Group Gratuity

What are the functions of the Group Gratuity insurance plan?

Any organisation or company should save money from their regular income with the intention to meet the planned gratuity accountability of its employees. The money that is saved and accumulated under this policy can then be used to claim payments for employees’ gratuity when they leave the organisation. Every company is responsible for paying its parting employees their gratuity amount and hence the company should make sure they have sufficient funds at that particular time.

How does Group Gratuity insurance plans help your organisation?

Every employer, irrespective of nature of company, is obliged to pay his/her employees the gratuity that was promised when they decided to leave the company or retires. Gratuity is a pre-defined benefit and thus it is every employee’s right to be aware of his gratuity amount before joining so that he can take a learned decision. This gratuity is calculated by considering the employee’s previous salary and experience.

Gratuity insurance policies are mandatory but if the employer doesn’t have Group Gratuity policy, he might be able to meet the gratuity expenses of his employees leaving the company. In the absence of a group gratuity insurance policy, the employer has to let go of a huge amount from his company’s savings and let it impact the company.

Hence group gratuities are considered the best to save the company from any kind of financial burdens and this also allows the employer to deposit fixed amounts of money at any time of the financial year. This puts the employer in a position to meet the gratuity needs of a parting employee. There are multiple benefits to having group gratuity insurance policies to the employer. The most important is the tax benefit that this policy can give the company. Any amount of money that is deposited in the scheme by the organisation will be considered as a business expense and shall therefore be used by the employer to reduce his taxable income.

What are the types of group gratuity plans?

A group gratuity plan can be availed from any insurance provider and the gratuity paid to the employees upon their departure from the company will be on the terms of the group gratuity insurance policy.

• Unit Linked Plan– A unit linked plan is a group gratuity policy type which will have no definite policy period. The salary and the experience of the employee determines the sum he/she will be getting as gratuity under this group gratuity insurance plan. Another factor that is taken into serious consideration is the contribution of the employee to the company. This type of group gratuity insurance plan provides life cover to the policy holder throughout the policy period and it also has automatic renewal cycle annually. The most important benefit is that the employer gets to enjoy tax benefits under the tax laws.
• Non-Participating Endowment Plan– Endowment plans provide participating and non- participating plans. In case of the latter, the benefits that the policy holder will get at the end of the policy period will be defined in the beginning itself. This creates an employee friendly environment where he/she can weight the benefits and then take a learned decision.

What are the precautions to be taken while availing a group gratuity insurance plan?

• Proper paperwork– Group insurance involve a lot of people both on the insurer’s side and the insurance provider’s side. Since there are so many people involved directly or indirectly, the law becomes an involuntary party in the entire process. The insurance provided must need the insurer to fill a lot of paperwork to complete the process without flaws. Therefore, it is important to do the paperwork keenly and carelessness in it can lead to discarding and rejection of claims later on.
• Timely premium payment– The most basic and important part of the entire insurance process is paying the premiums on time which will ensure the organisation is covered for liability all the time.
• Falsification-Insurance contracts mostly rely on the good faith and the lack of which might lead to extreme circumstances. The insurer believes whatever the employer tells them and it is the same way around. This kind of functioning leads to a place where the employer has the full right to deny a gratuity claim if and when he/she finds our that the information provided by the employee is false.