BUSINESS PERKS FROM EMPLOYEE’S INSURANCE
Business Perks From Employee’s Insurance
Despite the typical notion of insurances being beneficial only to workers, these guarantees are also handy for the companies as well. Purchasing insurance on a key staff has been a famous practice of some firms, to shield the business from losses in case a premature death occurs. Since this act is not considered as illegal, some have taken process to extremes, purchasing insurances for every employee, regardless of their positions.
This has long been accepted in the corporate world, as it safeguards a company’s figures during a sudden loss of a valuable team member. The whole corporation will suffer not only in terms of making up for the lost revenue, but also in resources, time, and effort it will have to devote to replace that certain worker. Hence key person life guarantee is bought, with the firm as the owner and beneficiary.
For huge firms, senior executives are usually the ones targeted in this method, because of the human capital they generate. However, as earlier mentioned, some include the whole workforce in this strategy as they are able to collect tax free benefits upon a laborer’s passing. Aside from this, a corporation is able to use the proceeds to fund some of their obligations such as healthcare and pensions, although some view it negatively as earning from a staff’s death, since it generates a steady flow of income for them.
The technique has become popular that regulators had to interfere and impose some limits, and prohibit corporate possession of insurance on all except for the highest paid 35% of workers. Plus, the individual’s authorization is required. Large sized companies, meanwhile, will still cover around a thousand employees with the given percentage.
This regulation is most advantageous for banks, out of all the industries because they are able to get the money from insurance companies in the form of cash value surrenders. Their holdings are also counted as tier 1 capital which is a gauge of their financial stability.
There also other initiatives taken to control this by drafting excellent policies that can be used by the firms as basis especially during situations that get out of hand. Despite this, the IRS and some attorneys lack cooperation, taking many businesses to court over claims of laborer abuse and evading tax payments. Still, many industries continue to find advantages with this regulations over the years.
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