Pluxee (Sodexo) meal coupons: Good bad and Ugly

October 2024 Updates

I tried Sodexo this year (now rebranded Pluxee)- they do have a smart card, OTP based payment mechanism now which is convenient. However, amount loaded to Pluxee is NO longer tax exempted from taxable income under income tax new regime. So there is no savings by having a pluxee card and going through all their rules. I would rather get my salary directly and pay as per my convenience.

 

A few discounts and offers they have are not practical in my area (Udupi, Mangalore) so with no tax benefit, I've stopped Pluxee card as amount as getting accumulated and I wasn't able to spend it. Without any tax savings would you still use Sodexho/Pluxee meal cards?>

 

Sep 2023 Updates

11 years after writing this post, I am back to using Sodexo. Now they have a digital card and app so it is a bit more easier, though acceptance in Udupi Managluru is still low. Not too many shops where I can use them.

Inflation has increased so much in past 12 years but Sodexo limit is still 2200 INR per month.

---- Original Post ----------

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 (Up to 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 up to 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 up to 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 *