Fake Medical Bills for Reimbursement: What Liability Does a Company Face?

Hi all,

I want to know what can be the liability on the company if its employees are submitting fake medical bills for quarterly medical expenses reimbursement.

Regards,
Nidhi

Dear Nidhi,

Please ascertain the veracity of the medical bills. If it is proven that the bills were forged, then conduct the inquiry and provide the defaulter with a chance to prove his/her innocence. If the inquiry officer finds the accused guilty, you can take disciplinary action, including termination of services.

It is worth recalling that the former Satyam Computers discovered that some of their staff had falsified transport claims. They conducted inquiries and terminated 3,000 employees!

However, ensure not to take disciplinary action without a proper inquiry.

Ok...

DVD

Dear Dinesh,

Can you please clarify what liability the company has from an audit angle, i.e., IT Audit or Tax Audit? In our organization, people are receiving a decent basic salary ranging from 25000 to 60000, so their medical reimbursement at 7% of the basic salary goes up to 21000 to 50000. What if the company pays Rs 15000 as medical reimbursement and pays the rest as a part of the salary (medical allowance)? I hope then the company can benefit from any liability.

An important point not to forget is that all employees must provide original medical bills at cost. Am I correct? Please revert.

Thanks in advance.

Dear Nidhi,

Ascertain the veracity of the medical bills. If it is proven that the bills were forged, conduct an enquiry and provide the defaulter with a chance to prove their innocence. If the enquiry officer finds the accused guilty, you can take disciplinary action, including termination of services.

It is important to note that formerly Satyam Computers discovered that some of their staff had falsified transport claims. They conducted investigations and terminated 3,000 staff members!

However, ensure not to take disciplinary action without a proper enquiry.

Ok...

DVD

Transport bills, if fake, can be checked by making it compulsory to provide 3 different quotations from 3 different transporters and then finalizing on the feasible one.

Regarding Medical Bills, if it's a genuine Medical Store Bill (including bill number, doctor's name, CST, VAT details, etc.), then one should not delve too deeply into it. Simply reimburse the cost as these expenses are already included in the CTC. The rationale is that if an employee seeks medical treatment, the company does not cover the expenses. Therefore, reimbursing genuine bills according to norms, regardless of how they were obtained, should not be problematic. The responsibility of issuing such bills lies with the medical store. HR does not need to investigate everything like the CBI. There are individuals in higher management positions who blatantly violate rules for significant amounts (e.g., petrol bills, mobile expenses, clothing, etc.) without being questioned. This could result in a situation where being overly cautious about small expenses leads to larger losses. If you scrutinize mid-level employees in every aspect, it may pave the way for your own downfall. Consider what happened to Satyam!!!

These are simply my thoughts that I implement, and others may have differing opinions.

I personally feel the best option would be for your company to allocate a certain amount towards medical expenses, which should be paid at the beginning of each financial year. This way, employees would be happy, and the issue of submitting fake medical bills would be resolved. It is a well-known fact that there are doctors associated with medical colleges who, due to certain government restrictions, may not provide bills for consultations, etc. By implementing this system, you would also save on the costs associated with employing someone to check the bills and maintain records. Trust me, I come from a company that has made this transition, and it has proven to be a significant success.

It is always better to pay a fixed medical allowance to employees every month or on an annual basis, against the certificate that he has actually incurred a sum on medical treatment for himself or his family members. This covers the IT deduction as well. Employees would be happy, and the employer is worry-free.

Dear Nidhi,

It appears from your following statement that you are not worried about people making false claims but worried about how to regularize paying up to 50000 in medical allowances.

"what if the company pays Rs 15000 as medical reimbursement & pay the rest as a part of salary (medical allowance)..."

Am I right? If so, you should be asking Madhu T K, an expert on law.

Have a nice day.

Simhan

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nidhi302 said:
Thanks, Dinesh.
Can you please clarify what liability the company has from an Audit Angle, i.e., IT Audit or Tax Audit?
In our org, people are getting a decent basic salary ranging from 25000-60000, so their medical reimbursement at 7% of basic goes up to 21000 to 50000. What if the company pays Rs 15000 as medical reimbursement & pays the rest as a part of salary (medical allowance)?
I hope then the company can benefit from any liability.
Also, an important point to note is that all employees get original medical bills at cost.
Am I right??
Please revert.
Thanks in advance.

The medical reimbursement component in CTC is to avail exemption from income tax. If an employee provides forged bills, these bills can be treated as null and void for exemptions. The employee will still be paid medical reimbursement as stated in their CTC, so you are fulfilling your commitment to the employee. However, the amount of the forged bill will be treated as a taxable amount. For example, if an employee's quarterly medical reimbursement is Rs. 6000/- and they submit fake bills worth Rs. 2000/-, these Rs. 2000/- are to be considered taxable. Although this method will not eliminate your scrutiny work, it is worth considering.

Regards