© 2010 towers watson. all rights reserved. getting the most out of your people strategies in 2011...

© 2010 Towers Watson. All rights reserved.

Getting the most out of your People Strategies in 2011 Synopsis of the presentations

2towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

Our expertiseHelping organisations improve performance through effective people, risk and financial management

Risk and Financial Services

• Insurance Consulting

• Investment Services

• Reinsurance Brokerage

• Financial Modeling Software

• Risk Management

Talent and Rewards

• Executive Compensation

• Talent Management

• Rewards

• Communication and Change

• Employee Surveys

• Global Data Services

Benefits

• Retirement

• Health and Group Benefits

Mergers and Acquisitions: From target evaluation to integration implementation

© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.towerswatson.com 33

Getting the most out of your People Strategies in 2011Overview of People Issues in 2011



Hiring and Attrition are back…

India is once again witnessing increase in Hiring Numbers

Most companies are facing issues in hiring mainly at the middle management and supervisory level.

Today's middle management challenge will become a leadership challenge in a few years from now

With Growth back on the radar, so is Attrition Better growth, better pay and personal reasons are the top three reason cited by

employees when leaving an organisation We believe that internal factors like inequity of compensation or lack of differentiation are

likely reasons that contribute to the ‘push’


Retaining top performers and keeping them engaged is the top HR challenge in India

Source: Towers Watson HR Pulse Survey 2010


Towers Watson’s View on Total Reward A framework that captures all aspects of the work experience

TOTAL REWARDPay Benefits

Learning and Development Work Environment

Base salary Bonuses Recognition Allowances Geographical and shift allowances

Career development Learning experiences Performance management Succession planning Training Talent mgt. Coaching

Leadership Culture Involvement Diversity Work/life balance Interesting meaningful work Job security

Long-term sickness benefit Pension Holiday Staff restaurant Relocation assistance Life insurance


Medium Term Talent Management Challenges for India Inc.

HR Service

Delivery

Effective Talent Acquisition

Productivity and Cost

Management

Management of

Attrition

Avoiding the middle

management trap

Key Medium Term Talent

Management Challenges

INTEGRATED HR PHILOSOPHY AND SYSTEMS


Getting the most out of your People Strategies in 2011Are companies getting the most out of their Compensation and Benefits spends?



Growth

Asia still driving global growth in 2011: Concerns Rising currencies Commodity

prices/inflation Asset bubbles

Source: EIU Country Briefing Report, October 2010

3.7

1.7

-2.2

3.1

2.4

2.0

0.4

-2.6

2.3

1.5

2.6

0.6

-4.1

1.4

0.8

8.3

5.5

4.9

7.8

6.4

2007

2008

2009

2010

2011

World US Euro Area AP (excl. Japan)


17%

73%

25%

2%

27%

57%

0%

10%20%

30%40%

50%

60%70%

80%

More difficult About the same Less difficult

Now compared to pre-financial crisis

One year from now as compared to now

Asia Pacific

In 2010/11, Companies Expect Retaining Key Talent To Get More Difficult, Especially In Asia-Pacific


Most pressing challenges for HR in Asia Pacific

37%

19%

13%14%

20%22%

13%16% 15%

0%

20%

40%

Controlling Cost Attraction & Retention Improving PerformanceManagement

% o

f res

pons

es

Biggest 2nd Biggest 3rd Biggest

Source: Towers Watson 2009 Asia Pacific benefits trends survey report


2010 – 2011 Salary Increases: General Industry

Source: 2010 Towers Watson – Compensation Planning Report, October 2010 2011 Salary Increase presented are based on projected/forecasted figures shared by participating

companies A total of 2,560 companies shared information for 2010 and 2,200 for 2011 General Industry figures

2010 - 2011 General Industry - Median Salary Increases

5.0

7.0

3.0

8.4

2.0

5.0 5.0

3.0

6.0

10.0

3.2

5.06.0

8.0

11.0

9.0

2.5

12.9

10.0

3.5

11.9

10.0

3.5

9.6

11.5

5.3

3.5

10.3

4.0

7.0

3.3

5.55.5

3.5

10.0

4.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0 2010 2011


Benefits preferred by employees in Asia-Pacific

Source: Towers Watson HR Perspectives on Benefit Trends 2010

% of responses


Benefits challenges in Asia-Pacific

Irrespective of how much employers spend, some 40% of employees still don’t really value benefits

% of responses

Source: Towers Watson HR Perspectives on Benefit Trends 2010


Growing trend towards employee choice

More than one third of companies have or are considering implementing choice

6%

10%

15%

17%

73%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Implementing choice

Statutory Benefits only

Considering choice

Employee choice

Traditional

% of responses

Source: Asia Pacific Employee Benefit Trends 2009 (Towers Watson)


Getting the most out of your People Strategies in 2011Developing a sustainable Reward and Talent Management model



About the TM&R Survey – Global Participants

Global Talent Management and Rewards Survey Conducted in May through June 2010

Captures the current landscape of rewards and talent management

Represents 1,176 companies across 17 locations

Employee Data from Towers Watson’s Global Workforce Study

Conducted online in 22 markets around the world between November 2009 and January 2010

Includes over 22,000 full-time employees in mid-size to large organisations


Globally, the recession forced companies out of ‘business as usual’ mode and changed the employee mindset

Theme of Renewal

Looking forward, organisations must re-think the way they design and manage their

reward and talent programs

Theme of Security

Employees are looking for job security, stability and opportunities to earn higher

levels of pay (which may be unavailable in current organisation)

In India, the slowdown forced companies out of ‘irrational exuberance’ mode and changed the employee mindset


The focus on cost control / management is here to stay Pay, bonuses and training budgets are the programs organisations are most likely to

change if economic or business conditions change substantially in either direction

Pay, Bonuses and Training Budgets are the programs organisations are most likely to change if economic or business conditions change substantially in either direction

Over the next 12 months, which actions is your organisation most likely to take if it has:

to cut costs? additional funds to spend on labor costs?

Program Top 3 Program Top 3

Reduce pay increases 78% Increase salary increase budget 69%

Reduce budgets for training and development programs

54% Hire more people 54%

Reduce or eliminate bonuses 57% Increase bonus opportunities 49%

Lay off employees 41%Increase budget for training and development programs

55%

Increase health care premiums that employees pay

18%Increase investment in better equipment for

employees27%

Reduce employee hours, e.g., furloughs, reduced workweek, etc.

13% Increase bonus eligibility 14%

Reduce contribution to retirement programs 8% Increase contributions to retirement programs 7%

Reduce number of days of paid time off or vacation

6%

Reduce health care premiums that employees pay

4%

Increase number of days of paid time off or vacation

2%


Economic uncertainty and company responses have affected drivers of attraction and retention Employers are having difficulty attracting and retaining top talent in general Critical Skill and Top Performers were reluctant to leave current employer due to uncertainty Severity of difficulty varies across regions as economic recovery is uneven Critical skill, Top performing and High potential employees are categories where Indian

companies are facing maximum difficulty with retaining talent . Also, sustained economic growth means greater opportunities for talent and difficulties in attracting and retaining talent at all levels

Attraction Drivers in Asia

• Employers underestimate convenient work location and benefits as factors candidates consider in deciding whether to join a company

Retention Drivers in Asia

• Employers likewise do not share employees’ view on the availability of/better pension and better financial planning resources as retention factors


Retention drivers are also shifting, with increased emphasis on employee well-being There are large gaps between employee and employer perceptions regarding

the influence of security and flexibility on employee retentionEmployers underestimate the impact of pensions, job security and more flexible work arrangements on employees’ decision to leave their organisation

Increased compensation

Availability of/better pension

Greater job security

Improved work life balance

Greater career advancement opportunity

More flexible work hours

All

Employee 91% 86% 86% 85% 84% 82%

Employer 88% 30% 43% 66% 87% 27%

Gap 2% 56% 42% 20% 3% 56%

Asia

Employee 91% 89% 90% 88% 88% 86%

Employer 94% 28% 47% 61% 90% 27%

Gap 3% 61% 43% 27% 2% 59%

India

Employee 89% 90% 43% 88% 79% 87%

Employer 91% 21% 90% 51% 91% 42%

Gap 2% 69% 47% 37% 12% 45%

USA

Employee 94% 86% 87% 86% 81% 84%

Employer 83% 37% 48% 70% 83% 37%

Gap 10% 49% 39% 15% 2% 46%

• Percentages equal the percent of employees or employers responding to a moderate or great extent: How would receiving each of the following from a new employer influence your/your employees’ decision to leave your current organisation?

• Gaps are the difference between employee and employer percentages – may not add up due to rounding


What is an Employee Value Proposition (EVP)?

Ultimately – it comes down to ‘the give’ and ‘the get’

An employee value proposition is the experience offered by an employer in exchange for the productivity and performance of an

employee.

Employee perspective

Employees’ connection with the EVP determines their level of discretionary

effort in bringing the company mission, vision and values to life.

Employer perspective

A strategically designed EVP attracts, retains, engages and motivates

employees to drive business success.


Elements of the EVP which are key, in India

Question: To what extent are each of the following, important elements of the way you view your company’s EVP in India?

Security / stability, Opportunity to develop skills/ abilities, Variety of jobs / work experiences and Opportunity to develop innovative products / services are key aspects of the EVP in India

Element of EVP Important to a great extent (% of employees)

A secure and stable position 51%

A wide range of jobs and work experiences 50%

Opportunity to rapidly develop skills and abilities 46%

Opportunity to develop innovative products/services 45%

Opportunity to earn significantly higher levels of compensation 45%


Organisations with global consistency report higher level of talent and reward program effectiveness

Provides a platform for getting the basics right

FOCUS ON THE BASICSThose elements of the deal that are attractive across employee segments Competitive Base Pay Challenging Work Career Advancement Opportunities Convenient Work Location Vacation or Paid Time Off Security - retirement

Formalise and

Communicate

EVP DEVELOP LEADERSHIP COMPETENCIES

To ensure they can manage in the new and changing environment

.

DIFFERENTIATE Rewards based on

employees’ performance

Elements of T&R based on different employee segments

DEVELOP GLOBAL CONSISTENCYAcross regions, levels and talent and reward programs

High Gain Actions for Building a Sustainable Model


Getting the most out of your People Strategies in 2011Are you ready for Globalisation?



Globalization Strategies

The modifier and adapter The collaborator The thought leader Develops strong capabilities of

dealing with a developing market

Designs products for low-income markets

Innovates in processes to improve efficiency in developing locations

Standardization to minimize training costs and human error

Processes adapted to deal with poor infrastructure

Takes advantage of similar conditions in other emerging countries with similar or lower level of development

Partners on the basis of late-mover

Low-cost advantages

Back-end work, no brand value

Very specialized

Started servicing needs of developed MNCs in India

Developed managerial skills, expertise and understanding of developed MNCs needs

Now expanding to developed countries to

To service clients better

To increase client base

BPO in IT, R&D and Legal Services

These firms have acquired first mover advantages:

Innovation and ownership of technology

Acquisition of key assets

Have built a global brand

Globally distributed value chain

This type of Indian MNCs are not common, but some interesting examples can be found in

Renewable energy

Biotechnology/Pharma


To Support Business and Growth Strategy

Acquire people or technology

Expand geographically

Gain market share

Reduce costs: sales, marketing, inventory

Goals of Buying Competitors

Secure raw materials/inputs

Improve quality

Reduce costs: R&D, production, inventory

Acquire hard-to-duplicate assets

Respond to deregulation

Enter higher-margin industry segment

Goals of Buying Suppliers

Balance market risks

Expand product portfolios

Enter entirely new businesses

Integrate product line

Goals of Diversification

Own distribution network

Freeze out competitors

Reduce costs: production, inventory, sales

Improve identity/visibility

Goals of Buying Customers


Potential reasons for expanding intogeographic markets

European Union

Gain access to large capital, consumer and business markets Establish regional manufacturing or distribution centers Acquire unique assets or human capital

CEE and Russia

Gain access to emerging consumer and business markets Secure natural resources and raw materials Establish low-cost export manufacturing operations

Mexico andSouth America

Gain access to emerging consumer and business markets Secure natural resources and raw materials Establish low-cost regional and export manufacturing sites

Japan, China, SE Asia and India

Gain access to massive and varied consumer and emerging business markets Secure natural resources and raw materials Establish low-cost regional and export manufacturing sites Acquire unique assets or human capital

North America

Gain access to large capital, consumer and business markets Gain access to technology and R&D Acquire unique assets or human capital


Getting the most out of your People Strategies in 2011Making M&As Work



Why do M&As fail traditionally?

Rank Top 10 Pitfalls in Achieving SynergiesNegativeImpact

Note: Survey of Forbes 500 CFOs. Assessed on a scale of 1 to 7, where 7 is high.

1 Incompatible cultures 5.60

3 Unable to implement change 5.34

5 Did not anticipate foreseeable events 5.14

7 Acquirer paid too much 5.00

9 Need to spin off or liquidate too much 4.05

2 Inability to manage target 5.39

4 Synergy non-existent or overestimated 5.22

6 Clash of management styles/egos 5.11

8 Acquired firm too unhealthy 4.58

10 Incompatible marketing systems 4.01


“ India everywhere ”: Over the last 10 years, US$62 billion of Indian capital has been ploughed into M+A deals around the world *

UK – Tata Steel buys Corus for $12 billion in 2006

UK – Samvardhana Motherson buys VisioCorp for $38.3 million in 2009USA – Essar Group buys Minnesota

Steel for $1.65 billion in 2008

Brazil – Shree Renuka Sugars buys Equipav SA for $329 million in 2010

Portugal – Wipro buys Enabler for S52.3 million in 2006

South Africa – Apollo Tyres buys Dunlop Tyres for $62 million in 2006

Germany – Suzlon Energy buys RE power for S1.7 billion in 2007

Russia – ONGC buys Imperial Energyfor S2.8 billion in 2009

Japan – Lupin buys Kyowa PharmaFor an undisclosed amount in 2008

Malaysia – Avantha Group buys Sabah Forest for $261 million in 2007

Australia – Samvardhana Motherson buys Empire Rubber for $5.2 million in 2007

* Source: October 2010 issue of Fortune Magazine (www.fortune.com)


Key M&A process steps for HR

Note: All deals are different; this timeline represents typical sequence of events.

ImplementationIntegration PlanningDue Diligence

Manage deal price and risk

Secure top team

Manage the messages

Prioritize and manage activities

Plan

Develop change management plan

Design and implement staffing model

Align Total Rewards

Measure synergies

Define and implement HR service delivery

Execute Ongoing


HR Professionals can contribute at each stage of the deal to assist in…

Stage 1: Target Evaluation

Finding compatible business ventures and partners

Stage 2: Due Diligence

Ensuring the deal is sound and establishing the value proposition

Stage 3: Integration Planning

Defining the blueprint for all aspects of the merged entities

Stage 4: Implementation

Executing the merger integration plan for the new enterprise


HR Due Diligence ― key questions

What are the people assets we are acquiring?

Profile key management

Organization chart

Skill profile/development programs

Demographic characteristics

How will the people fit together?

Cultural barriers

Incompatible job definitions

Incompatible reward structures

Incompatible process and structure

Duplicate jobs!

Is the people cost reasonable?

Benchmark a few jobs

Benchmark staffing levels in a few functional areas

What is the root cause?

Inadequate skills?

Demographics?

Expatriates

Potential redundancy/ Workforce flexibility?

Goodwill issues/morale

Procedure steps

Legal barriers

Union issues

Temporary/contract workers

Adverse balance sheet impacts?

Change of control triggers

Pension, welfare liabilities understated

Contracts with executives may contain future liabilities

Book accruals understated, e.g. vacation, sales commission

Adverse revenue impacts?

Sales incentive design

Likely employee turnover

Retention plans

Pending industrial disputes

Adverse margin impacts?

Understatement of ongoing program cost

Severance payments

Commitments to future cost increases

Collective agreement commitments

Expatriates

Relocation expenses

Other?

Compliance

Illegal payments

Discrimination

Acquired rights

Payroll & HRIS

What are the people assets we are acquiring?

Profile key management

Organization chart

Skill profile/development programs

Demographic characteristics

How will the people fit together?

Cultural barriers

Incompatible job definitions

Incompatible reward structures

Incompatible process and structure

Duplicate jobs!

Is the people cost reasonable?

Benchmark a few jobs

Benchmark staffing levels in a few functional areas

What is the root cause?

− Inadequate skills?

− Demographics?

Expatriates

Potential redundancy/ Workforce flexibility?

Goodwill issues/morale

Procedure steps

Legal barriers

Union issues

Temporary/contract workers

Adverse balance sheet impacts?

Change of control triggers

Pension, welfare liabilities understated

Contracts with executives may contain future liabilities

Book accruals understated, e.g. vacation, sales commission

Adverse revenue impacts?

Sales incentive design

Likely employee turnover

Retention plans

Pending industrial disputes

Adverse margin impacts?

Understatement of ongoing program cost

Severance payments

Commitments to future cost increases

Collective agreement commitments

Expatriates

Relocation expenses

Other?

Compliance

Illegal payments

Discrimination Acquired rights

Payroll & HRIS


Why is leadership critical to success?

Set priorities right and create business momentum

Provide employees with commitment, engagement, confidence and comfort

To inspire a sense of purpose, coherence, community and trust

To be a comforting anchor in a turbulent sea of change

Research has shown that leadership becomes the most important driver of engagement during periods of disruption Leadership involvement and employee perception of leaders are key drivers

of change

Belief that leadership cares affects employees’ willingness to change

Companies that foster a high degree of leadership involvement and supportive cultures have a clear advantage

Source: From Responsibility to Action: Making Benefit Change Work. A Towers Watson study of 140 employers and 2,380 employees in large organizations


Culture is ranked as the most challenging people issue in M&A

Selection of the top team

Integrating benefits, pay and other reward programs on a global basis

A well-executed employee communication program

Effective leadership from top team

Focus on cultural alignment

Most Challenging People Issues in M&A Deals

Source: Towers Watson Track Survey. Note: Percentages reflect the answers of those respondents who have completed at least one deal in the past three years.

17%

22%

24%

30%

37%

52%

35%

47%

42%

40%

14%

21%

15%

14%

15%

17%

22%

14%

14%

8%

Extremely challenging Somewhat challenging

Neutral Not very/Not at all challenging


Getting the most out of your people strategies in 2011Employee health and wellness

towerswatson.com© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

38

2011 Global Medical Trend Survey – Key Findings

Responses from 170 leading health insurers who provide medical insurance solutions to employers in 37 countries throughout Asia, Africa, Europe and the Americas. 95% of the countries show a medical trend that exceeded the rate of general inflation

Almost three-quarters (72%) of survey respondents say they expect higher medical costs over the next five years

The average medical cost trend for 2009 was 10.2% and is projected to be 10.5% in 2011. Asia Pacific is expecting double digit increases

The rate of medical trend is two to three times the rate of general inflation

Medical trend is expected to be 2.5% higher in Emerging economies than in Advanced Economies

Wellness service offerings are growing in prevalence and some form of wellness feature is now typical in all regions


Escalating healthcare costs in Asia-Pacific

Cost of healthcare in Asia-Pacific was estimated at US$880 billion in 2008 and will surpass US$1trillion in 2010 *

Medical insurance costs are increasing around the region: Faster than salary growth

Faster than CPI

Country Cost Increase

India 12.3%

China 9.4%

Indonesia 14.2%

Japan 4%

Malaysia 9.6%

Philippines 10.3%

Singapore 8.4%

South Korea 10.0%

Taiwan 17.3%

Thailand 9.0%

Average 10.2%

Source: 2011 Towers Watson Global Medical Trends study * Source: WHO World Health Statistics 2009


40

Successful incentive and engagement programs have common features

Aligned with overall people and corporate goals Visibly supported by CEO, executive team and mid management Consistent with organisational culture Communicated early, often, and fully Meaningful and timely rewards or penalties Members have access to tools and resources to succeed Members can easily ascertain their reward status Streamlined administration Incentive program is sustained, even if targets and goals evolve

over time Comprehensive measurement plan in place to allow revision of

program


41

Staying@Work

Companies with the most effective Wellness programs have:

28% higher shareholder returns over a five-year period

1.8

fewer days unplanned absence per employee

1.2

percentage points lower medical trends

Lower turnover, fewer lost days for disability, lowest levels of presenters and greatest improvement in lifestyle risks

11%

higher workforce productivity

Source: 2009/2010 Staying@Work Report, published by Towers Watson.


Pioneering Health care survey (a follow on to our 2009 survey) The survey “Group

Healthcare: Healthcare trends 2010”, was conducted in the third quarter of 2010 for 154 large employers in India across various industries

The survey throws light on the current practices and experiences of these companies with respect to their health care provisions

It also helps identify the future outlook and strategies being planned to combat the key issues and challenges faced by the industry

Industry Group Percentage of Companies

IT / ITES 41

Manufacturing 37

Financial 17

Education, Healthcare & Medical Sciences

12

Oil & Gas 9

Food & Beverages 8

Business & Professional Services 7

Construction, real estate & Engineering

6

Wholesale & Retail trade 6

Transport, Storage & Logistics 5

Information & Mass communication

4


Key findings related to provision of healthcare

Employee welfare is the main objective of providing healthcare benefit

Majority of the sample (62 percent) reported an average premium cost escalation ranging from15 to 25 % in the last three years.

This compares to 30 percent of the respondents reporting an average premium cost escalation in the range of 10 -15% last year.

More than half the survey respondents are keen to align their current benefit provision to the market.

A shift from protective to preventive health care

55 percent of the respondents reported a claim ratio of 100 percent or higher.

The top three priorities for employers in the current healthcare scenario are• Controlling cost of employee health programs• Increasing quality of health care• Providing incentive programs to improve employee health/wellness


Key findings related to managing riskStrategies and Actions

The survey listed more than 20 strategies ranging from sharing of claim costs to parental cover to others

Maximum yearly limit on total claims amount seems to be the most popular current strategy

Making parental cover co pay or fully paid by employees through a separate policy is the most popular strategy in the coming year or two

Co pay is a prevalent practice at the moment. However it is observed that surprisingly not many have claims sharing process planned for the next two years even while the claim ratio is greater than equal to 100 percent for around 55 % of the respondents

Sixty six percent of the surveyed companies made some changes to the benefit design within the last three years but only 18% of the companies had a reduction in the insurance premium


Insured health care costs

Higher than average 15 – 25% increase in premiums

Increase in premium costs less than increase in claim ratios

Medical inflation likely to outstrip price inflation in the future

Business Drivers

Attraction and retention

Improve employee productivity

Cost control

Tax efficiencies

Employees

High perceived value

Not aware of benefit dollars spent due to lack of effective communication

Inefficient utilisation

Employer concerns

Higher costs due to new medical technologies

Poor employee understanding of how to use the plan/seeking excessive care

Providers recommending too many services

Health care

Emerging trends impacting healthcare benefit provision


Getting the most of your people strategies for 2011

Managing employee benefits risks


Main principles addressed by accounting standards

MeasurementCash basis or Actuarial basisChoice of Assumptions

RecognitionHow the cost is recognised in the

over a period of time

Accounting for variability

How to recognise differences of actual vs expected

Disclosures Format of presentation


For accounting purposes, employee benefits are classified into 4 types

Short - Term Benefits (which cannot be carried forward beyond twelve months)

Examples are wages, salaries, paid annual leave, non-monetary benefits like medical care, housing etc.

Other Long Term Employee Benefits

Examples include long-service leave, long-service awards, sabbatical leave etc.

Post employment benefits Examples are gratuity, defined

benefit pension, post-employment medical care

Termination Benefits Due to termination before normal

retirement date or Voluntary redundancy (e.g. VRS)


Inputs for a Actuarial Valuation


50

Actuarial Assumptions for Accounting valuations

Long term nature of the liabilities

Best Estimate - An unbiased outlook

Chosen by Company having taken advice from the actuary in concurrence with the auditor


51

Actuarial Assumptions – Where HR plays a key role

Financial Assumptions Salary increases

Demographic Assumptions Employee turnover

Leave utilisation / encashment rate


Actuarial Assessments as a business tool

Key is financial impact on P&L and Balance sheet

Change in Benefit Design

Business case for new benefit plan (if long term)

Financial projections and budgeting

Due diligence for a merger/acquisition

Impact of change in corporate structure

Decision to fund retirement benefits

Ensure appropriate assessments

Assistance for assumption setting Salary and attrition analysis Leave availment and balance utilisation


India: Benefit current issues

Convergence with IFRS – Accounting for long term employee benefits from April 2011

— Updated accounting standards AS15 and AS36

More news on International workers Provident Fund – October 2010

Proposed Payment of Bonus Act change of eligible population – September 2010

— Eligibility increased to Rs 15,000 per month

— Amount raised to 11% of a maximum of Rs 5,000 per month salary

Provident Fund declares 9.5% interest for FY11 – September 2010

— Companies with an exempt PF Trust will need to match this rate to credit to its employees

Increase in the eligible population to be covered by the Employee State Insurance Act– May 2010

— The threshold earnings criteria to determine eligible employees is now Rs 15,000 per month


India: Direct Tax Code current proposal - Benefits

Key highlights (effective date planned April 2012)— Superannuation: No requirement for employees to pay tax on

contributions exceeding Rs 100,000. Proposed tax deductibility limit to be shifted back to the employer

— Pension: Allowance of up to 10% of salary employer contribution to an approved pension fund tax exempt for the employee

— Medical reimbursement: Tax exempt limit for out-patient care increase to Rs 50,000 (from Rs 15,000)

— Medical premiums: premium paid by individuals to a medical policy exempt from tax up to Rs 50,000

— Deductions for long term investments: individuals will have a Rs 100,000 exemption for long term investments to the Provident Fund, New Pension Scheme as well as Rs 50,000 towards the payment of premiums for life and health insurance, tuition fees

— Perquisites: The current draft Bill makes no mention on the treatment of perquisites. Expected that perquisites will remain but the precise valuation method is to be confirmed later


Thank you

Towers Watson India Private Limited

404B, 4th Floor, Centrum Plaza, DLF Golf Course Road, Gurgaon, Haryana, 122003, India

Tel: +91 124 4322800

© 2010 towers watson. all rights reserved. getting the most out of your people strategies in 2011...

Documents

towers watson client

towers watson hr pulse

towers watsons view

financial management

push slide

hr challenge

effective people

people strategies