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Often I have been asked as how to make a provision for Insurance cost in HR budget. What would be a reasonable cost? Is ESI better than group health Policy?

ESI is a statutory provision and is compulsory for all in the notified area or notified industry. So, if one fall under the notified industry or area, they will have to enroll with ESI authorities. I may add that there is no restriction to taking additional coverage for health or Personal Accidents. In fact, Personal accident cover is strongly recommended in addition to ESI cover.

Budget for Insurance is not difficult. Generally, precedence is taken for the previous policy. The cost varies widely based on the sum assured, coverages, employee profile, location etc.

For a new company/ organization, where the precedence is not available, the benchmark can be taken as the ESI rate of contribution, which organization (Employee + employer) contributions. As per the ESI Act , the combined contribution is 4.00% (3.75% by employer+ 0.75 %by employee) of wages. The salary cut off of Rs 21,000/- applicable to ESI Act should not be considered.

It is a broad yardstick of measure and not an absolute number. The premium will vary based the group size, coverage opted for, etc. But yes, it will give a broad idea of the Insurance cost to be factored in the HR budget.

From India, Bengaluru
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