and diversified to a great level in the last few years.

Today, there are many other types of group plans meant for corporates and similar types of organisations that aim to make things easier for employees and employers. Group gratuity plans are a sub-category under group plans; these plans provide coverage to employers and help them fulfil their liability to pay gratuity to pay employees.

Understanding gratuity 

‘Gratuity’ refers to the process of paying the employees of an organisation a certain amount of money for their continuous service to the organisation. There are certain laws that specify which industries should mandatorily pay gratuity, when it should be paid, how much, and so on. If the employee completes a particular number of years within the company, they receive a certain amount of money.

Similar to group life insurance, group gratuity plans help you in meeting your responsibilities towards your employees.

How do group gratuity plans help organisations with gratuity?

As mentioned earlier, it is the liability of an organisation to pay gratuity to employees when it is due. However, the markets are unpredictable. One cannot predict when the tides will turn and lead to the business revenues reducing to a great extent. In such a situation, fulfilling one’s legal responsibility can be a financial burden. The organisation may have to pay gratuity to employees from their savings. This may lead to a worsening of the financial conditions of the business.

This is where a group gratuity scheme comes to the rescue. These are group plans provided by life insurance companies that help in ensuring that the organisation gets to accumulate the funds for gratuity. The organisation can simply deposit/invest a certain amount of money with the insurance company which will be utilised as per your choice. When the need to pay gratuity arises, the organisation can raise a claim for the same with the insurance company. The reason they are called group gratuity schemes is that they can be bought to secure the gratuity of a number of employees.

Some benefits of group gratuity schemes include: 

• Ensures smoother business operations 

When a large corpus amount is already being saved to pay for the gratuity of the employees, the organisational heads can breathe a little easier. There is no pressure to dip into the money that you may have saved for hard times.

• Increases employee retention 

Wondering what is the major benefit of group life insurance, group gratuity schemes, and similar plans for organisations? It is employee retention.

When there is a group gratuity scheme in place, the employees are assured that they will not be bereft of their hard-earned gratuity earnings. In some cases, the returns may be quite high and so the gratuity benefits may be higher as well. This can be a good factor to retain employees.

• Tax benefits 

The premiums that an employer pays toward group insurance plans are considered a business expenditure. As such, they are exempted from taxation to a certain limit as long as they meet the terms and conditions.

Types of group gratuity plans 

• Group investment-linked gratuity plans 

Just like there are life insurance policies that provide a chance to invest in the market, there are group gratuity schemes that deal with market-linked investment as well. Within these plans, you get the freedom to choose amongst different kinds of fund options. Equity options provide you with better returns, while debt options involve a lesser number of risks.

• Group non-linked gratuity plans

These are rather like non-participating endowment plans. You receive a fixed amount of returns on your money with some additional benefits.

What to ensure before selecting a group gratuity plan:

 

• The credibility of the insurer – You must thoroughly review the insurance company you are buying the policy from.
• Providing accurate information – Ensure to provide factual information only; falsifying things can lead to issues when a claim needs to be raised.
• Record of the paperwork – Ensuring a large number of people means a lot of paperwork. Ensure to trace the paperwork and keep the documents safe and handy.

Do reach out to a consultant to get a better understanding of how group life insurance and group gratuity schemes can help your organisation.