Anonymous
1

Dear Experts,
If the employer is paying "Medical allowance" to its employees (to whom the ESIC benefit are applicable) every month under the salary / wage, then is it necessary to also contribute under ESIC?? Thanks!

From India, Mumbai
[email protected]
730

Finance Manager
Medical Allowance is a part of salary, and ESI contribution is statutory. God forbids if any employee meets with an accident during the course of employment or any employees dependent family member is under some ailment will the Medical allowance will suffice the medical treatment expenses.
From India, Ahmadabad
Dear Annonymous,
yes if the employees to whom the ESI is applicable even then you have contribute the ESI on their wages/salary irrespective of paying medical allowance/reimbursement. since it is
statutory regulation Hence cannot be avoided whereas medical allowance/reimbursement is subjected to terms of contract & discretion of employer it is not statutory allowance therefore you have to contribute the ESI irrespective of medical allowance,
Thanks & Regards
V SHAKYA
HR & Labour, Corporate Laws Advisor

From India, Agra
Dear Experts, thanks for clarifying the query. My second question would be if Employer still needs to contribute to ESIC, then will he be required to consider "Medical Allowance" as wage for the purpose of definition of "Wage" or should exclude such allowance in order to arrive at Wage for calculating the contribution.
From India, Mumbai
manojkamble
374

Sr. HR Executive
What ever components shown in the monthly salary will attract ESIC on it. thus if you are paying Medical Allowance as a part of salary then it will automatically attract ESIC contribution on it.

[email protected]
730

Finance Manager
The Salary/Wage is the agreed amount between the employer and employee for their services, now ESIC is a statutory contribution which need to be mandatorily if your company is covered under ESIC. To exclude Medical allowance or to be merged with any other component or to keep Medical allowance as one of the component is the management's call.
While excluding the Medical allowance one should ensure that the employees right to POW are met and also adhere to MW.

From India, Ahmadabad
suresh2511
220

Labour Consultant
If you pay Medical Allowance thru the salary to the employees who are under coverage limit of ESIC i.e. drawing salary upto Rs.21000/- per month will attract ESI contribution on it. However, if you pay the same as medical reimbursement against the medical bills ESI contribution is not deductible.
Suresh

From India, Thane
You can pay a component under Medical allowance even on monthly basis but at the end of the year the employee need to submit bills to that extent ( subject to the limits specified under Income Tax rules) so that it comes under Medical reimbursement which don't attract the ESI & even Income Tax.

In case the employee is unable to submit the bills to that extent then the total amount paid to him shall attract deduction under Income tax rules. The component should be named as Medical reimbursement failing which it comes under regular wages and attracts both ESI & IT.

The employee even covered under ESI may not be able to go to the Dispensary for petty illness and need the treatment and to meet such expenses this medical allowance will be used hence this allowance & in general it is on reimbursement basis.

To avoid all related issues better to reimburse on submission of bills either quarterly / half-yearly / annually so all the related issues can be avoided and helpful to the employee.

From India, Hyderabad
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