I work for the BPO industry and have some query regarding ESIC. After the ceiling of ESIC is being raised from Rs.7,500/- to Rs.10,000/- we have more employees who come under the ESIC cover.

We are currently giving the benefit of Medical Insurance to our employees (this is in addition to the ESIC cover for those employees who are eligible for it as per law). The Medical Insurance benefit is as per the level / position one holds in the company and the Insurer is Oriental Insurance. The employees at the lowest level are covered maximum upto Rs.50,000/- p.a. The level of coverage is given below:

Level 1 to 5 Rs.50,000/- only employee is covered

Level 6 to 10 Rs.1,00,000/- only employee is covered

Level 11 to 15 Rs.2,00,000/- employee + spouse + two children are covered

Level 16 to 20 Rs.5,00,000/- employee + spouse + two children are covered

The employee can claim for the above benefit if they are hospitalized in a 15 bed hospital for atleast 24 hours. This is also a cash less facility in case the employee goes to a network hospital.

I just wanted to know if the Medical Insurance benefit can be used in lieu of the ESIC.

Is there any law that says that if the employer offers better benefit than ESIC, then it is not necessary to cover the employees under ESIC.

The reason I want to know this is because there are employees who are not happy with the services of ESIC and they feel that employees contribution of 1.75% that is deducted from their salary towards ESIC is of no use to them.

Could any member of this group help me in my above query.


Kuldeep Singh

From India, Vijayawada
Harsh Kumar Mehta
Consultant In Labour Laws/hr
Human Resource And Industrial Relations
Consultancy_hr & Ir
Agm - Hro, Compensation & Benefit Mgt,
Hr Executive
Sr. Manager-hr


First principle is, you cannot contract out of law.
If ESI (or any law for that matter) is applicable, we simply have to abide by it.
Medical Insurance Schemes will NOT automatically cover you for non-implementation of ESI.
I remember that there is a provision in the ESI Act itself that if an employer offers superior benefits than the scheme, then it may seek exemption. This needs to be checked though. The experience does not show any example of exemption.
Further, if certain employees, though covered under ESI are unable to utilizr the ESI facilities, like frequent travel for work, working in areas where ESI facilities are not available, then such employees may be exempted against a representation and by satisfying the authorities of the justification in exempting such employees. (I doubt if a BPO may qualify such exemption!)
Kiindly check thoroughly these provisions before initiating any action.
October 26, 2006

From India, Pune

Dear Mr. Singh,

Yes exemption can be sought from ESI if your organisation has medical facilities being given to employees which is better than the ESI facility. For this you will have to write to the Ministry of Labour , they will send you a form to be filled in for the purpose, this form will ask you for various details regarding your organisation and also the details of medical facilities extended by you to your employees which you feel are better than the ESI. Along with the form you can attach copies of such medical policies, the copies can be from you policy manual or staff handbook.

Once the same is sent to the ministry they might consider your request and grant you exemption, but the process takes a long time and also the exemption is always given for only a year, next year again you will have to seek a renewed exemption. Also the Ministry publishes a Gazette carrying the names of the organisation which is exempted from the same.

Usually to get an exemption for first time, it might include an inspection from the Ministries side and much documentation, once you have got it then it is only a matter of following up every year and keeping up your policies.

This exemption is slightly easier to get if the company is a PSU or semi govt. as my Company was PSU I am aware of the procedures followed there.

Hope this clarifies your query.

thanks and regards


From India, New Delhi

Dear Kuldeep,

The first thing we all tend to stress on is Hospitalisation and Treatment only, but ESI also provides for free treatment and medicines for minor ailments like fever, cough and cold, indigestion. To replace this with a better system and still remaining profitable requires a big infrastructure which very few Companies can afford.

In my previous Company, we were exempted from ESI. To replace the system we had to employ staff numbering above 100 included Doctors, Administrative personnel and support staff and the heirarchy went up to the level of Dy. General Manager, which was a very very high rank in the Company, two levels below the Executive Director.

In addition the scheme required maintenance of a network of External Medical Consultants like General Physicians, Surgeons and Specialist of all Medical Discipline including Dentist, Polyclincs, Hospitals and Nursing Homes, Pharmacy Shops and Theurapic and Rehabilitation Centres. The whole Medical Department was responsible for maintaining and coordination of the Scheme which started from Diagonisis, Treatment, Medication, Hospitalisation if required, and finally sanctioning of payment of bills. These Bills were then submitted to the Insurance Company for settlement of Claim. For claiming the Amount from Insurance again a set of qualified people had to be recruited along with consultants.

So, an employee with any ailment could simply go to one of our Company Doctor and get treated for free. He had the option to go for even Medical Check ups. This included employees with Chronic Drug and Alcohol Abuse. Just like ESI.

The whole system is not worthwhile unless you have a workforce exceeding a few thousands for a particular location, since Specialists, Nursing Homes and Polyclincs will not get enlisted unless you are giving bulk and the Insurance Company have a profitable premium.

Now, the other thing is in general ESIs have received a non written order not to entertain any such exemption from the private sector, as it result in huge loss in revenue.



From India, Thane

Getting an exemption from the ESI scheme is a very difficult task. While working in a Public sector undertaking we had carried out this excercise, as the company medical scheme in our view was far superior to ESI scheme. None of our employs were availing the benefits from the ESIC and were not paying the ESIC contribution. Since the beginning the company was paying both the employers and employees contribution.

After I joined this company I applied for exemption on the plea that our company scheme was far superior, no employee was willing to take benefit from ESIC, employees were refusing to pay the contribution, and the recognized union gave in writing that it was willing to opt out of the scheme.

Despite this the Ministry of Labour did not initially give us the exemption and wanted us to modify the company scheme at several places as they felt the provisions were inferior to ESIC. It was felt that in the process the company will land up in giving much more additional benefits to employees than what was existing. The entire process had to be abandoned.



From India, Nagpur


I appreciate the advise given by other senior members.

Seeking exemption means undertaking huge responsibility of running another establishment with Hospital with specialization and taking risk cover of employees from sickness benefit, Temporary & Permanent Disablement benefits, workmen compensation act, personal accident scheme, pension. Medi-claim only covers risk of hospitalization not out patient treatment , diagnosis, medical reimbursement of bills for the same.

No business organisation is expert in taking care of total risk of ESI Act and run . This may a wild thought.

your organisation is doing business of its expertise and employers do not wish take risk and assume additional responsibility in this field. Unless, the Govt insists under some other act of welfare and safety under occupational hazard of the Industry.

Now a days, ESIC is expanding its expertise in the field and building super specialty hospitals and trying provide treatment the members and dependent family members

Hence, my view is not to seek exemption from ESI Act.

From India, Hyderabad
One year before my wife was undergone neutrus removal at Government Hospital. It is possible any claim through ESIC with my ESI membership. Also she is undergoing another surgery (Hirania), it is possible to any ESIC claims if I treated her in private hospital?
From India, Chennai
Harsh Kumar Mehta

1. Sir, it will be more better if you may raise the same issue with appropriate ESI Dispensary to which you are attached. ESI dispensaries/Hospitals are required to firstly provide medical facilities to the eligible insured persons and their family members in their dispensaries/hospitals only. If in any special case, they consider it fit to refer the matter to any specialised hospitals/private/government hospitals, then only they take such actions. They may be having instructions from their superior office in this regards.
2. Therefore, it will be better if you approach ESI dispensary of the area and discuss the issue.

From India, Noida

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