Why paying via Sodexo Coupons and Cash is not the same!

So, do you pay via Sodexo?

sodexo

If you are part of an MNC and have opted for tax savings in the form of food coupons, then you are indeed part of sodexo’s network.  Paying at retail store’s cash counter may look cool, but little do we understand what exactly takes place behind the scenes. I’ve tried my best to explore and present my version of my limited findings.

Just like you, I too had this question lingering in my mind for quite sometime, not long before I found out the roots for this tax haven we are currently being subjected to.

Who is Sodexo?
Sodexo is a French multinational corporation and is one of the largest food services and facilities management companies and have their presence in over 80 countries. They make money by making you opt for Sodexo coupons (part of your company’s flexible compensation package). In turn, you could use these coupons to pay in lieu of cash for food items at any retail chain (wherever they’re accepted).

Sodexo Business Model Vs. Government Model
Before you can understand the business model, you should first understand our own government model.

As per the govt. rules, an employer cannot pay more than Rs. 50/- per meal during employee’s working hours.  Let’s do a quick math here, presuming that we have 22 working days in a month and 2 meals is the max you can have at your office, our total expense works up to Rs. 2200/- p.m (remember this limit that most of us get on a monthly basis) However, the maximum anyone is eligible to get is Rs. 3000/- (30 days X 2 meals/day X Rs. 50 = 3000/-).  This also explains why the voucher value is never above Rs. 50/-

maximum-value-of-sodexo-coupon

Maximum value of Sodexo is always Rs. 50/-

So, to adhere with govt. rules and to make disbursal of this amount much easier to employees, large Organizations gradually started moving from the conventional system to the Sodexo model. This turned out to be far less cumbersome as the entire process was taken care by Sodexo.

The process goes as below, which also explains their business model:

  1. Your organization pays Sodexo in hard cash according to the value of coupons based on whatever you had declared in your compensation Flexi package
  2. Sodexo, in turn provides you either with paper-based or card-based coupons – note that the coupons come with an expiry date
  3. You can use your coupons for food item purchase anywhere within India (wherever they are accepted – probably in retail chains and supermarkets).  However when you are provided with the card-based Sodexo coupon, you are left with no option but to use them only at outlets specifically earmarked by Sodexo (which would obviously be your Organization’s cafeteria or food court)
  4. On a monthly basis, the merchant submit their vouchers, and it  might take upto 24-34 and sometimes 45 days for Sodexo to reimburse the merchant. However, the only flipside during reimbursement is the 4-7% service/commission charge levied by Sodexo (now you know how Sodexo generates its revenue from).
  5. In addition to charging service/commission charge, Sodexo also earns from the Interest during  window period while it reimburses merchants. Note that your organization had already paid Sodexo in lump-sum during the beginning of the financial year.
sodexo-model

The Sodexo Business Model

All said and done – you might ask, their model is fine and I get my much desired tax exemption – so what’s the big deal? Wait, the ordeal is not still over. As consumers, little do we know that we are at the receiving end or in literal sense ‘face the music’ while we pay via Sodexo coupons.

As explained in the model earlier, we know that Sodexo charges upto 7% as commission charges – but where do you think merchants are transferring this to, at a time where they are already reeling under pressure from competitors and lagged payments? Just like we pay VAT or service charges or service taxes at merchant outlets, these charges are conveniently cascaded to us without even we knowing that we are being taken for a ride.

In simple words, merchants who accept Sodexo coupons automatically mark up their prices by 7% so that they could make profits. On a comparative note, you would be purchasing products or services at a higher price when you are offering to pay via Sodexo or when the merchant is ready to accept coupons.

Paying via coupons is fine, but when what happens you are paying via cash? Merchants can’t  have double standards those who pay via Sodexo and those who pay via cash – so they simply adopt an unified approach – charge EVERYONE alike irrespective of whether they pay via Cash or Coupons.

Merchants Markup Prices   when you pay via Coupons!

Merchants Markup Prices when you pay via Coupons!

So what that means for you is, when you pay via Cash to a merchant who accepts payments via coupons, you are using ‘real cash’ to buy a product/service at a comparatively higher price than other merchants. This may sound shocking, but sadly this is the reality and frankly speaking doing roaring business.

The next time, you go to a store or restaurant that accepts Sodexo – make sure you have the coupons (paper cash) handy, and don’t end up paying ‘real cash’ for marked up prices. Rather, you can get the same product at a far better price elsewhere for your hard-earned ‘real money’.