Abstract
Every concern should ensure proper administration of social security programs. In Chittagong University, employee benefits are controlled by University rules and regulations, which are framed in line with the policy of the Government of Bangladesh. It is a public university having an autonomous character. Both in-service (or active) and retirement benefits are provided to employees. Some nonmonetary benefits are also provided during the active period, including basic salary, house rent, medical allowance, bonus, book allowance, medical and other loans and retirement benefits. The latter include provident fund, gratuity/pension benefits, group insurance, leave payments, benevolent fund and so on. Nonmonetary benefits generally include medical care, subsidized transport, leave without pay and so on. This article confirms that employees are satisfied with the benefits, but the impression of their experience when they apply for retirement benefits is somewhat negative and their concerns need to be addressed.
Keywords
Introduction
Employees are the mainstay of an organization. This is particularly true in a university. To recruit and retain a well-qualified workforce, different kinds of considerations are provided by employers to recognize the value of employees and their contributions in the form of compensation and benefits. Salary and other cash payments and benefits are provided to employees in return for performing their job. Common examples of benefits are insurance (medical, life, dental, disability, unemployment and worker’s compensation); vacation pay, holiday pay, and maternity leave; funds for retirement; profit sharing; stock options and bonuses. (Profit sharing, stock options and bonuses are forms of compensation in most regions.)
Benefits may be tangible or intangible. The examples of benefits given above are tangible benefits. Intangible benefits include a broad range of practices: appreciation from a boss, likelihood for promotion, nicely decorated work areas, arranging social events and festivals for recreation and so on. 1
A broad definition of employee benefits 2 includes a number of policies, practices and plans related to the following five categories of employer payments or costs:
Legally required social insurance payments: These include employers’ contribution to social security, government-provided medical insurance, unemployment compensation insurance, workers’ compensation insurance and temporary disability insurance programs.
Payments for private insurance and retirement plans: Benefits are provided for personal loss exposures such as old age, dental expenses, death, legal expenses, disability income, property damage, medical expenses and liability judgments.
Payments for time not worked: These include vacations and holidays, maternity leave, sick leave and jury duty.
Extra cash payments to employees: Benefits in this category include educational expenses allowances, savings plans, moving expenses, holiday bonuses, current profit-sharing payments and suggestion awards.
Cost of services to employees: These include items such as subsidized cafeterias, adoption assistance, recreation programs, wellness programs, clothing allowances, day care centers, financial counseling, transportation benefits and retirement counseling.
In Bangladesh, employers provide both tangible and intangible benefits. These are governed by rules and regulations of the particular enterprise and are generally framed in line with government and enterprise policy. In such a context, the Bangladesh Accounting Standards (BAS) 3 provide a list of tangible benefits. According to BAS 19, employee benefits include the following:
Short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit sharing and bonuses and nonmonetary benefits (e.g., medical care, housing, cars and free or subsidized goods or services) for current employees
Postemployment benefits such as pensions, other retirement benefits, postemployment life insurance and postemployment medical care
Other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within 12 months after the end of the period, profit sharing, bonuses and deferred compensation
Termination benefits
Equity or share ownership benefits
For the employees of Chittagong University, which is a nonprofit organization (see www.referenceforbusiness.com/small/Mail-Op/Nonprofit-Organizations.html), it is seen that benefits are important to motivate better performance. Keeping this in mind, the authors have attempted to examine the management and effectiveness of the benefits.
Scope of the Study
The University of Chittagong is a government-funded and independent nonprofit organization. At the end of 2011,the University had 2,616 employees (including 690 members of the faculty, 290 officers, executives and managers, 472 third-class employees and 1,164 fourth-class employees) to support the academic mission. 4 This study pertains to all types of employees.
Study Objectives
The objectives of the study are the following:
To highlight the different types of employee benefits, that is, in-service benefits, postretirement benefits and non-monetary benefits (if any) offered by the University
To critically examine the status of the postretirement benefits
To suggest steps to improve the management of the funds applied for future benefits
Method
The study is based on primary data coupled with some secondary information assembled in a review of the literature along with relevant rules and regulations. Primary data have been collected by interviewing University officials. As to postretirement benefits, interviews were conducted with a sample of 40 retired employees (covering 10 teachers, 10 officers and 20 third- and fourth-class employees) along with officials of the accounts section. As to secondary data, different books, articles from the Internet, Bangladesh Accounting Standards, Chittagong University diary, Chittagong University statutes regarding benefits, Government Orders and other sources have been consulted for necessary information as an aid to the analysis. Data were collected for the academic years 2006-2007 to 2010-2011 and the tabular method was used for the analysis.
Findings and Conclusions
This section of the study has been divided into two parts: (a) an overview of the benefits and (b) an in-depth review of the postretirement benefits. In the first part, the authors describe the nature of the different types of benefits offered by the University to its employees with the payment system, and in the second part, they examine the present status of the benefits, particularly the postretirement benefits, offered by the University because of the importance of these benefits. The base salary and nonmonetary benefits are usually provided to active employees, but postretirement benefits are completely related to the future. Prudent fund management in this regard is required for the support and betterment of retired employees.
Part 1: Overview of the Benefits
Both in-service and retirement benefits are offered by the University to its employees. Some nonmonetary benefits are also being provided to the employees. Table 1 shows the different types of in-service, postretirement and nonmonetary benefits offered by Chittagong University. In combination, these might be referred to as total compensation.
Different Types of Benefits Offered to University Employees.
Source. Data provided by officials of the accounts section.
In-Service Benefits
In-service benefits are the current remuneration for active employees, typically paid in cash, available services and insurance protection by the University to its employees. The several in-service benefits are described below.
Basic salary
Basic salaries to the employees are provided monthly on the basis of set pay structure in line with the government rules of salary. 5
House rent allowance
The employees receive house rent allowance with their monthly basic salary at the rate applied for the Metropolitan area as set in the National Salary Scale 2009. In addition, those who are enjoying the residence facilities provided by the University have also been given house rent allowance since July 1, 2010, coupled with a salary deduction made equivalent to 7.5% of basic salary plus a certain rate of rent per square foot for their residence. 6
But there is an unanswered question related to this type of benefit since the government has not decided how it will be treated. Consequently, the beneficiaries of the allowance may face a risk of giving back the money they are enjoying now at the time of retirement or other termination. We note there is an instance of such requirement that was mandated. 7
Furthermore, it is to be noted that professors who hold higher posts, for example, Vice Chancellor, Pro Vice Chancellor, Dean, Provost, Proctor, Registrar, Controller of Exam and so on, are required to pay only the rent on the basis of square foot but not 7.5% of basic salary.
Medical allowance
Medical allowance is being paid with the monthly basic salary as per the National Salary Scale 2009.
Bonus
Yearly festival bonuses are paid (a) in two Eids equivalent to 1 month basic salary paid to Muslims and (b) once, equal to 2 months basic pay on Puja to the Hindus and on the largest religious festival to the Buddhists and the Christians. These are not performance related.
Book allowance
Book allowance of TK2,000 (TK = Bangladeshi taka) is paid once in a year to professors at the beginning month of the fiscal year.
Rest and recreation allowance
Rest and recreation allowance was started with effect from 1979 according to a government order. It includes current 1 month basic salary and a 15-day deduction from earn leave, given every 3 years in service. But at present, 15-day deduction from earn leave is waived. 8
Income tax benefit
Tax on the yearly income from salary of the employees is being paid by the University according to the government rule.
Medical assistance
The University provides medical support in the following forms to its employees.
Aid to sick employees: Sick employees get medical support to the extent of TK20,000. But faculty who are under the health insurance scheme with Delta Life Insurance will not directly get this benefit; rather their annual insurance premium is reduced by the amount of TK20,000 before making deduction for the insurance.
Medical loan: In order to cover expensive treatments for the employee and family, an employee can get an interest-free loan from the medical loan fund to a maximum of 3 months basic salary, to be repaid in 30 installments, or a loan of 6 months salary repayable in 60 installments. This benefit has been in effect from 1995. 9
Reimbursement of medical expenses: This benefit is provided to regular employees of the University to cover medical expenses incurred by them 10 and their dependent family members. The reimbursement must be in a recognized clinic and must not exceed the rate in force in a government hospital.
Health insurance for faculty: Faculty and their spouses have been enjoying the benefit of health insurance policy with Delta Life Insurance since September 15, 2009. Before this arrangement, they were provided a traditional health grant of TK20,000 each, once in the service period. The holders of this health insurance policy will get medical benefits to the extent of TK500,000 for his or her own illness and TK500,000 for his or her spouse’s illness in a year on submission of necessary medical reports and bills and fulfillment of other related terms and conditions.
Benefit from Welfare Trust
The Chittagong University Employees Welfare Trust Fund was formed with an initial grant of TK1,000,000 with a view to provide suitable financial assistance to the regular employees of the University or their families in the following cases:
Death of any employee of the University during service
Grave illness or serious injuries of an employee himself or herself or any of his or her family members
Unusual loss of property due to fire or other cause deemed fit to be considered by the Board
In the event a relative dies, an amount of TK5,000 maximum from this fund is provided to the employee for transporting the body to the individual’s residence.
The fund is administered by a board of trustees consisting of the Vice Chancellor as a chairman and 10 additional members including the Pro Vice Chancellor, the Registrar, the Comptroller of Accounts and the President of the associations of the faculty, officers and staff.
Other sources of the fund are the contribution of the employees from their monthly basic pay, voluntary gifts, donations and other grants from the Government of the People’s Republic of Bangladesh or other organizations, grants made by the University from time to time and all income arising from the investment of the fund.
Leave with pay
The University offers the following types of paid leave to its employees:
Casual leave: In order to meet unexpected need for time off, the University permits employees to enjoy 15 days casual leave in a year. Any days of casual leave that remain unused during the year are considered void.
Earned leave: An employee earns 33 days of leave each year. Additional amount of leave more than the casual leave limit if urgently needed can be used from the balance of his or her earned leave. The unused balance of days is then accumulated to his or her account until the end of service. After completing the qualifying service, the employee will get cash benefit for maximum 12 months leave earned by him or her.
Medical leave: Employees who fall sick can use medical leave for 30 days in a year subject to the submission of a medical certificate/report. Unused medical leave is accumulated to the employee’s account but is not then paid in cash.
Study leave: Faculty can enjoy study leave to a maximum of 4 years at a time and an additional year, if needed, subject to getting award of the degree, for conducting research studies either home or abroad.
Sabbatical leave: Leave allowed by the University to conduct research, apart from the research required to satisfy degree requirements, is called sabbatical leave. After completing the qualifying service and other conditions set by the University, a professor can enjoy a sabbatical leave for maximum of a year on fulfilling conditions established for that leave.
Maternity leave: A female employee of the University can enjoy maternity leave for 6 months. She is eligible for this leave a maximum of two times during her service in the University.
Postretirement Benefits
Postretirement benefits are treated as future benefits. A description of the different types of post-retirement benefits provided by the University follows.
Preparatory to retirement leave
Employees are entitled to enjoy 1 year PRL (preparatory to retirement leave) previously known as LPR (leave preparatory to retirement) in the last year of their service period before retirement. A University employee in addition to PR shall be entitled to a lump sum amount in lieu of leave left over after availing of PRL, not exceeding 12 months pay to be calculated on the basis of basic pay drawn immediately before commencement of PRL. 11
Provident fund
Chittagong University provides facilities of provident fund to its employees who leave or retire from the service or are determined to be unfit for further service. Here a noncontributory provident fund is created by the amount equivalent to 10% of basic salary contributed by the employees. All eligible University employees who have opted for pension/gratuity and also the eligible persons who have joined or join the University service on or after July 1, 1974, shall join the fund as a compulsory subscriber. 12
An amount of 60% of the deposit of the fund is supposed to be invested by the Comptroller before the end of each quarter, with the approval of the Vice Chancellor, in profitable securities, subject to the approval of the finance committee and the syndicate.
When a subscriber (employee) resigns or initiates the PRL time off or is unfit for further service, the amount credited to his or her account in the fund, with interest but less any advances, loans and so on taken from the fund and any deductions, is paid to the employee.
Pension/gratuity
Chittagong University Employees’ Pension/Gratuity Statutes came into effect starting the July 1, 1974.The pension/gratuity benefits under these statutes become applicable to existing employees as on June 30, 1974, with service calculated from the date of initial employment with the University. 13 If an employee of the University retires, resigns or is subject to discharge owing to abolition of his or her post or dies after completing qualifying services of
5 years but less than 10 years, he or she or the family in case of his or her death may be granted gratuity not exceeding 1 month last basic pay drawn for each completed year of qualifying service.
10 years or more, pension shall be paid to him or her or the family in case of his or her death at the rates as may be prescribed by the Government from time to time.
Every employee of the University, entitled to a pension or gratuity benefit under the above statutes, normally has the right to retire after completing 25 years of qualifying service provided that the syndicate may in any special case on the ground of essential service require an employee to complete his or her service up to the age of superannuation. The payment of pension/gratuity benefits under these statutes is made according to University ordinance and regulations. In addition to the pension benefit, each pensioner shall get the medical allowance monthly and two festival bonuses yearly equivalent to 1 month net pension each, as per rule.
In the event of the death of an employee (a) before retirement, but after completion of a qualifying service of 10 years or more, his or her family will get the pension for a period of 15 years at the normal rate of pension; or (ii) after retirement, but before the expiry of 10 years after retirement, his or her family will be entitled to benefit of pension for the unexpired portion of the period of 15 years counted from the date of retirement of the employee.
In the above context, the calculation procedure of pension benefits as followed by the University is shown. Table 2 shows the rate of gross pension applicable to the corresponding qualifying service dictated by the Government and followed by the University.
Pension Benefit Corresponding to Completed Years of Qualifying Service.
Source. Chittagong University Calendar (Registrar of the University of Chittagong, 2003, p. 70).
In the case of an employee with 10 years or more of qualifying service, the rule for the surrendered portion of his or her pension is computed and paid as follows:
50% of the gross pension will be payable to him or her on retirement or to the family in the event of death, calculated at the Government rates shown in Table 3 for each taka of his or her pension surrendered. 14
The remaining portion of the gross pension will be payable monthly, as prescribed by the Government.
If an employee wants to surrender his or her full pension on retirement (or the family wants the same in the event of his or her death), 75% of the gross pension will be payable as a lump sum to him or her (on retirement) or to the family (in the event of his or her death) calculated at the Government rate in (1) above.
Rate of Pension Payable Per Taka of Gross Pension Surrendered.
Source. Government of Bangladesh, Ministry of Finance, Finance Department (1989).
Let us assume that an employee retires after completing 20 years of service from the University. At the time of retirement, his basic salary was TK20,000. So, he will be paid the pension benefit calculated in the following manner:-
If he wants to enjoy a monthly payment of the pension:
His net pension would then be 50% of gross pension, that is,
50% of TK12,800, that is, TK6,400.
So the amount of lump sum pension benefit payable to him on retirement would be
And the monthly pension will be TK6,400 plus the medical allowance. In addition, he will be paid yearly two festival bonuses equal to TK6,400 (net pension) each.
If he wants to surrender the full pension on retirement:
Net pension would then be 75% of gross pension, that is, 75% of TK12,800, that is, TK9,600.
So, the amount of pension benefit payable to him as a final settlement would be
He will then get monthly medical allowance and yearly two festival bonuses equal to TK6,400 (net pension) each.
Leave cash payment
The University is required to provide a cash payment of any leave earned by an employee to a maximum of 12 months at the rate of basic salary in the month before the PRL.
If an employee wishes to go for voluntary retirement after completing the qualifying service period of 25 years, he or she is also entitled to a benefit equal to a leave maximum of 12 months salary. 15
Benevolent fund
The University has established the Chittagong University Employees Benevolent Fund for the benefit of the employees. 16 All regular employees of the University, other than the persons older than 60 years when appointed, are eligible to receive benefits from the benevolent fund. This fund consists of employees’ monthly contribution from their salary, any grant made by the University and the Government to this fund, any donation made by any outside organization or individual or institution toward the fund and all income, profits and interests from investments made out of the fund.
If an employee of the University retires or leaves the job after serving 15 years and has subscribed to the benevolent fund for not less than 10 years, he or she will be paid at a time an amount equal to his or her 6 months basic salary, provided this amount shall not be less than TK6,000. The fund is administered by a board of trustees headed by the Registrar of the University with two syndicate members and two senate members and all presidents of employees’ association from each category. The Comptroller of Accounts acts as Member-Secretary.
Group insurance
Group Life Insurance 1 and 2 consisting of employees’ contribution from their monthly basic salary is to provide financial support after death while employed or at the time of retirement or leaving the service. If an employee dies while actively employed, his or her family or beneficiary will be paid the following amounts 17 :
Source. Data have been collected by the authors from officials of the accounts section.
Otherwise, the employees will get back their full contribution made as premium on retirement or at the time of leaving service.
Medical loan fund
The medical fund was formed with an initial amount of TK500,000 taken from the capital fund with a view to provide financial assistance to employees for medical purposes. Later on, annual deposits of TK100,000 from recurring fund of the budget have been deposited. At present, TK50 from the professors’ monthly salary and TK200 from the officers’ monthly salary are being deposited to this fund (as per the decision made by the finance committee and approved by the syndicate). After completing the qualifying service for retirement, an employee will get the benefits of reimbursement of medical subscriptions to this fund. Employees are also allowed to take medical loan from this fund under some terms and conditions.
House rent allowance to deceased’s family
The University also provides a house rent benefit to the deceased employee’s family. If an employee expires during the service, his or her family will get a house rent allowance 2 years from the date of death at the rate then in effect.
Contractual reappointment
The reappointment of retired employees is possible on a contract basis, with the honorary titles: professor emeritus, supernumerary teacher and reappointment officer. A brief description of these types of benefits is given below.
Professor emeritus: After satisfying the requisite qualifications, a retired professor can be considered for the post of professor emeritus by a specialized committee of five members (preferably composed of other retired faculty) to be selected from inland and abroad. The job tenure of a professor emeritus will be continued until he or she wishes to give up the role. He or she has no specific work but is expected to be involved with research or supervising research and to refrain from working in other institutions.
Apart from pension, a professor emeritus will also enjoy a monthly honorarium approved by the syndicate plus all monetary and nonmonetary benefits enjoyed by active professors. He or she also can choose to live in the University’s residential houses. Prior to December 2011, three retired professors have been awarded the post of professor emeritus in the University.
Supernumerary professor: After retirement, a professor may be reappointed as a supernumerary professor for at best a 5-year contract, which can be renewed, by the syndicate. The supernumerary professor can remain active until he or she becomes mentally or physically exhausted or health deteriorates. He or she is expected to be involved only with teaching and/or doing research work.
The remuneration of a supernumerary teacher will be fixed by the syndicate but it will not exceed the highest scale of the basic pay enjoyed by the supernumerary teacher at the eve of retirement. Besides, all monetary and nonmonetary benefits enjoyed by active faculty will be offered to a supernumerary teacher. But he or she will not be entitled to the residential houses provided by the University. Among the five retired professors who were granted this status prior to December 2011, two are still active.
Reappointment officer: Retired officers may be reappointed by the decision of the syndicate up to their age of 65. The types of work and their remuneration will be determined by the syndicate, but their monthly basic salary must not exceed the amount earned prior to retirement. All other monetary and nonmonetary benefits will be given as similar to their peers in service. Like supernumerary teachers, they also can contribute to the provident fund but will not be considered for the University pension scheme and the residential support. A count of the reappointed officers in the different sections/offices of the University since this status was established (i.e., 1994-1995) is shown in Table 4. 18
Number of Contract Reappointments of Retired Officers.
Source. Data have been collected from the concerned officials of the registrar’s office.
Table 4 shows that a total of nine retired officers have so far been reappointed by the syndicate under the contractual reappointment schemes. Six of them have completed their contract period and three are still working.
Nonmonetary Benefits
In addition to the cash benefits, the University provides some nonmonetary benefits.
Medical care
There is a medical center established on campus with full-time doctors, nurses and staff for the treatment of the employees and their family members who reside on campus. In addition, two doctors are appointed in town for the treatment of employees and their family members who reside off-campus.
Subsidized transport
Both in-campus and off-campus employees enjoy transportation for a minimum subscription compared with present high transport cost.
Leave without pay
Unpaid leaves are known as leave without pay. The University allows the following types of unpaid leave:
Study leave (extraordinary): Leave permitted by the University to complete degree requirements in addition to the paid study leave is called the extraordinary leave and is unpaid.
Leave under lien: An employee (faculty only) of the University can enjoy leave without pay for a maximum of 3 years for authorized purpose under lien while maintaining his or her service with the University. The University can extend this leave period by 1 year as extraordinary leave if required.
Part 2: In-Depth Review of Postretirement Benefits
Provident Fund
The management of the provident fund and returns on invested monies are important for the sake of promised employee benefits. At the time of final settlement with employees, they would naturally expect to get their contribution to the fund with interest in the final lump sum payment. Many may also want to take advantage of the provision allowing an advance or loan from the fund to meet current expenses. To handle these transactions smoothly, an adequate balance needs to be maintained at all times. But a report of a committee of three that includes two senior professors and the Comptroller of Accounts of the University (the committee was created by a decision of the finance committee in 2011) indicates that the fund is at present in deficit of about TK300 million. Interviews with representatives of the accounts section of the University suggest the following reasons for the deficit.
Granting excess loans/advances
Advances may be granted to a subscriber up to 80% of the amount standing to the employee’s credit in the fund and no further grant will be allowed unless the first advance is fully repaid. Table 5 shows the position of granting advances to the employees from 2006-2007 to 2010-2011.
Advance Granted as Percentage of Subscription.
Source. Approximate figures, provided by officials of the accounts section. Percentages calculated by the authors. Monthly average subscription was TK1,600,000 before the revised salary scale 2009 and TK2,800,000 after the revised scale.
The information in Table 5 shows that the average rate of advance granted during 2006-2007 to 2010-2011 is 101.6% of the amounts subscribed, leaving the fund with a constant negative balance. Almost entire subscriptions have been issued as advance in the years 2006-2007, 2009-2010 and 2010-2011. But the picture is even worse in the years 2007-2008 and 2008-2009, when the fund experienced advances made at the rate of 111% and 136% of subscriptions.
Increased number of application for advances
About 100 to 120 applications for advances have been received monthly from 2006-2007 to 2010-2011, which is creating continuous pressure on the fund. Very often the money has to borrow temporarily from other funds, such as the medical loan fund, development fund and others, in order to honor the huge number of requests for advances.
Imprudent transfer of funds
Transferring funds to meet other purposes is a common phenomenon. Nevertheless, the monitoring system of this transferring is so poor that that the accounts do not reflect this for indefinite periods of time.
Difference in the investment returns and deposits to the fund
Interest is allowed on the amount deposited by the employees to the provident fund. The balances in the fund are invested in financial institutions. In fact, there is a sharp difference between the rate of interest credited to the deposits in the fund and the investment returns. Table 6 illustrates the interest rates from 2006-2007 to 2010-2011.
Table 6 shows that average rate of interest on investment varies from 8.5% in 2006-2007 to 10.5% in 2010-2011, whereas the interest rate on employees contributions to the fund remains the same at 12.5%. As a result, the almost 3% annual difference in the rates contributes to a growing deficit.
Difference Between the Rate of Interest on Deposited Funds and on Invested Funds.
Source. Annual average interest rates earned on investments from public and private financial institutions, according to representatives of the accounts section.
For the foregoing reason, the University authority could not comply with the rules regarding the investment of 60% of the balance in the provident fund due to the following reasons 19 :
Increased number of applications for advances from the fund
Increased number of advances granted
The unprecedented transfer of fund to serve other activities and delays to the recovery of transferred money
Unavoidable pressures for final settlement of contributions to the provident fund, for which borrowings from other funds are at times inevitably needed and then a shortage of invested funds becomes evident
In this context, it is worth mentioning that the rate of investment in private sector financial institutions is significantly higher than that in public sectors. The difference between interest paid and interest received can be reduced by investing the fund as much as possible in private sector financial institutions. But limitations imposed by the Government do not allow the University to invest more than 25% of the fund with private sector institutions.
Pension Benefits
Pension benefits paid to retired employees of the University are fully funded by the Government. An estimate of the number of employees expected to retire and their estimated pension benefit is sent to the Government through the University Grants Commission (UGC) a year before the actual allocation. The number of actual retirements sometimes increases due to early retirement or sudden death. In fact, for each retirement, large amounts of money are involved so an underestimate of the number of retirements has significant consequences for the fund. Deficits must be covered by borrowing from other University sources. As a consequence, the University has to struggle to make up the deficits. The funds sought and actually received and the percentage of shortage from 2006-2007 to 2010-2011 is shown in Table 7.
The Amount Demanded From the University Grants Commission and Actually Received Annually as Pension and the Percentage of Shortage.
Source. Rounded figures, provided by the accounts section.
Table 7 shows that pension amount received every year from 2006-2007 to 2010-2011 is less than the amount demanded. The deficits of course are additive, making the situation worse each year. The average shortage stands at about 10% (averaging each year’s percentage of shortage) for which the University had to borrow from other funds to meet the pension demanded until the recovery of the shortage from the Government.
Viewpoints of Retired Employees
At the end of a long career, employees must plan not only for their own future but also for their family members’ based on their expected retirement income. But at retirement, the employees of the University suffer from considerable delay and difficulty in receiving payment of their full retirement benefits as a single lump sum payment. The major reason is the regular shortage of funds in the provident fund account.
Several additional issues have come to light after interviewing a sample of 40 retired employees (including 10 professors, 10 officers and 20 third- and fourth-class employees). A 4-point scale was used to record their responses to the questions in the interviews.
Tables 8 and 9 show the experience of the interviewees with the payment of retirement benefits along with the behavioral pattern of the officials at the time of payment processing.
Experience of Retired Employees With Payment of Benefits.
Retired Employees Assessment of the Behavior of Accounts Section Staff.
Table 8 confirms that the employees interviewed are highly satisfied with the nonmonetary benefits. But their experience with retirement benefits is not as positive. A lot of time is spent in processing the application form. In fact, 80% of the faculty said that more than 6 months were taken to process the application, whereas only 20% said the time taken was 2 to 4 months. The officers seem to have been afforded a bit more preference; 60% of them said the application processing time was more than 6 months whereas 40% said it was 2 to 4 months. All third- and fourth-class employees experienced less preference, stating that their application processing time was more than 6 months.
After completion of the application processing, the employees interviewed had to wait for an additional month after 6 months to receive the first payment of their retirement benefits. The time waited to receive benefits from earn leave, group insurance premium, medical loan fund and provident fund (in full) was 1 to 2 months. All third- and fourth-class employees in the group received earn leave, group insurance premium, medical loan fund and provident fund benefits fully in a single payment. Though all the individuals received the earn leave, group insurance premium and medical loan fund benefits fully, 80% of them said that they got provident fund benefits in a single payment whereas 20% said they received two installments. Payments from the benevolent fund took an additional 2 to 4 months for everyone interviewed.
Almost all the interviewed employees had to wait for the full payment of the pension benefit. Only 20% of the faculty and officers reported receiving the payment within 1 to 2 months; the other 80% of the faculty and officers and 100% of the third- and fourth-class employees had to wait more than 6 months. Apart from 20% of the officers, all other employees did not receive pension benefit fully at a time—40% of them received it in two installments and 60% in more than two installments.
In the interviews, the employees involved in applying for benefits were asked to assess the behavior and attitudes of the employees in the accounts section who handled their applications. Table 9 shows their responses to the questions.
Table 9 shows how employees applying for benefits perceived the behavior of the accounts section personnel in processing these transactions. As to their cooperation in expediting payments, it is seen that 40% of the professors and 20% of the officers strongly agreed; 40% of the faculty, officers and third- and fourth-class employees agreed and 20% of the professors and 40% of the officers and third- and fourth-class employees disagreed with the statement on the role of the Comptroller of Accounts while seeking his part in expediting the payment. In all, 20% of the teachers, officers and third- and fourth-class employees strongly agreed; 40% of the teachers and officers and 80% of the third- and fourth-class employees agreed and 40% of the teachers and officers disagreed with the statement on the role of the concerned officers and staffs while processing and moving the file and issuing check for payment. Only 20% of the teachers and officers strongly agreed, 80% of the teachers, 60% of the officers and 20% of the third- and fourth-class employees agreed and 20% of the officers and 80% of the third- and fourth-class employees disagreed with the statement on the behavior of the concerned officials while requesting them during the whole period of the payment process. It is, therefore, observed from Table 9 that the behavior and attitudes of the concerned officials are not perceived to be good or cooperative. Although nearly the same responses were made by the teachers and officers on the behavioral pattern of the concerned officials, including the Comptroller of Accounts, as much as 80% of the sample third- and fourth-class employees showed their dissatisfaction.
Against the backdrop of general dissatisfaction shared by the retired employees, an attempt was also made to obtain the opinions of accounts section personnel. Toward this end, the following matters have come to light:
Reasons for delays in making payment are (a) the shortage of money in the provident fund and reduced grants for pensions from the Government than the amounts requested and (b) the increasing number of applications for retirement benefits.
Due to the timing of salary continuation and the official date of retirement (i.e., payment of salary is continued from the date of retirement till next July 1), and since processing for pension benefits starts on July 1, the Government’s practice of paying the pension grant in four installments frequently makes it impossible to pay the pension benefit as a single payment.
Nobody contacted in the accounts section agreed with the claims. They stated that if such incidents had occurred, they had no knowledge of it.
Suggested Steps to Improve the Management of Benefits
In the context of the difficulties observed in processing postretirement benefits, the authors provide several suggestions to alleviate the problems related to the pension benefits, the provident fund, house rent allowances and the behavioral issues of the officials. The goal is to improve the management of the benefit payment processes.
Suggestions Related to Pension Benefits
Since the amount granted by the Government through the UGC for pension benefits is always less than the amount sought, the University authority can urge to the Government and the UGC to increase the grant to the required level. In this case, the authority can show the Government the real picture of deficit of pension grant and explain the consequences of this deficit, which the authority has been facing every year.
If the authority fails to convince the Government by taking the step suggested in (1) above, it can change the tradition of raising pension demand in its budget. The amount of current year pension demanded can be increased by the rate of last year or the average rate of the past 5 years deficit, whichever is higher, in addition to the revised budget for the past year pension deficit.
In the next year, the amount of the deficit either will be reduced or completely eliminated. Moreover, if any surplus arises due to an excess pension grant, a separate fund named “pension fund” can be formed and this fund will be utilized in future only for the pension purpose. Obviously, the formation of this fund will have to be ratified by the Government, and the transparency as well as the accountability of this fund management must be ensured. By the permission of the Government, the fund also can be invested in the profitable securities with a view to serving its purposes in a better manner.
Since Government’s policy of disbursing the annual pension grant in four installments is one of the most important reasons for the inability to pay the pension benefit fully as a single payment, the University authority can request the UGC to disburse the entire pension yearly at a time. Otherwise, the University officials can think of forming the “pension fund” as suggested in (2) above, which will help the authority meet pensioner demands with minimal delay in the future.
Suggestions Relating to Provident Fund
In order to reduce the deficit in provident fund, an up-to-date statement of the deficit amount with an explanation of the reasons for this deficit should be prepared and forwarded through the UGC to the Ministry of Finance of the Government. The statement should be sent by a committee of highest officials of the University with a specific request to reimburse the deficit and avoid it in the future. Thereafter, the Government needs to be convinced that the deficit is creating personal problems for employees and that there are genuine reasons to address the situation.
Generally the private sector financial institutions offer higher rates of return than the public sector. So, if the maximum amount of the provident fund can be invested in private sector accounts, the shortage in interest and the deficit will be reduced. But due to the Government provision relating to compulsory investment of at least 75% of the provident fund in public sector financial institutions, the shortage is a common phenomenon. So a plea should be raised to the Government through the UGC to either eliminate the mandated investment of the provident fund or provide the shortage in interest payable as a subsidy.
The 60% investment of the provident Fund (as prescribed by the General Provident Fund Rule 1997) must be ensured by following strictly the formula given below:
Nevertheless, if the 60% investment is not possible, it has to be decided in meetings of the syndicate how the final settlement of the provident fund will be resolved at the end of an employee’s service.
It must be ensured that any loan taken from the provident fund for other purposes of the University be repaid as soon as possible with interest at the rate prevailing in the market.
Interest can be charged on an advance given to the employees. Here interest will be calculated at the prevailing rate and to be included in the principal when he or she makes repayment by installments.
The University also can take some initiatives to reduce the deficit in the provident fund by transferring a part of its income earned from different sources listed below to the provident fund:
i. 20% of the income earned by selling the admission form of the first-year honors every year
ii. 10% of the income received from other sources like rent of premises, selling trees from the campus, toll realized from University gate and so on
Suggestions Relating to the House Rent Allowance
Those who are enjoying the residence facilities plus house rent allowances (subject to the deduction of 7.5% of their basic pay plus rent per square foot of spaces) where they reside may be required to pay back the cash allowances at the end of their service. That is why the University authority should negotiate this matter with the Government through the UGC, explaining the reasons convincingly, so that the employees will not have an unexpected reduction in the benefits at the time of leaving or retiring.
Suggestions Relating to the Behavior of the Individuals Processing Benefit Applications
It should not be forgotten that the employees who have just retired today were our colleagues yesterday and long-service employees have worked together for decades. Besides, we should remember the very important and probably the most effective proverb: “As you sow, so shall you reap.” So it is not professional to misbehave at any point in rendering services to retired employees. Rather, the present concerned officials should make the utmost effort to cooperate with those who are no more in service. University officials should initiate an investigation of the described behavior. The necessary corrective measures, possibly including “customer” sensitivity training, can be introduced to correct the situation.
The applications for retirement benefits should be processed within the shortest possible time without showing discriminating attitudes in terms of political, social, personal or any other reasons. Above all, a uniform practice for making the payment of retirement benefits should be introduced. The advance/loan requests should be issued to active employees from the loanable funds maintained with the University without any discrimination.
Conclusion
To ensure continued academic excellence, the University of Chittagong has no other alternative but to provide attractive total compensation in line with competitive practices in the country, and a pleasant working environment. The University leaders follow the rules and regulations regarding employee benefits enacted by the Government. The Government is the main source of these benefits. Nevertheless, the authority can ensure the proper management of funds, efficient management, and when appropriate, they can modify the system used to manage applications for retirement benefits, specially the pension and the provident fund, in order to minimize the risk of developing any discontent in the employees in getting the benefits.
Footnotes
Acknowledgements
The authors would like to thank Professor Dr. Monjur Morshed Mahmud and Professor K. M. Golam Muhiuddin of the Department of Accounting and Information Systems, University of Chittagong, Bangladesh, for their valuable suggestions, and Mr. Howard Risher, Editor of Compensation & Benefits Review, for his generous editing and well-judged comments on this article.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.