India – here we can’t do without the services of the hired help, domestic help, servants, maids, cooks, drivers, security help etc. and especially if both husband and wife are working. Since they are indispensable you are bound to feel responsible towards them. You can ensure that their risks are covered through financial instruments which cost less but provide major benefit to the employees. This could even make your help loyal to you since you are dependent on them in times of crisis.
Step 1:
Because of the RBI guidelines you can open a no-frills account for your employees (which they might not be able to open as it could be difficult to meet the minimum balance requirement). The central bank has exempted low-income groups from the know-your-customer procedure if an existing customer agrees to act as an introducer. All you’ll have to do is take your help to the bank where you maintain an account and arrange for an account to be opened for him/her. Then instead of paying cash to them you deposit their salary into the account. Explain them about the importance of savings and propel them towards a financially-secure future.
Step 2:
The economically-disadvantaged section don’t have access to financing options from banks, so they take from non-institutional sources who charge huge interest engaging them in a vicious debt trap. You could step in by buying a health policy for them. Assuming your employee’s age is between 19 and 35 years, you would have to spend about Rs.115/month for a sum insured of Rs.1 lac.
Step 3:
You can introduce them to Mutual funds like SBI MF accept minimum investments of Rs 100 per month. If you help them sign up for such SIPs you could direct a portion of their salary to such schemes and encourage them to do so too. But this step can only be applicable if your house help’s is in 20’s because that is the time when they can afford to take some risks.
Step 4:
Domestic help can’t have a retirement benefits but a PPF account can be maintained by depositing a small amount every month. The minimum amount that can be invested in a PPF account is Rs.500 per year. You could motivate them to do the same from their salary. PPF comes with a lock-in period of 15 years and offers a tax-free return of 8% per annum. So, small amounts saved over a long term builds up to a healthy corpus.
Step 5:
People in low income bracket suffer more in case the breadwinner dies, because of lack of savings. But today due to availability of lower rates of Term Insurance, a cover of Rs.1 lac is available by investing a few hundred rupees every year (depending on the age of the insured). So, buying a term cover for your domestic help would be the final step.
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Tags: insurance policy, Term Insurance