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Saturday, January 21, 2012

Sodexo meal coupons: Good bad and Ugly

Lot of photo sharing in past few posts, time for some serious text. This post shares some thoughts on Sodexo meals coupon, which many retailers have stopped accepting

Why Sodexo?
Because of govt policy which allows tax exemption on money spent on food during working hours (Upto Rs 50 per meal), concept of meals coupons came into being. (Employee takes these coupons instead of cash, amount spent on these coupons, subject to max 3000 per month, is exempted from income tax. Depending on which tax bracket you fall, you may save upto 10-20 or 30% of this amount per month. Most of the IT companies give coupons worth Rs 2200 per month (assuming 22 working days and 2 meals per day), which effectively save about Rs 660 in tax, assuming employee is in 30% bracket.

The Sodexo network and coupon lifecycle:
Instead of giving cash to employees, company pays the amount to Sodexho (Say Rs 2200 per employee). Sodexo prints coupons for this amount and gives to employees. Employee takes these coupons to stores/restaurants which accept them, uses these as currency instead of cash. If he was to get cash he would have got only Rs 1600, now he can buy upto  Rs 2200. Shopkeepers later redeem these coupons from Sodexo for cash.

Above lifecycle seems simple and straight forward, but below are some tricky catches in the mechanism:

Free Money for Sodexo: From the day Sodexo gets cash from companies and till the date they reimburse the amount to shopkeepers, Sodexo will have this entire amount, without paying any interest. This duration can be as long as 12 months at times. The amount of cash Sodexo gets at its disposal because of this scheme, from lakhs of employees from thousands of companies runs to billions of dollars and thus Sodexo will be one biggest beneficiary in this whole mechanism, as against employees, which was the original intention

Unclaimed and Expired/Damaged coupons: All coupons come with an expiry date. If not used by then or if lost or damaged, employee effectively looses on that amount. The cumbersome mechanism to get a new coupon issued for this amount is best left untouched and in all these cases, Sodexo gets to keep the entire money. (Clever right). I am sure at least 5-10% of the coupons issues will expire/get lost/get damaged.

Are you really saving by using Sodexo? Prima facie answer might be yes, but consider these:
·         Because you want to use Sodexo you drive to a far away supermarket instead of next street kirana store- you’re spending more time and fuel driving there
·         You spend lot of time in the queue at supermarket, because everyone wants to pay by Sodexo and it takes time counting these coupons
·         You buy stuff you don’t really need, just because you can use Sodexo OR because coupons are expiring and you need to use them somehow.
·         Shops don’t return change when you pay by higher denomination coupon. Thus you lose couple of rupees here and there
·         Some shops charge extra to accept Sodexo- 2-5%. You still don’t mind because you think your tax saving is higher than that.
·         Some coupons might get lost/damaged and you don’t want to go through the process of getting new ones
·         You may not always be in 30% tax bracket. If you’re in 10-20% bracket, all above factors make it much more sensible to pay by cash

Why Sodexo coupons are not digitized?
Given the technological advances, it would make much more sense for everyone involved (except may be for Sodexo) to issue a debit card like card which can be swiped to use Sodexo. I believe Sodexo corporation doesn’t favor this initiative because of following:
·         With Electronic cards, processing becomes faster. Which means Sodexo will have to reimburse money to shopkeepers much faster (no excuse of time required for collecting and processing these coupons manually)
·         With electronic cards, employees will have more control on their Sodexo currency. Chances of loss/expiry will be less
·         With electronic cards, Sodexo loses its status as alternate currency. At present, an employee can sell the coupon to others OR use it at local shop and local shopkeeper uses it at supermarket or a shopkeeper gives back a lower denomination Sodexo meal pass as change. All these will stop once coupons get digital
·         Electronic form allows employees to pay exact amount, without having forgo change.

Why shopkeepers are complaining?
Sodexo takes a cut from the coupons and pays a reduced amount to shopkeepers. If shopkeepers submit coupon for Rs 100, they get Rs 97 from Sodexo, after about 20-25 days of submitting the coupons. It is same with credit and debit cards, where banks take a small cut from the amount before paying merchants. (But the difference is, for credit and debit cards, most of the transaction is electronic, except for submitting charge slips). For shops like large restaurants having 20-30% margin, this 2-3% transaction charge doesn’t matter. But for other shops working on wafer thin margin, this cut and reimbursement time makes it an unprofitable mode of payment. Further, the news is that Sodexo is trying to increase the charge from 3% to 7% and increase processing time. The only reason shops accepted Sodexo was because their competitors was doing so and not accepting meant losing customers. When Sodexo strong arm tactics was unbearable, supermarkets teamed up and decided to stop accepting, so as to force Sodexo to revert to earlier norms.

Time it takes to count the coupons, possibility of fake/damaged coupons and administrative headache associated with it are other reasons why shops hesitate to accept Sodexo. Migrating to a smart card based system is the best solution to all stakeholders, except for Sodexo

Can we do without Sodexo?
Meals vouchers were supposed to be used inside the company campus, but they’re being used everywhere, for food and non food items, defying the original intent. Any tax paying individual is guaranteed to spend Rs 2200+ per month on meals and food items, so it will be good to all parties if Governments realize this and simply increase standard deduction by corresponding amount, saving all the headache for employees, companies, shops. Only company suffering from such a decision will be Sodexo, so it is very likely to exercise its influence to resist any efforts of eliminating Sodexo as a middle man. Even if Sodexo is to exist, employees should consider the actual savings after factoring in the points mentioned earlier. Since most companies have cafeteria, it should be easy for companies to issue coupons which are valid only at company cafeteria, thereby serving the true intent of the scheme.

Also read: iMint Cards (now Payback)* An Analysis of MLM * SpeakAsia *

34 comments:

Readitt said...

well researched informative post on sodexo

Raveesh Kumar said...

Informative Article Nidhi. Only thing worries me is the coupons which are already accumulated and many vendors are not accepting it! :(

Anonymous said...

Sodexo already introduced the Prepaid card in most of the Europe instead of paper vouchers . In Asia also they are launching the card soon. The usage of this card is restricted based on time/date and merchants category.

Shrinidhi Hande said...

Readitt: Thanks

Raveesh: yes, it is a risk accumulating them till last minute (expiry date)

Anon: let us wait for it to come to Asia

Anantha said...

Nice info Nidhi. It's a very valid point you have mentioned about why Sodexo is not going for a debit card (kinda) system.
Thanks for the info..

ಶಿವಪ್ರಕಾಶ್ said...

informative article.. Thank you :)

Shrinidhi Hande said...

Thanks Shivaprakash

Ananatha: Welcome

Aravind GJ said...

I cannot understand why do we need such coupans. Everyone needs to eat and one needs to pay for that. Why tax concession only if we use meal coupans.

In our campus, Sodexo has provided card (similar to debit card) but can only be used in Office canteen. And the caterer is Sodexo (Previously RKHS)!!

Sandeep Shande said...

nicely analyzed and written .. your post has more depth than the articles in Economic Times :)

company specific coupons and some prepaid currency utilizing magnetic strips/chips in access cards is way to go !

manual counting of coupons were not only headache to person buying items but also people who used to stand behind in the queue.

let's do away with this unproductive activity i.e counting of coupons.

Shrinidhi Hande said...

Shande you made my day :)

Arvind: we had RKHS card at Satyam long long ago...

Vasi said...

Clear points,narrated neatly.

Shrinidhi Hande said...

Thanks Vasi

Sivakanth Reddy said...

I heard from one of my friend in Bangalore that the traffic police accepted Sodexho coupons as bribe as he fell short of money. Another way of using these coupons..:)

envywin said...

very nice informative article.. i remember once I paid an autowallah thru Ticket coupon in the mid of the night as I did not have change for Rs. 500. had a hard time convincing him to accept... :)

Shrinidhi Hande said...

Reddy garu,
that incident of police taking sodexho for bribe is true.

Envywin;
Thanks for sharing

Bharanidhar said...

Nidhi..A comprehensive and informative article.

Anonymous said...

hi,
if anyone willing to sell sodexo coupons at 10% discount can contact me.

apparagarwal@gmail.com
9910485949

Anonymous said...

VERY INFORMATIVE ARTICLE. ITS BETTER TO ALLOW EMPLOYER TO ISSUE COUPON IF GOVT REALLY WANTS TO GIVE TAX RELIEF TO EMPLOYEE ON FOOD ITEM. I STILL UNABLE TO UNDERSTAND HOW GOVT/EMPLOYER IS ALLOWING MEDIATOR LIKE SODEXO TO MAKE MONEY IN LEW OF TAX EXEMPTION OF AN EMPLOYEE.

Shrinidhi Hande said...

Anon: Thanks

Bharanidhar: Thanks

Neeraj said...

Congrats on this article. It is high time the Government finds an alternative to this. But that is highly unlikely, given that so many scams have surfaced. And maybe this one also becomes a scam if delved further into this.

Nice piece of information!!!

Shrinidhi Hande said...

Yes Neeraj. Thanks for the comments

Anand Ravindran said...

Once a shopkeeper told me they stopped accepting sodexo by the time of billing. It was about 2000 rupees. I had enough cash to pay that day and I escaped the situation. I used to buy regular in that shop using sodexho. The shop keepers have removed the stickers of sodexho. But I failed to notice because of other advertisement stickers. They have not kept any board or so. When I tried asking about that he showed no interest in listening to me. From that day I never go that shop again.

Shrinidhi Hande said...

Anand: Thanks for sharing your experience

Anonymous said...

Excellent article. Sodexo and Accor coupons can be eliminated only by joint efforts of retail segment.

Anonymous said...

anybody wanting to sell any meal coupons can contact me at 9653783614.

Anonymous said...

Any one want to purchase sodex meal pass Booklet of 2000Rs Valid till Dec-2013 @Rs2000 Pls SMS me on 9004058896
Note :- Only for Mumbai people

Anonymous said...

Nice article. One thing which i find un-explained, is, Sodexo is printing this coupons and selling them (it involves manpower and cost to print as well as distributue). As they are making a sale (earning money), they need to pay tax as well (probably 10-30%). Now, if they are making a cut of even 3%, how are they in business?

Shrinidhi Hande said...

I guess they're getting tax exemption too?

abhinavwizkid said...

Dear Nidhi,

First let me congratulate you on a very comprehensive article. Although I do not agree with all the points because of the following points:-
Its not that I have anything to with Sodexo but because I believe in people should know the right thing and as a vendor I have been accepting Sodexo Vouchers:
1) Sodexo has a set reimbursement calendar and asks all the outlets to submit the voucher by then. We do not even have to go anywhere, their people come and collect it and within a few days the money is directly transferred in our account so there is no free money available for Sodexo.
2) Expired & Damaged Vouchers - SOdexo replaces and re validates vouchers that have expired or are damaged, for this a person just has to submit the vouchers to his or her HR team and route it to SOdexo through them. The fresh vouchers are given with a minimum validity of 1 year. If you cannot use a voucher in ! year then you are stupid.
3) Sodexo offers customized denomination to curb the problem of not getting back change.
4) If any shop is charging you extra and you complain to the Sodexo people they immediately derecognize the outlet and offer an alternative.

You raised a point of why SOdexo vouchers are digitized so let me tell you that if you notice the Meal Law a few years back and the one active right now there is a difference. The earlier one had the word "Electronic voucher" mentioned in it. The new law has that word omitted and only "paper voucher" is mentioned. SO the electronic cards do not have a legal backing.
Sodexo in my experience is a very ethical client and also very strict on their KYC norms. They are ready to loose business but don't go against the law of the land to make money and that is the reason all my 25 shops in Maharashtra accept the vouchers and get paid without any trouble.

The reason why Major supermarket chains were complaining were because since the have a bigger lobby they tried to bring SOdexo to its knees by stopping the acceptance of Sodexo vouchers without any prior notification which is a very unethical thing. Yes Sodexo charges 3% from its outlets but that is fair, how else do you expect it to be in business and pay the salaries of their employees.
It is not the Meal vouchers that are supposed to be used in company campus, it the electronic cards. All the Sodexo electronic cards used by its clients are only used in their campus and you can check with major IT companies.
I hope that being a blogger and writer you would authorize this so people know the real scenario and not the one that is projected.

niranjan said...

wanting to sell sodexo meal coupons against cash , can contact me at 9938398687.

Note: Better for odisha

Anonymous said...

hi,
if anyone willing to sell sodexo coupons at 8% discount can contact me.

patra.nira@gmail.com
9938398687

Note: Better for odisha

RAHUL GUPTA said...

Any body willing to sell sodexo at 9% please cont me 9891724312

Anonymous said...

I would like to request our Employer to get sodexho meal pass for certain group of employees falling under 20%-30% Tax bracket. If sodexho charges any Service Tax on coupons' worth,then i am afraid that employer may hesitate. Can anyone clarify whether Svc Tax is applicable?

Anonymous said...

I have coupon for 5900 need to sell it ,please contact me 7827722626

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