In Ind AS 19/IAS 19 Generally 4 types of Benefits have been discussed which can be payable to employees.
1. Short Term Employee Benefits – Payable within 12 Months
2. Post-Employment Benefits – Payable only after completion of Employment
3. Other Long Term employee Benefits – Long term Paid Leave, Disability Benefits
4. Termination Benefits – Benefits payable in exchange for Termination (By Employee or By Employer)
Short Term Employee Benefits
1. Leave Encashment: – In Corporate world, there exists a policy for Sick Leave, Maternity Leave, Paternity Leave, Jury Service, Military Service. According to policies I have seen, An employee can either take a leave for his presence or encash it.
For Eg. If any employee was present on 2nd October, infact when that day was holiday and his presence on 2nd October gave him a right to either take a leave on any day after 2nd October or take cash for it.
According to Ind AS 19 company should recognize an expense for presence of employee on 2nd October.
Or If that employee was working on any Under Construction Asset/Project then that expense should be capitalised as explained in Ind AS-2/Ind AS 16.
2. Profit Sharing Plans: – Sometimes to engage employees in the growth of Business, companies have Profit sharing Plan through which certain portion of profit will be distributed to employees who would complete certain No of years in the organisation.
According to Ind AS 19 Company should estimate No of employees who will be expected to complete defined period with the company and recognise cost for that.
May be you would be aware that there are 2 types of Plans in Post Employment Benefits category generally Known as
1. Defined Contribution Plans.
2. Defined Benefit Plans.
Q.1 What is Defined Contribution Plans?
Ans: Any Plan which suggest or mandate to contribute a fixed amount to any Fund/Trust. Means Employer Just need to contribute Suppose Rs. 100 P.m. Now what happens to these Rs. 100 is a different thing. Whether (PF Fund/ESI Fund will be able to pay Rs. 100 to employee that employer is least concerned). Any Actuarial Risk is borne by Employee.
Q.2 What is Defined Benefit Plans?
Ans: Any Plan which suggest or mandated by Law to pay employees “agreed benefits” (Determinable by various means). Further Any Actuarial Risk will be borne by Employer. (Gratuity)