Interview Dilemma: Is Medical Allowance Part of Gross Salary and Affected by ESI?

I have faced an interview in which I have been asked whether medical allowance is included in the gross salary and if ESI is deducted on the medical allowance or not.

Hi,

I liked this question. Can you tell me the name of the organization where you were invited for an interview? The question is confusing.

First, the medical allowance is usually given to an employee who is not covered under the Employees' State Insurance Corporation (ESIC), which means if an employee is drawing a salary less than Rs. 10,000 a month. Thus, if the salary is less than Rs. 10,000, the employee will receive benefits through ESIC. Even then, if the medical allowance is also given to an employee who is covered under ESIC, the ESIC (1.75%) will be deducted from the medical allowance. Usually, the medical allowance is given to employees not covered under ESIC and is part of their gross salary.

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

Hi,

There is a thumb rule to decide whether an amount (whatever the nomenclature an organization has for salary heads) shall be wages under Section 2 of the E.S.I. Act or not:

1. Any payment being made to an employee within a two-month interval shall be considered wages for E.S.I. contributions. This includes bonuses, incentives, conveyance, or any allowance, regardless of the salary head's nomenclature. Prior to April 2004, conveyance was not considered wages for E.S.I. However, if it is now being paid regularly along with monthly wages or within a two-month period, it falls under the purview of E.S.I. wages.

I hope this clarifies the concept of wages under Section 2(9) of the E.S.I. for all our HR members.

Regards,
Mohd. Arif Khan

Understanding ESIC and Medical Allowance in Payroll

1.0 ESIC is a mandatory field in payroll if the gross salary is equal to or less than ₹15,000.

2.0 Medical allowance is an optional payment that can be decided by the company only.

3.0 Medical allowance is not part of the gross salary; it is part of the CTC.

4.0 ESIC cannot be deducted from the medical allowance.

Ensure there is a single line break between paragraphs.

Thank you for your reply, Sumit, but my question remains unanswered. My query is whether an employee receiving ESI benefits can also receive a medical allowance. In other words, can employees earning a salary below 15K avail of the medical allowance benefit or not? Kindly provide clarification.

What if a company is providing both ESIC and medical allowance benefits to an employee with a salary below 15K? Is this correct?

Employers can provide medical insurance to those ESIC-covered employees. An ESIC-covered establishment has to cover employees earning a gross salary of ≤ ₹15,000 per month under the ESIC scheme and provide the rest with medical insurance. ESIC-covered employees will have additional medical insurance coverage, but deductions for insurance will be made from ESIC-covered employees' salaries. Both ESIC and medical insurance premiums cannot be deducted.

Yes, the medical allowance is also a part of the gross salary for the calculation of E.S.I.C. wages, and it can be 8.33% of basic + D.A.

Hello Everyone,

Please advise, if an employee is covered under E.S.I., can the company give an allowance under the "Medical Allowance" category?