Why it's time to OFFER more in your OFFER letter

Budget 2018 has brought about interesting times. Particularly for those in talent acquisition. I say this because of the reintroduction of a standard deduction into the employee’s salary structure, in lieu of medical reimbursements and conveyance allowances.

While this move may be well received by employees and HR managers alike—they are freed from the hassles of submitting and verifying bills, respectively—to a person whose job is to attract the brightest minds in the industry and give them a reason to join your company, things have become a tad harder.

For long, the kind of benefits a company had to offer played a huge role in getting an employee off the fence and making the decision to join the ranks. The standard deduction introduced in the budget not only takes away two key employee benefits, the amount saved by employees thanks to it aren’t all that great either.

Along with the standard deduction, the 2018 Union Budget also increased education cess to 4%. The standard deduction only added another Rs 5,800 to the non-taxable income bracket, an employee in the 5% tax bracket would only end up saving Rs 290 a year. After factoring in the education cess, annual savings drops to only Rs 194.

Folks in other tax brackets aren’t faring any better. An employee making upwards of Rs 15 lakhs a year (30% tax bracket) ends up paying an additional Rs 713 in taxes each year and an employee in the 20% tax bracket only saves an extra Rs 150 a year.

Come April 2018, all your employee offer letters are going to undergo an overhaul to accommodate the standard deduction. Now is the time for you to push for the inclusion of other tax-saving employee benefits like fuel reimbursements, communications reimbursements, books & periodicals allowances and more.

Doing this ensures a win-win. Employees get to take more salary home as these benefits help reduce an employee’s burden on taxes. Prospective employees would naturally be drawn to an offer letter with more benefits.

The only problem is verifying the claims employees would be making for these benefits. While manual verification is a time and resource-intensive job, the government has also clearly indicated it’s interest in making processes like these digital.

By introducing e-assessment, the government has done away with the need to verify physical copies of bills during the year-end audit, effectively paving the way for players who have completely digitised these benefits. Digitisation ensures greater efficiency, transparency and saves companies a lot of time and money. Companies have historically shied away from offering these benefits, but with digitisation on the horizon, it’s high time we geared up for a revolutionary change.