Choosing Between ESI and Mediclaim: Which is Better for Software Company Employees?

Hi Everyone, can anyone suggest whether ESI or Mediclaim is the better option for employees in a software company?

Coverage Under the ESI Act, 1948

Coverage under the ESI Act, 1948, is compulsory and statutory. Non-compliance with the same is a punishable offense. The coverage is based on certain conditions as laid down in the said Act.

Therefore, your comparison of coverage under the ESI Act with mediclaim policies appears to be improper.

Software companies do not enjoy special privileges when it comes to the applicability of labor laws.

Thank you.

ESI Mandate and Mediclaim Facilities

ESI is a mandate for employees having a salary of less than 15 thousand per month. However, the company can provide mediclaim facilities to all employees.

Hope it helps!

ESI is a government agency, and Mediclaim is a private agency. We cannot ask the private agency to treat the patients as we require. ESI is a part of social security for industrial workers extended by the government.

My views are a bit different. ESI is undoubtedly a statutory compliance, and I don't wish to provide a lecture on ESI. But according to my view, both should be implemented for a software company.

See, I know very well about life in the IT/ITES sector, and I wish to join this sector as an HR Manager with priority. Though as per ESI, 1.75% of Basic + DA should be paid by the employee and 4.75% by the employer. Though the ceiling may change from INR 6500 to INR 15000, it means for a larger section of employees, now ESIC will become mandatory.

But, again if you consider senior profiles, meaning those whose (Basic + DA > 15000), they generally don't prefer to use ESIC facilities. In most software companies, this remuneration structure is much different compared to many other domains. It's a status quo. It is also a fact that medical facilities in ESIC hospitals are substandard. Most government hospitals in India are not of AIIMS standard!

Mixed Bucket Approach

Under this situation, it's better to have a mixed bucket that can cater to the requirements of employees and employers:

1. Basic + DA <= 15000/6500 (Still, the ceiling of INR 15000 is not approved but may be approved) - Use ESIC option.
2. Basic + DA > 15000, I believe Mediclaim would be a better option.

By this statutory compliance is met too.

Employees' Facilities

1. They can select hospitals as per their requirements/status quo.
2. The scope of facilities is wide.
3. If the policy is of Insurance-cum-mediclaim nature, approved by IRDA, then still a deduction can be obtained under 80C of the Income Tax Act, 1961, right away. Moreover, the good news is due to the liberalization policy of this current central government, it is expected that the Insurance bucket, facilities, and tax structure MAY be revised.

Tax Saver for employees. Additionally, the premium may be contributed by the employee and employer jointly.

Employers' Benefit

1. Under certain circumstances, it can act as a tax saver - please consult with your Chartered Accountant or Company Secretary, as many factors are there which can't be discussed via this blog.
2. Retention of employees can be more, at least attraction of employees can be achieved, as this scheme is more attractive compared to ESI.
3. Certain group employees' policies are there which can be effectively used to cater to immediate medical relief not only in India but also abroad. And here FEMA, 1999, will not be applicable to the employer directly, and if the expenditure is under prescribed ceilings. The good news is the employer doesn't need to bear the heavy cost.
4. Statutory compliance is also met, since my bucket has more options to cater to the requirements.

Thanks and Regards,

Sovik B

[Phone Number Removed For Privacy Reasons]

I cannot understand the purpose of comparing ESIC and Mediclaim policies. In fact, ESIC is a mandatory law to be implemented if the conditions are fulfilled and cannot be replaced with Mediclaim. The present ceilings are Rs. 15,000/- per month and not Rs. 6,500/- as referred to by someone in the thread.

Regards,
P K Sharma

Coverage Under the ESI Act, 1948

1. Coverage under the ESI Act, 1948, is compulsory and statutory. Non-compliance with the Act is a punishable offense. The coverage is based on certain conditions as laid down in the said Act.

2. Therefore, your comparison of coverage under the ESI Act with mediclaim policies appears to be improper.

3. Software companies do not enjoy special privileges concerning the applicability of labor laws.

Appreciate and validate the information by comparing both. I hope ESI is the best.

Attribution: https://www.citehr.com/498102-what-a...#ixzz35tpkoKS3.

Understanding ESI and Mediclaim Benefits

ESI is a statute that needs to be followed. Mediclaim is a special benefit that a company provides to employees for tax exemption and welfare purposes. Apart from the salary limit, ESI does not have any limitations on the medical expenses to be incurred, but Mediclaim has a certain coverage amount.

Everyone within the salary cap of 15k can avail of the benefit if they or the company is registered under the ESI policy. Individuals under ESIC coverage can receive treatments in the best hospitals in the country if referred by the concerned ESIC hospital and be treated by the best doctors in the country. It is not true that so-called blue-chip hospitals are only meant for Mediclaim policyholders.

I believe my views were not clear. You are correct that the current 'salary' ceiling for ESI mandate is INR 15,000 because you have used the word 'SALARY'. I believe you have not noticed I have used the term 'Basic + DA' and not 'SALARY'.

FYI, wage under Sec2 (22) of the ESI ACT, 1948 means all remuneration paid or payable in cash to an employee if the terms of the contract of employment, express or implied, are fulfilled. It also includes any payment made by the employer in regards to during a lockout, strike which is not illegal, or layoff or period of authorized leave, and other additional remuneration, if any, paid at intervals not exceeding two months.

Then my friend, does salary mean only 'Basic + DA'? No, right. Then am I a fool to write all this in the thread? People fail to understand the meaning of what I wish to imply because in India, we follow the 'Mug Up Policy of knowledge'. That's why in India, there is still a policy: if you are not getting a job by your skills, use bribe or shortcuts or a reference from someone influential or only via B school campaigning. Do hell with such students, such HRs, and do hell with such colleges/B schools (corporate houses - only for profit) or HRs. Funny, right? But this is true. Without any disrespect or hard feelings, I just wish to say this is the practical picture of the market.

I have used the concept of 'Basic + DA' instead of using the words 'remuneration/salary/wage' for comparing ESI with Mediclaim, keeping in mind the laws of taxation. Please don't expect that I will teach the interpretation of statutes, deeds, documents, along with Taxation details, cash flow statement readings, etc. If people here don't understand the difference between penalty and fine, then how can I continue this discussion forward so that everyone can understand?

My friend, as per the ESI ACT, 1948, the coverage of this act is at present restricted to employees drawing wages not exceeding INR 15,000 per month. Please refer to the bare act with rules if required. NOWHERE IS IT WRITTEN THAT BASIC + DA SHOULD BE UP TO INR 15,000 or THAT WAGE/REMUNERATION/SALARY MEANS ONLY - BASIC + DA.

Now, the question to you is, can there be any punishment if any company doesn't provide ESI coverage to employees whose remuneration/wage/salary/commission is above INR 15,000 or provide better facilities using a different option with equivalent features? If yes, then who is the adjudicating authority?

I have never seen any such types of rules, nor an ACT specifying details or CASE LAWS. If you have any such information, please share it with details; I would love to learn.

Employer(s) liabilities are limited to providing ESI Coverage to only those employees whose salary, remuneration, wage is <= 15,000, if the employer is liable to follow the ESI ACT, 1948 under the prescribed criteria of the ACT.

FYI, if someone's BASIC + DA is >15,000, then generally in a software company, that's too in Vishakhapatnam, remuneration would be around 30,000 - 50,000 per month - MINIMUM. That is around 3.6-6 lakhs per annum - MINIMUM. Now, do you understand why I used the concept of TAX, and why it's important to compare Mediclaim? HOW ARE STATUTORY COMPLIANCES BEING MET?

FYI, many Trade Unions are asking CG to introduce the concept of 'BASIC + DA' in the ACT instead of the word 'Wage'. The reason being in Mumbai, Chennai, Kerala, the remuneration standard is quite high, so is the cost of living; thus, more employees will be covered.

Please don't hesitate to ask questions; we can have a long discussion on labor laws, Income Tax Act, 1961, etc. But please don't advise anyone to mug up without understanding.

Thanks & Regards,

Sovik B

MBA, Pursuing CA/CS

B.Sc- Mathematics Hons

Under University of Calcutta.

I would like to convey that the definitions of wages/salary as given in various labor statutes are also known to me. However, I always stress the need to comment on the provisions of the laws first in these threads, as it is more important, and what is being opted for by the industries is additional guidelines.

For instance, if the EL provisions are for 1 day after every 20 working days, then it should be understood first. Further comments on prevailing situations/practices/positions in similar industries should be given. One can go above and beyond the provisions made in the act according to their needs. But as far as coverage/compliance under ESIC is concerned, one cannot opt voluntarily.

In this particular case, Geethanirmalkar asked about the advantages and disadvantages in comparison with ESIC and mediclaim for a software company, and I gave my view as follows:

"I cannot understand the purpose of comparison between ESIC and Mediclaim policy. In fact, ESIC is a mandatory law to be implemented if the conditions are fulfilled and cannot be replaced with Mediclaim. The present ceilings are Rs. 15,000/- per month and not Rs. 6,500/- as referred to by someone in the thread."

So, what wrong suggestion or comment has been passed on by me that was taken so hard by you? For your reference, I am providing an extract of your quote as follows:

"See, I know very well about life in the IT/ITES sector, and I wish to join this sector as an HR Manager with priority. Though as per ESI, 1.75% of Basic+DA should be paid by the employee and 4.75% by the employer. Though the ceiling may change from INR 6,500 to INR 15,000, meaning ESIC will now become mandatory for a larger section of employees."

"But, again, if you consider senior profiles, whose (Basic + DA > 15,000), they generally don't prefer to use ESIC facilities. In most software companies, this remuneration structure is much different compared to many other domains. It's a status quo. It's also a fact that medical facilities in ESIC hospitals are substandard. Most government hospitals in India are not of AIMS standard!"

In the above paragraph, you mentioned the "ceiling may change from 6,500 to 15,000," whereas the ceiling is already Rs. 15,000. Secondly, you stated that senior profiles whose remunerations are greater than Rs. 15,000 generally don't prefer to use ESIC facilities. However, a person earning above Rs. 15,000 is an excluded employee and cannot benefit from ESIC.

The site provides a platform where we can share and discuss our views, and many new HR professionals are benefiting daily. It is essential that we quote the relevant provisions of the applicable laws on the queries first, and then add our suggestions, which may be more helpful.

Regards,
P.K. Sharma

Dear Mr. Sharma (Apex Management), you are misunderstanding me; please try to understand where I am stressing. I know very well the provisions of laws. However, what you are failing to understand is the practical implementation of laws in the case of IT/Software/ITES. I can't use strategies of the FMCG domain in a software company. But this does not mean statutory compliances are different for different industries.

Understanding ESI in the IT/ITES Sector

See, I know very well the life in the IT/ITES sector, and I wish to join this sector as an HR Manager with priority. As per ESI, 1.75% of Basic + DA should be paid by the employee and 4.75% by the employer. Though the ceiling may change from INR 6500 to INR 15000, which means for a larger section of employees, now ESIC will become mandatory.

I have used 'ceiling may change from INR 6500 to INR 15000' because there is a reason. FYI, soon the ESI Act will be revised, and the remuneration/salary/wage ceiling will change from INR 15000 to INR 25000. We are waiting for the official gazette. The Ministry is considering this, and soon this might happen. It is assumed that you know all these. Refer to my attachment for more information.

Please refer to the attachment so that I can make you understand the practical situation. Now, please don't say I have practiced drawings/color crafting after referring to the attachment. Colors have been changed to highlight and stress some important words/phrases, which I can't do normally here.

Thanks and Regards,

Sovik B

I received a question via private email asking how Basic + DA > 15,000, as shown in the attachment, results in a remuneration amount between 30,000 - 50,000 per month. The answer is: It cannot be forecasted, but if we view the proposed changes and keep in mind the best market practices, corporate taxes, and salary/remuneration breakups, then generally Basic + DA > 15,000 would result in a monthly remuneration of INR 30,000 - 50,000.

For calculation purposes at this moment, if we need to discuss whether ESI or Mediclaim is better or not, it's better to consider Basic + DA instead of Remuneration. This is because the proposed changes, which were supposed to be effective from April 1, 2014, include:

1. PF ceiling will increase from INR 6,500 to INR 15,000 - here salary ceiling means Basic + DA.

2. ESI ceiling would increase from INR 15,000 to INR 25,000 - Here the salary's meaning is provided by Sec 2(22) of the ESI Act, 1948.

Reference link: http://economictimes.indiatimes.com/...ntenttarget=no

Again, a strategic discussion like this should include both current statutes and possible changes in future statutes in a harmonious way. The benefit of this would be that the suggested plan would consider the effect of future changes in statutes too.

Thus, if my ESI bucket included:

a. Basic + DA <= 15,000, then ESI should be mandated. This would automatically meet my ESI Act, 1948 requirements along with the proposed changes stated above, as the monthly remuneration will lie between INR 30,000.

b. Basic + DA > 15,000, then this case does not come under ESI, but medical cum insurance (Individually/jointly funded) will reduce both corporate tax and income tax of the employee. This means that the facilities of ESI will be there, plus there are chances of sum assured and tax savings, which ESI cannot provide individually.

But it's still better to wait with patience. And yes, apologies for the mistake in the previous attachment, so this correction is now accurate.

Thank you.

Consultation Request for Insurance Plans

Hope my professional friend who posted this question will consult with you. I have one request: if any professional HR consults with you regarding this kind of insurance, please suggest those plans which provide sum assured, mediclaim, and tax savings.

Due to my profession, I know a few such policies, but still, it's a request if you can cite some examples with features. I hope many HR professionals would be able to understand the importance and difference.

Though I am not from an insurance background, I understand the psychology of HRs and Senior Managers. It's like even if they are not aware of precise details, they simply don't want to gather information and thereby lose the opportunity for cost savings and better employee engagement just by thinking, 'All people are salesmen who wish to take away their money.'

A few of such plans and proposals, with detailed plans, will help industry leaders to widen their narrow minds. Even in my career, I have heard these kinds of weird comments, like, 'You are a 26-year-old guy, what do you know about business/accounts/HRM?' 'You don't have experience,' and the most recent weird comment is, 'We require your DIN number in order to consider your capabilities for the post of AM in a software company.' Hilarious, may God bless India and such kinds of HR professionals, senior management, Directors!

Regards, Sovik B

Dear all,

He asked about the advantages and disadvantages of ESI and Mediclaim. After going through all the answers, I am a little bit confused. First, please note that we can't compare them with each other. Both schemes are important and required for employees.

Everyone is saying that ESI is provided to those whose gross salary is less than Rs. 15,001. However, ESI will first be applicable based on the geographical area. If the area where you are working is not covered under ESI, even if you are earning less than Rs. 15,000 in salary/wages, you will not be covered under the ESI Act. In this situation, you have to be covered under the Employee Compensation Act.

ESI vs. Mediclaim

ESI is statutory, while Mediclaim is a facility. ESI is for social security, whereas Mediclaim is a benefit. ESI coverage is when you are on duty, whereas Mediclaim covers you 24 hours. ESI provides a pension for deceased IP, while Mediclaim offers medical assistance only.

There are several advantages and disadvantages in both, which I have shared a few of.

Thanks,
V K Rao

Hi sir/madam, this is Srikanth. I am working in a company, and they have assigned me a project. The project revolves around the question, "Why are employees not utilizing ESI hospitals and instead opting for private hospitals?" This is the essence of my project summary. Please evaluate which topic aligns with this summary and suggest where I can gather relevant data. Your prompt assistance is greatly appreciated. Thank you.