Managing employee benefits in an effective and efficient manner

The lingering effects of the COVID-19 pandemic continue to affect the labour market amidst rising concerns around the Great Resignation; a phenomenon that is far from over. With cost of living pressures showing no signs of abating, and 28% of Malaysian employees telling us that they are likely to change employers in the next 12 months in our 2023 Global Workforce Hopes and Fears survey, organisations will be forced to rethink their rewards strategy to cater to the growing expectations among talents. Non-financial rewards will be increasingly crucial as organisations reconcile the need to motivate employees amidst anxieties over the current economic situation, and provide sustainable rewards that will not break the bank. 

Coupled with the uptake in remote work which has effectively removed the boundaries between work and life, most notably for employees with children or dependents, the need to recognise employees adequately and to make them feel valued has become necessary for every organisation. As people enter different phases of their lives, and as priorities change, they may begin to value certain benefits over others. For example, travel allowance at earlier stages of their careers, and childcare benefits as they begin expanding their families. As a result, employers have begun to reevaluate their priorities specifically towards employee benefits management.

What is employee benefits management?

Employee benefits management is how a company’s human resources (HR) department develops and manages benefits for their employees, typically with the help of HR software. It is a part of the larger employee management process that considers which benefits to offer to employees (based on factors such as job grade, job role, department, etc) as well as setting the terms and conditions to be eligible for certain benefits. Employee benefits also serve as a driving force behind employee recruitment and retention. Essentially, your benefits programme can motivate employees to stay and draw new candidates to your company. It is important for HR departments to understand benefits administration and how to manage it effectively.

How an employee benefits programme strengthens your workforce strategy

1. Automation to improve employee benefits management 

Benefits management can be complex and time-consuming for HR administrators, with tedious data entry tasks and tax requirements that employers have to comply with. In order to adequately manage a company’s employee benefits, employers are beginning to consider automating the benefits management process. Automating benefits administration involves using either specialised benefits administration software or tools such as robotic process automation (RPA) and intelligent automation to harness useful information and help make decisions for employee management more quickly and accurately. 

Moreover, due to the data-heavy nature of benefits management, automation essentially ensures that employee benefits are processed accurately and efficiently, reducing the amount of paperwork and manual data entry involved in managing employee benefits, saving time and effort for HR staff while reducing the risk of errors. On top of that, automated benefits administration systems can help organisations comply with all relevant laws and regulations related to employee benefits. 

Specialised benefits administration systems can also provide employees with easy access to information about their benefits. In instances where employees are able to make changes to their benefits elections, they can easily do so without involvement from HR improving employee experience and satisfaction.

2. Integrating payroll and employee benefits management

As you consider the advantages of an automated benefits management system, it may also be worth thinking about how it can be integrated with other aspects of HR administration, such as payroll. Payroll is closely tied with employee benefits administration, and both are reliant upon the access to and use of accurate data to effectively sustain these critical processes within your business.

The accuracy and reliability of your data used and shared among these key processes is critical to ensure employees are paid accurately and on time, that additional compensation is accurately budgeted for, and employee benefits are cost effective for your organisation. To ensure that the benefits system and payroll system are integrated, a centralised system can help reflect real-time updates between the two systems, so payroll data is always up-to-date and benefits selections are accurately reflected in employee pay. 

With this, a Total Wellness approach will increasingly become the foundation of the employee experience. The Total Rewards strategy to date has provided a blend of monetary and non-monetary rewards offered to employees using a traditional “top-down” approach; hence wellness is seen as a part of benefits offerings. Employers should look to the future in terms of benefits management, by creating a personalised bottom-up approach that bridges the gap between employee preferences and the total reward offering to develop the overall Total Wellness system. 

How does employee benefits management impact tax? 

In setting up a flexible and fully functioning employee benefits management system, companies should consider how the new system can help you manage the tax implications of each benefit. A benefit-in-kind (BIK) is any non-cash benefit of monetary value that you provide to your employee. Some benefits have monetary value and are a form of the pecuniary liability for example, childrens’ school fees. The tax treatment differs for different benefits and perquisites. Some are fully taxable, some are partially taxable and some are tax-exempt.

These benefits and perquisites form part of an individual’s taxable income and would need to be subjected to tax computations and reporting during the month it is consumed or enjoyed by the employee. Examples of taxable benefits provided by employers are optical, gym membership, petrol benefits and more. As for tax-exempt benefits, common ones are medical for self and family, food and drinks provided at the workplace, transportation between pickup points or home and the place of work (to and from) and more. Travelling between Malaysia and any place outside Malaysia (leave passage) and petrol benefits are some examples of taxable benefits with some exemption.

These partially exempted taxable benefits would still need to be reported in year end forms. As such, when providing benefits to employees, employers would need to manage the taxability, computation of tax and eventual reporting into the Form EA (Annual Statement of Income from Employment) and Form E (Employer Annual Statement of Remuneration) correctly. Many employers manage the provision and claims of such benefits outside of payroll and may miss the reporting and tax applicability of such benefits and risks, ending up in a non-compliance situation.

How can we help? 

Administering and managing employee benefits can be quite complex. Understanding the considerations involved in the process will assist you in deciding whether you should handle your benefits administration on your own or outsource all or part of it. 

When considering whether to handle your own benefits administration or hire someone else to do it, ask yourself:

• How involved in the administration do I want to be?

• Can I afford to purchase the software or hardware needed to manage the process myself?

• Will self-administration take too much of my time?

• Can we outsource the end-to-end management of benefits administration?

By taking into account the considerations presented above, you can ensure that your employee benefits systems are properly managed, while providing your employees with the flexibility and choice of benefits that they desire. Speak to us today, to find out more about employee benefits management. 

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