Flexible Compensation- 2019
Last Date - May 24th 2019
For any concerns related to Flexi salary please connect with your local HR for assistance
Introduction to Flexi Compensation
Flexi compensation mechanism allows employees to restructure their CTC by altering value of some components as per their choice and
rework the structure against the Standard CTC as issued by the organisation on an overall CTC neutral basis.
Additionally, this redistribution of values across various CTC components is expected to bring tax optimisation for the employee.
Across Industry companies such as Godrej, GE India, Bayer, Reliance Industries, RPG, TCS, Kohler and IBM already have Flexi
Compensation system working in one form or other.
This policy is effective from April 1st 2017. With every new Financial Year employee will have option to make Flexi choice afresh.
All JSW on roll employees in Levels L01 to L19 including Graduate Rotation Program-GRP’s will be covered under this policy, choice of
flexi option for restructuring the CTC component remains with the employee. Trainees hired under the campus hiring policy will also be
covered in this policy.
Employees currently excluded are Dolvi (E00 to E07), Salav Unionized and HBPCL staff not aligned to JSW Salary structure in SAP,
their status for inclusion in the policy can be reviewed later.
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Flexi Compensation- Changes & Additions 2019
1. NPS:- As per NSDL and PFRDA guidelines employees have to contribute minimum Rs 500/- per transaction.
Hence we have revised the minimum contribution levels for NPS to Rs 530/- per month including transaction fee.
Please check the options carefully.
2. Books & Periodicals:- A new component for L15 and above grades has been introduced called Books &
Periodicals, please check details in subsequent slides.
3. Gift Card:- An annual amount of Rs 5000/- as Gift coupon can be chosen under Flexi option, amount will be
disbursed in the form of loaded card for usage, please check details in subsequent slides.
2 of the components above are new additions to the Flexi Kitty and are CTC neutral, to be adjusted from
the Standard CTC.
Terms used in the Flexible Compensation Policy
STANDARD CTC - Standard CTC is the CTC which an employee receives as part of his Salary Review letter or during
his Appointment with the group. This CTC is the basis for employee to make changes as per the Flexi option. Standard
CTC will be used as base for all salary review processes.
GROSS SALARY - sum total of Basic Salary, Supplementary Allowance/ Special Pay, Medical Allowance, Provident
Fund, Leave Travel allowance (LTA) and Annual Bonus. Gross Salary will always be based as per the Standard CTC.
This definition and linkage to Variable pay calculations may undergo some changes during the financial year 2019-20.
FLEXI CTC- Restructured Standard CTC by using the Flexi Option and allocating amount from the total Flexi Kitty into
various component solely on employees choice within the ambit of this policy will be considered as Flexi CTC. This
CTC will be used only for the processing of salary in the payroll and form 16.
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Importance of Standard CTC and Linkages
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Flexi Salary – May 15th 2019
ADDITIONS 2019-20
7. Gift Card
8. Books & Periodicals
• For employees staying in Company Accommodation HRA will be excluded from Flexi Kitty
• Medical Reimbursement will appear in SAP Flexi CTC Option as earlier
• Medical Reimbursement may be merged with Supplementary allowance as there is no tax incentive to it now.
• Two new components called Gift Card and Books & Periodicals has been introduced. 6
Flexi Salary 2019- New Components
1. Gift Card
• Employee choosing the option to go for Company Gift Card of Rs 5000/- will receive a loaded card in the month of September every
year. This will be a tax free card for employee. Whoever chooses to go for it only will receive it on a CTC neutral basis adjusted from the flexi
kitty.
• This card can be used for purchase of both food/ non food items or bill payments etc but without Cash withdrawal facility.
2. Books & Periodicals
• At GM-L15 & above levels, employees will be able to claim tax benefit of Rs 24000/- per annum against validated bills on a CTC neutral
basis from their Flexi Kitty.
• Bills should pertain to Books & Periodicals linked with employees nature of work (technical & managerial books and periodicals), this should
not be interpreted loosely to accommodate work of fiction, religious nature etc and neither should it be daily newspapers. Journals of specific
technical/ managerial content can be taken into consideration under this policy.
• Amount towards this Head can be chosen with a minimum limit of Rs 6000/- per year to maximum Rs 24000/-. Claims & Payments
processing to be done on a Quarterly basis.
• Nature of Books/ Periodical/Journal purchased as eligible for reimbursement under the policy will be sole discretion of HR head of respective
unit/ business after initial review is over from GBS.
Components of the Flexi Policy- 6 Options to restructure your salary
New Additions 2019
Tax Benefits on all Flexi CTC components will be as per the prevailing tax norms and on CTC neutral basis
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Understanding Overall Major Impact of Flexible Compensation Policy
1. First and foremost employee should be able to save more or spend more as per the choices he/she makes under the Flexible
Compensation Scheme.
2. It is expected that employee is going to save on tax by using the mechanisms provided in the policy, but the overall actual tax
impact is dependant on many other factors outside the purview of Flexi Compensation hence tax saving comparative should be
limited to Flexi components only.
3. Due to allocation of amount higher than the base amount in Standard CTC under LTA, Meal Card, Gift Card and in NPS employee
salary pay-out quantum will reduce in the month of May 2019. Hence employees needs to balance their tax saving and cash
requirement judiciously.
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House Rent Allowance
Current Components Flexi Components Available Flexi Kitty Amount Allocation
House Rent Allowance (HRA) :- HRA Flexi option will be applicable only to Minimum Value to be maintained as per the HRA table linked to
Linked to Grade & Work employees staying in rented grade & work locations
location i.e. A+,A,B & C as accommodation. (Ref:- JSW HR Policy Manual)
mention in policy +
Not applicable for employees staying in Employee can add additional value up-to maximum of 50 % of basic
company accommodation. salary for metro city and 40% of Basic salary for non-metros city
under Section 10 (13A) as per IT rule
All other policy related to this allowance remains same
Some scenarios/ queries on HRA
1) My Rent is going up soon what should I do- All employees who are looking forward to upward revision of their rentals to use the flexi option and increase
their HRA amount appropriately to avoid later hic-ups (Can allocate 40% / 50% of Basic as per Income Tax Act).
2) I've recently moved from Township to Mumbai – As you have moved from township (company housing) to city location (on HRA) there is a change in
your CTC. If you have moved on or after 20th of the month you will be able to use the flexi option with the next month payroll cycle else you can use the flexi
option within the month effective DOJ at the new location. HRA in this case will be prorated from the date of joining the location.
3) I've moved from Township to Mumbai/ other location and have retained township housing :- HRA will be as per HR policy applicable to the new
location, plus employee has the choice to increase his/her HRA up-to maximum 50% of Basic salary as per prevailing tax exemption for the new location. Rent
will be recovered for usage of township from monthly salary.
4) Is the HRA limit as per JSW norms or Income tax norms:- HRA amount in Standard CTC is as per the JSW policy which becomes the minimum HRA to
be kept intact in the . New HRA limits of 40% and 50% is as per the Income Tax norms. Employees at Metro Cities can alter their HRA to 50% of Basic Salary.
Metro cities as per income tax classification are Delhi, Mumbai, Chennai and Kolkata.
5) Employee Tagging:- HR, Finance, Payroll and Administration teams to check that the tagging of employees in the ESS for Company Housing is properly
updated before launch for correct linkage of HRA. Else employee may face recoveries later. 11
Benefits Illustration for employees – HRA- L12
Level L12 L12 L12 L12 Minimum of the three is
Basic Salary per annum 720000 720000 720000 720000 exempted from Tax
City Classification A+ A B C
1) Actual HRA received
Monthly HRA as per Classification 12770 7670 6320 5650
Actual Yearly Rent Paid 360000 240000 200000 160000 2) Actual rent paid reduced
Tax Bracket Assumption Highest Slab 30% 30% 30% 30% by 10% of Basic salary
3) 50% or 40% of basic
@50% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption salary as per IT act City
WITHOUT FLEXI Rate Rate Rate Rate Classification
Yearly HRA as per Classification Received 153240 92040 75840 67800
Least of the three is exempt from
Rent Paid Minus 10% of Basic salary 288000 168000 128000 88000 income tax
50% or 40% of Basic Salary as Per Location 360000 288000 288000 288000
EXEMPTION (A) 153240 92040 75840 67800
@50% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption
WITH FLEXI OPTION Rate Rate Rate Rate
Yearly HRA Received 360000 288000 288000 288000
Least of the three is exempt from
Yearly Rental Paid Minus 10% of Basic 288000 168000 128000 88000 income tax
50% or 40% of Basic Salary as per location 360000 288000 288000 288000
EXEMPTION (B) 288000 168000 128000 88000
Additional Exemption (B) – (A) 134760 75960 52160 20200
Addl Yearly Tax savings @ 30% Bracket 40428 22788 15648 6060
Locations for rate 50% of Basic Salary as HRA for Tax purpose is assumed to be for Delhi, Mumbai, Chennai and Kolkata locations 12
Benefits Illustration for employees – HRA- L08
Level L08 L08 L08 L08 Minimum of the three is
Basic Salary per annum 240000 240000 240000 240000 exempted from Tax
City Classification A+ A B C 1) Actual HRA received
Monthly HRA as per Classification 5780 3470 2980 2560
Actual Yearly Rent Paid 192000 156000 114000 84000 2) Actual rent paid reduced
Tax Bracket Assumption Highest Slab 10% 10% 10% 10% by 10% of Basic salary
3) 50% or 40% of basic
@50% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption salary as per IT act City
WITHOUT FLEXI Rate Rate Rate Rate Classification
Yearly HRA as per Classification Received 69360 41640 35760 30720
Rent Paid Minus 10% of Basic salary 168000 132000 90000 60000 Least of the three is exempt from
income tax
50% or 40% of Basic Salary as Per Location 120000 96000 96000 96000
EXEMPTION (A) 69360 41640 35760 30720
@50% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption '@40% Tax Exemption
WITH FLEXI OPTION Rate Rate Rate Rate
Yearly HRA Received 120000 96000 96000 96000
Yearly Rental Paid Minus 10% of Basic 168000 132000 90000 60000 Least of the three is exempt from
income tax
50% or 40% of Basic Salary as per location 120000 96000 96000 96000
EXEMPTION (B) 120000 96000 90000 60000
Additional Exemption (B) – (A) 50640 54360 54240 29280
Addl Yearly Tax savings @ 10% Bracket 5064 5436 5424 2928
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Locations for rate 50% of Basic Salary as HRA for Tax purpose is assumed to be for Delhi, Mumbai, Chennai and Kolkata locations
Leave Travel Allowance- LTA
Current Components Flexi Components Available Flexi Kitty Amount Allocation
LTA can be revised up-to a fixed quantum of INR 75000/- per annum or
2-month Basic salary per annum whichever is higher, employee should
opt for this benefit if there is a surety of travel.
Leave Travel Assistance LTA:- Leave Travel Assistance
Amount is limited to one month Can be accumulated and availed twice
This is as an annual component to be paid in the month of January as
basic salary per annum paid in a block of four year to avail tax
per the existing policy.
annually benefits subject to submission of bills.
Exemption is applicable under section 10 (5) as per IT rule subject to
travel within India upon submission of bills
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Benefits Illustration for employees – Leave Travel Allowance
LTA Assumption:- Full allocated amount is claimed as exemption
Level L12 L10 L08
Basic Salary 720000 432000 240000
WITHOUT FLEXI
Current LTA as per 1 month Basic 60000 36000 20000
WITH FLEXI OPTION
2 Months Basic 120000 72000 40000
2 Months Basic or Rs 75000/-
whichever is Higher 120000 75000 75000
Exemption Increase 60000 39000 55000
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LTA – Payout in January 2020
Scenario 1- Under Flexi Option LTA is 1.44 Lacs per annum
YEAR 2019- LTA Each Month YEAR 2020 Financial Year 2018-19
JANUARY- 5000 JANUARY- Rs 123000/-
Basic Salary = Rs 720000/- per annum
FEBRUARY – 5000 FEBRUARY LTA = 1 Month Basic = 720000/12 = Rs 60000/ - annum
Prorated per month = 60000/12 = Rs 5000/- per month
MARCH – 5000 MARCH
Financial Year 2018-19 Ends, Financial Year 2019-20 Ends,
Salary is Reviewed Salary is Reviewed Financial Year 2019-20 – FLEXI OPTION
APRIL - 12000
Basic Salary = Rs 864000/- per annum
MAY- 12000 LTA = 2 Month Basic = 2 X 864000/12 = Rs 144000/ - annum
Prorated per month = 144000/12 = Rs 12000/- per month
JUNE – 12000 1st time employee Flexi choice,
will reduce take home salary due
to recovery Total Payout in January 2020 for the LTA year 2019.
JULY- 12000
5000 X 3 + 12000 X 9 = Rs 123000/-
AUGUST- 12000
SEPTEMBER – 12000 LTA Works on Calendar Year while taxation is for the Financial year
OCTOBER – 12000
NOVEMBER – 12000
DECEMBER – 12000
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LTA – Payout in January 2020
Scenario 2- Under Flexi Option LTA is zero
YEAR 2019- LTA Each Month YEAR 2020 Financial Year 2018-19
JANUARY- 5000 JANUARY- Rs 15000/-
Basic Salary = Rs 720000/- per annum
FEBRUARY – 5000 FEBRUARY LTA = 1 Month Basic = 720000/12 = Rs 60000/ - annum
Prorated per month = 60000/12 = Rs 5000/- per month
MARCH – 5000 MARCH
Financial Year 2018-19 Ends, Financial Year 2019-20 Ends, Financial Year 2019-20 – FLEXI OPTION
Salary is Reviewed Salary is Reviewed
APRIL - 0 Basic Salary = Rs 864000/- per annum
LTA = 1 Month Basic = 864000/12 = Rs 72000/ - annum
MAY- 0 Prorated per month = 0 = Rs 0/- per month
JUNE – 0
Total Payout in January 2020 for the LTA year 2019.
JULY- 0
AUGUST- 0 5000 X 3 + 0 X 9 = Rs 15000/-
SEPTEMBER – 0
LTA Works on Calendar Year while taxation is for the Financial year
OCTOBER – 0
NOVEMBER – 0
DECEMBER – 0
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LTA Flexible Choice Impact
1. Employees are requested to put amount in the Flexible Kitty LTA option after verifying that they have exemption/ carry forward amount in their
LTA option
2. Any amount parked in LTA in ESS will necessarily have a 12 month effect this will have two impacts which employee needs to notice.
Amount of money blocked under LTA will be calculated on Annual basis and hence gets blocked for payout till January of the upcoming
year.
In the month of May when Flexi window is open, Payroll System will pick up amount from retrospective date (April 1st 2019) in the month
of May 2019.
Both the above will have an impact and will reduce the take home salary to some extent in the month of May
Hence employees are cautioned to check the amount of their choice.
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Tax Benefits Illustration for employees – NPS
Tax deductions offered by NPS Maximum limit Section
Deduction from salary towards retirement Rs.1.5 lakh 80C
Voluntary contribution towards NPS made by employee Rs.50,000 80CCD (1b)
Voluntary contribution towards NPS by employer 10% of basic salary 80CCD (2)
EET SCHEME:- The new pension scheme falls into the category of the EET (exempt-exempt-tax) system in that contributions are eligible for deduction,
withdrawals are fully taxable while returns are exempt from tax.
NPS Scheme with Employer & Employee Contribution after 80CCD (1)
Level L12 L10 L08
Basic Salary 720000 432000 240000
10% of Basic Salary employer Contribution 72000 43200 24000
Additional Contribution by employee 50000 50000 50000
Total Tax Savings @ 20% Bracket 24400 18640 14800
NPS Changes 2019
1. As per NSDL guidelines, NPS any transactions below Rs 500/- excluding transaction fee is not accepted as deposit, under either of
employer or employee personal contribution.
2. Simultaneously, Rs 1000/- is the minimum amount needed to be deposited anytime during the financial year in your NPS account for
keeping the account active and to avoid freeze of account as per PFRDA requirement.
3. JSW will now accept monthly deposits of minimum Rs 530/- including transaction fee under Employer contribution, employee options are
below:-
a. Higher of the 2 below will be considered as employee contribution per month under JSW NPS employer contribution scheme
• Whole percentages 1%, 2%, 3% , 4%,..........10% of the Basic Salary (1.3%, 2.7% etc. will not be accepted)
OR
• Rs 530/- per month including transaction fee, whichever is higher will be considered for contribution
b. “NIL” contribution option under Employer Contribution, employee may choose to go for a “Zero/ NIL” contribution under this
scheme for the year in SAP. Employee to ensure that a Rs 1000/- personal contribution is still made by him/her anytime during the year
to keep the NPS account active. Tax benefit on Personal contribution is upto Rs 50000/- per annum.
NPS Personal Contribution - SAP Prompt 2019
NPS Prompt on Choosing NIL option, under Flexi 2019- NPS – Employer Contribution
Please note, choosing to go for NPS Nil option under Employer contribution would still need a necessary contribution of Rs 1000/- per annum to
keep your NPS account active with PFRDA/ NSDL. You may do so, by making a Personal contribution into your NPS account of Minimum Rs
1000/- to Rs 50000/- per annum with similar tax benefits using same PRAN number on NPS website. You may reselect the Rs 530/- or whole
percentage of Basic salary as contribution option next year under employer contribution next year. For details please contact your local HR
before submitting your Flexi choice.
• Personal Contribution to NPS account can be made under the same PRAN No and doesn’t require any other separate PRAN No/ Account.
• Same account can be chosen by the employee for both Employer and Personal contribution. Employee can choose
• Maximum Tax Benefit per annum is up to Rs 50000/- under Personal Contribution.
• Rs 1000/- per annum is required to be deposited under personal contribution excluding fee to avoid freeze of account, JSW has no linkage with
employee personal contribution.
• Personal Contribution for employee cannot be made through JSW SAP or any other JSW internal system. Employee has to directly go to NSDL
website for making the contribution
NPS Flexible Choice Impact
1. Although detailed communication has already been circulated separately on NPS during the last 2 years, please note that amount invested in NPS
will be locked up till retirement of an Individual, hence employee needs to be certain before committing large sum of money in NPS.
2. Change from April 1st 2019:- Minimum contribution to employee NPS account per month is Rs 530/- including the transaction fee. As per
the guideline from NSDL transactions below Rs 500/- will not be processed.
3. Amongst the 77 POP’s available under the NPS Scheme, JSW has chosen to partner with SBI Bank as preferred POP. All other documentation
and formalities for NPS. In case of any change in POP, employees will be informed during the year.
4. Any amount parked in NPS in ESS will necessarily have a 12 month effect this will have impact which employee needs to notice.
In the month of May, Payroll System will pick up amount from retrospective date April 1st 2019.
The above may have an impact and will reduce the take home salary in the month of May
Employees are cautioned to check the amount of their choice.
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Flexi Kitty Norms
Employee can increase/decrease the amount against all components as per availability of balance amount in the Flexi kitty.
Employee can choose NIL/ ZERO value for all the above components except HRA and Meal Cards
Exemption for all components is applicable as per prevailing income tax rule
For all existing flexi components other terms and conditions will be as per the existing JSW HR policy manual
Flexi Choice once made(through submission on ESS) cannot be changed till the next Salary Revision or employee transfer to a new
location.
Organisation reserves the right to merge/ split and remove any component from the CTC structure in future as it deems fit on a CTC
neutral basis with prior information to all employees.
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Flexible Compensation Plan – SAP Window 2019
• Policy was first launched on June 1st, 2017 and is effective from April 1st 2017.
• Employees will be able to finalise their Flexi option from 15th of May till 24th May 2019 in the ESS
• Employees not submitting till 24th May 2019 (last date), it is assumed that employee will not be utilising the flexi option and his/her payroll
will be processed as per the Standard CTC for the year 2019-20.
• No request post submission for opening the Flexi window or changing the flexi option shall be entertained after 24th May 2019.
• Units may plan to keep ready a list of all employees and their LTA exemption/ carry forward status
• Payroll will process the input as per submission effective from April 1st 2019.
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Policy Caveats
• Employee can utilise the flexi option once a year in the month of May upon opening of Flexi window every year, new joiners/ employee
transferred can make their choice in the month following their joining
• In case any of the flexi components ceases to provide tax benefits due to change in provisions of Income Tax/ other laws, organisation
reserves the right to review and merge such allowance/s in the Supplementary/ Special Allowance notifying all employee. This will be done
on a CTC neutral basis. This decision will be final and binding on all employees.
• Flexi compensation scheme will be available through SAP ESS.
• For all purposes signed policy document will be considered as final except for the changes in Advance medical Reimbursement
communicated here.
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Flexible Compensation Stakeholders
Stakeholders and their broad roles in relation to Flexi Scheme.
Plant/ Location HR- Policy communication and query resolutions
IT and SAP Team- Design the ESS utility and resolve Technical queries
GBS – Payroll processing, Reimbursement, Taxation, Form -16 & Accounting and revert on employee queries
Group Compensation & Benefits Team- Policy formation & governance
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Thank You
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