How digital reimbursements can reduce costs?
Companies need to move towards a system where costs are low, and employees are encouraged to avail benefits.
It may not always be the hot topic on the table at financial planning meets, but a closer look reveals that employee benefits may be worth a second look. When we get down to brass tacks, it’s almost definitely an area that can have a significant financial impact on a company’s balance sheet. In fact, it leaves little doubt when you consider that salary, which benefits are included in, is the biggest cost head in a lot of industries. The link between salary and benefits is a key one to understand.
Today, most companies offer employee benefits. In India, tax-saving reimbursements like fuel reimbursements and mobile reimbursements are pretty popular. According to the Zeta employee benefits study, commissioned to Nielsen India, 87 per cent of companies offer at least one type of tax-saving reimbursement.
More benefits means happier employees and hence more profits. However, a finding from the employee benefits study warrants digging a little deeper. Especially into the costs of offering tax-saving reimbursements.
According to the study, 36 per cent of companies discontinued at least one benefit. Over half these companies did so due high costs involved.
The study also revealed that 81 per cent of companies have a dedicated team that verifies employee claims. Overall, these teams average about six members, with manufacturing companies employing teams with about 8 members on average.
Still on the topic of the high cost of reimbursements, the survey gathered that 94 per cent of companies still follow a manual, paper-based process. Typically, when an employee makes a claim, the claims form and the supporting bills are sent for verification. In companies with offices in multiple cities, the claims would be brought to a central location for verification. The claims are verified, processed and employees are updated about the status of their claims.
Once the verification process is complete, companies would then have to look into storing these documents. The law requires that companies maintain these records for audit purposes. Suffice to say, between logistics, verification and storage, the costs end up being pretty significant.
Eliminating even one of these costs would yield substantial savings for companies. It doesn’t come as a surprise then, that the cost of offering benefits, according to 70 per cent of companies in the study, outweighs the benefits derived.
According to the study, tax-saving reimbursements are offered for employee motivation. In fact, 92 per cent of the participants interviewed gave this as the reason why tax benefits are offered at their company. However, 67 per cent of employees interviewed preferred to have more money in hand as opposed to reimbursements.
Summing up the reasons behind this preference among employees reveals that the way in which reimbursements are managed leaves a lot to be desired. According to employees the claims process itself is time consuming and complicated. Employees spend around 23 minutes making just one claim, according to the study. When added up, that’s a lot of productive hours lost for companies.
Any asset, when underutilised, ends up becoming a cost. Similarly, the framework set up to manage tax-saving reimbursements also becomes an added cost to company, that yields no real benefit.
How to cut the cost
What is really required at this point is a system that allows companies to manage tax-saving reimbursements in a more efficient manner. Companies need to move towards a system where costs are low, and employees are encouraged to avail these benefits.
Going back to the prevalence of paper-based processes in companies, the study reveals that 90 per cent of employees prefer making claims digitally. While they feel all the challenges faced while making claims the traditional way would be addressed, digitisation also brings considerable cost savings to companies.
Armed with a fully-digitised system, even a small HR team could ensure that the entire organisation’s tax-saving reimbursements programme operates smoothly. Switching to a digitised claims process would also mean no more paperwork. By extension, this would also reduce the company’s spends on logistics and storage.
As employees save time filling up forms, attaching bills and getting approvals in person, a considerable amount of productive time is also saved.
Artificial Intelligence (AI) and Machine Learning (ML) are hot topics today, and the power of this technology can also be harnessed when it comes to managing employee reimbursements. Digitised claims could be verified automatically using this technology. The human interaction at this stage could be reduced to a mere supervisory role, reducing the number of resources required to process claims.
Overall, taking a digital approach to managing employee claims would mean that company can benefits from significant savings. It could be in the form of time, resources, overall costs. Finally, with Budget 2018 paving the way for digitised tax assessments, going digital would also ensure compliance.