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Traditional vs. New Alternative EOSB System: GratuityAdviser launches new Comparison Tool

Traditional vs. New Alternative EOSB system


“Which system is better for me, the old traditional one or the new alternative EOSB Gratuity scheme?”


This is probably THE question HR managers will be asked the most. As companies are considering whether to switch to the new End of Service Benefit (EOSB) system, employees naturally are asking: Which system is better for me? This article breaks it down for you.

 

 

The GratuityAdviser Comparison Calculator

 

 

So – which system is better? The answer is - as you would expect – “it depends”. Let us explain.

 

 

What the Comparison Tool teaches us

 

The old system was clear: The end result can be expressed as a formula, that multiplies a certain number of days per year employed with the final salary.


And here comes the first question: What will an employee’s final salary be, in (say) 15 year’s time? Hence the estimated yearly salary increment is a crucial variable when forecasting the future EOSB gratuity under the traditional system.

 

The new system is also not straight forward – in a nutshell, it very much depends on the investment return of the fund that the employee has chosen. We can make an educated guess based on historical performance what this performance for different fund types is likely to be, but remember: Future investment gains are always uncertain. In our tool, users can choose between typical EOSB funds: Capital guarantee, Conservative and Balanced funds.


EOSB Fund types for EOSB calculator

 

The third key variable is the time to retirement. It may well be that for the first few years the one system is better, only for the other system to “catch up” and eventually produce a better outcome.

 

Hence the three key variables to take into account are:

  • Estimated investment return of the fund chosen;

  • Estimated salary progression of the employee; and

  • Time to retirement


Based on your scenario assumptions regarding these key variables, either the traditional or the new alternative system will provide better results. Try it out!


Traditional vs. New Alternative EOSB system


 

 

Helping Employees Maximising their EOSB savings

 

What the comparison tool teaches us as well is that Employees can maximise their EOSB savings, if they take the right investment decisions. For instance, we have written earlier about capital guarantee funds, whether they are a good investment vehicle for employees who have many years of employment ahead of them or not. (Spoiler alert – they’re not!).

 

This in turn is a call to action for HR Managers, as HR can make a vital contribution to employees’ financial literacy. GratuityAdviser will shortly be launching a financial literacy course, aimed at employees of companies who are switching to the new EOSB system. Please stay tuned!

 

 

Key Take-Aways for HR Managers

 

In summary, how can the new Comparison Tool help HR Managers? We can think of several specific points:


  • Firstly, the GratuityAdviser Comparison tool is a practical resource that helps employees understand the differences between the old and new EOSB systems.

  • Secondly, HR manager can use the tool as an educational resource, and to answer questions from employees.

  • Thirdly, the tool can help employees understand scenarios that maximise their future EOSB payouts.


In short, we beleive our tool is a handy resource for HR managers & employees. Please check it out and give it a try!

 

 

 
 
 

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