43 per cent Small and Medium Enterprises discontinuing employee benefits on high cost: Report

About 43 per cent small and medium sized enterprises (SMEs) have discontinued at least one employee benefit over the years due to high costs, according to a study.

Two out of every three SMEs in the country felt that the cost of running an employee benefit programme such as reimbursements for fuel, phone bills among others outweighs the actual value of the benefit, said the Zeta 'Employee Benefits' study.

The study, commissioned to Nielsen India, covered 194 corporates and 1,233 employees across seven key cities in the country, taking a comprehensive look into the current state of employee tax benefits across industries, including SMEs.

Around 82 per cent of SMEs have a dedicated in-house team to manage tax benefits or reimbursements and the average size for this team is around five members, it said.

Despite having a dedicated team, 43 per cent SMEs have discontinued at least one or more of these benefits citing high running costs, it added.

This figure is higher for SMEs compared to large and medium sized companies with employee size upwards of 500.

The report showed that 61 per cent employees do not opt for these benefits because they find the process of claim submission time-consuming given that the average time taken by employees to fill a single claim is 24 minutes.

Moreover, it found that, one in every two employee prefers to opt out of these benefits for a perceived higher in-hand salary.

About 91 per cent SMEs continued to depend fully or partially on a paper-based process when it came to processing reimbursement for employees, it said.

The process typically required employees to fill in claim forms either physically or digitally and submit these along with paper bills as proofs of spends for the said benefit.

Most SMEs claimed to be struggling with paper work, with 46 per cent citing invalid or illegible bills submitted as the largest concern while handling reimbursements, followed by problems like bill verification (18 per cent) and bill storage (14 per cent).

Zeta chief executive officer and co-founder Bhavin Turakhia said the SME sector continues to struggle in areas of digitisation, innovation and hiring and retaining the right talent in spite of witnessing tremendous growth over the past few years.

"We have found that only 9 per cent SMEs use digital process to handle reimbursements," he added.