Employee benefit liabilities of BSE 100 companies increase to Rs 4,227 billion

Money spent by Indian companies on employee benefits in 2013 reported a 17% increase

The combined employee benefit liabilities of BSE 100 companies increased to Rs 4,22,700 crore, said a survey.

According to Towers Watson’s, report “Employee Benefits Accounting and Risk study”, an annual report analysing financial statements of 94 of the BSE 100 companies as at 31 March 2013, the combined estimated employee benefits liabilities registered an increase of 17 per cent to approximately Rs 4,227 billion as compared to approximately Rs 3,600 billion in the previous year (which covered 99 companies). Further, the combined overall funding of the total defined benefit (DB) liabilities has steadily increased from 86 per cent in 2011 to 88% in 2013.

Moreover, the unfunded employee benefit liabilities have decreased from 32 per cent to 12 per cent in a span of 6 years, said the report.

While there has been an increase in combined overall funding, the funding level for Gratuity plans and DB Pension liabilities also witnessed increase from 6 per cent and 8 per cent over the same period.

This revealed that a significant portion of the corporate liability on account of long term employee benefits is now better funded than a year ago, said the report. Even with an increase in liabilities and potential economic pressures, companies are contributing more to these plans. The 2013 contributions were almost twice that of ‘service cost’ (which represents the cost of one year’s additional benefit accrued) on an average basis for the BSE companies.

“Against the backdrop of an uncertain and dynamic macro-economic environment, Indian companies are increasingly becoming cautious and conscious about financial facets of employee benefits.  Consequently, unfunded employee benefit liabilities have witnessed a marked decrease over the last 6 years with corporate liability for long term employee benefits now being better funded, a trend which is likely to continuing with more companies disclosing liabilities for benefit plans,” said Kulin Patel, Actuary and Director - Client Account Management, Towers Watson India.