Ethika e-book

FOR YOUR COMPANY
Employee Beneﬁts Insurance
ETHIKA'S GUIDE TO BUY

TABLE OF CONTENT
4. Structuring the Group Health Insurance plan
3. Group Health Insurance plan
2. How to structure the right employee benefit package?
1. Employee Benefits Program
5. Insuring Employees Parents
6. Other Benefit Policies
1
2
4
7
14
17

All about the different Employee
Benefits plans
EMPLOYEE BENEFITS
INSURANCE PROGRAM
Introduction
The information to help you
understand the benefits plans
and features
Contact details and glossary
of the terms used!
IN THIS E-BOOK YOU WILL FIND
In this book you will find the information to help you
understand the benefit plans and features along
with examples, Contact details, and glossary of
terms used!
Welcome to Ethika Employee benefit insurance programme. Benefits are just a small part of what makes a
culture or a company successful, but it is still an important part to get right if you aim to create an
environment where people can thrive and do the best work of their lives. Our handbook has important
information which guides towards the best way to offer your employees the right Employee Benefit Package.
In today’s business world, the most valuable asset any company can have is the right employees, and even
the biggest challenge is how to stop right employees from jumping ship. While most of the organisations
struggles in optimising between the needs of their employees and their families and their financial budget to
decide the structure of employee benefit package. The ideal practice should be to structure the package
which will increase company’s overall happiness index.
We have many real time case studies which have shown how the happiness index of employees is linked to
the company’s overall productivity and performance, and that’s why Organizations need insights or market
perspective or in some cases basic awareness about this delicate subject and that’s why large corporates
hire highly remunerated internal and external experts for this purpose, these experts understand that many
Organizations HR do not have the time or internal resources of large Corporates. For a start-up it become
much more important to offer a right benefit plan as it can help them in aligning the employee with
company’s vision, that’s why we are here today, to help you in choosing the right EBP, however , let’s first
understand the rationale behind offering Benefits package.
11

HOW TO STRUCTURE
THE RIGHT EMPLOYEE
BENEFITS PACKAGE?
As any HR manager dealing with the subject quickly discovers, there is no template for designing or running
the perfect employee benefits scheme. Each workplace will demand different solutions, and so-called best
practices aren’t always the perfect solution for every employer.
“One size does not fit all!”
The purpose of this book which is created after dealing with many of our clients in different sectors and after
implementing many of strategies in our own company is to help understand basic components and rational
involved in deciding structure of Employee benefit policies.
Rationale: Compulsory by law
Many of the companies want to offer only the bare minimum benefit package which is made compulsory by
law. Those policies are typically :
• Employee State Insurance
• Provident Fund
• Workmen compensation
• Gratuity
• EDLI
Rationale: All other peer groups are offering so we should also offer
• Group Health Insurance or Group Mediclaim – This covers your Employees and their dependents
hospital bills. This is probably most discussed and highest in terms of the budget among all other policies.
• Group Personal Accident
• Group Term Life Insurance
Rationale: Traditional Not much popular:
Further some of the companies look at offering additional benefits like NPS, superannuation, Leave
encashment etc.,typically PSUS or some old and big private companies.
Some of the new benefits which got recently popular are:
Holiday trips on some special occasions like completing some specific tenure, or paid holiday on wedding,
work from home, flexi hours, pick and drop from home and office, parenting leave, day care crush for new
mothers, Health tests, etc are other new age benefit policies.
These are typically construction companies,
manufacturing, hospitality companies who
operate on very low margin and where the
resources availability in market is plenty.
These three are most common
components for the Employee Benefit
Insurance offered by most of the
companies in ITES, IT and financial sectors.

happiness of employees ?
what
can help in
increase the
Then What is Right rationale?
Fundamental reason for offering any employee beneﬁt policies
(after taking care of all the policies made compulsory by law) is to
understand...
8
questions which
will help you to
identify the areas are
1. Will it Increase connectedness among peer groups ?
2. Will it create moments of positive emotions at work place?
3. Will create a culture of acknowledging others and gratitude
4. Will create reasons for celebrations
5. Will help them to identify their bigger purpose and live for it.
6. Will help them grow their IQ
7. Will make them more healthy ?
8. Will it give them more security ?
3

deciding regarding the health insurance terms for your organization or still contemplating-to take or not take
then you might find this chapter very useful. One thing is for sure, decision you take every year knowingly or
unknowingly impacts and adds protection all the hundreds to thousands of lives that you serve and lead.
The decision how ever has to be decided on it’s merit. The bottom line factor to consider are-
a. How to fix Sum insured per employee - uniform or gradewise
b. Extent of the coverage (covering OPD and Health checkups)
c. Flexibility of coverage (waiver on room rent etc)
d. How to minimise the possibility of hospitals taking undue benefit by inflating the bills.
Before we begin to explain our thumb rule to resolve these conundrums, some distinctions are important to
be drawn like-
Why should corporate offer Health Insurance Benefit?
“A stitch in time saves nine”, right? “Similarly, an insurance for health saves your wealth”. It has been a
paradoxical thinking that health insurance is only for old people, but the fact is, Health Insurance should be
taken in teens. Another common misunderstanding is, health insurance is an expenditure, but if you think it
through, with continuous changes in the environment and economy, healthy living has become luxury and
health insurance has become a major rescue.
Increasing Gap Between Affordability and Capacity: Over the past decade, the cost of
treatment rose to a double-digit pace of growth, outpacing average inflation in both rural and
urban India (according to published results of a cross-national survey on health conducted by
the National Sample Survey Office (NSSO) in 2014 quoted in Live Mint).
In simple terms, with rising cost of treatment, health care is becoming unaffordable. Visiting a
private hospital for basic consultation itself is creating a huge hole in pocket. On the other hand,
the salary and allowances are not catching up with the same pace. As a result, the gap between
the affordability of treatment and earning capacity is increasing. Hence, it is going to become
more and more difficult to take care of hospital expenses from the pocket today and in the times
to come.
Pace of evolution of new diseases: world is changing fast, the climate change and the
increased pollution and global travel and population migration has increased the risk and
unpredictability of next big health epidemic or major public health breakout. During the past 20
years, at least 30 new diseases have emerged, some of which expensive to manage in the
setting of third world health care system. There are other causes too such as antibiotics abuse
etc but these are not subject of this book. Bottom line is we can pretend to be certain about the
health risk we may encounter that can be fatal or seriously debilitating merely judging our social
or hereditary factor. As much as risk of the disease has increased treatment option have also
grown, but all things come at a cost, especially in society and nation where best health care
options are privatized.
GROUP HEALTH INSURANCE -
MOST POPULAR
EMPLOYEE BENEFIT
If you are HR or C&B person reading this book, and you are the one
a.
b.

HEALTH INSURANCE
FOR THE TIMES OF NEED –
WHICH ONE MUST HAVE NOW!
IS AN INEVITABLE SHIELD
For example, Laparoscopic surgeries decreased the time of recovery to less than half but increased the cost
of treatment to 10 times. Similarly, the cost of Robotic surgeries or stem cell treatment is out of reach for a
common man, although they offer more effective solution. So, the risk of requiring such expensive
treatments can be transferred by having an appropriate health insurance.
5

How to view Group Health Insurance distinct from
Quick Facts: About Group Health Insurance
individual retail health insurance?
GROUP INDIVIDUAL
Pre-existing
Diseases
Coverage
Yes No
Tax Beneﬁt
Year on your
cost escalation
Can be booked under
business expenses.
However the input credit
on GST is not applicable.
No increase in premium
because of the claim. The
only increase in premium
because of age slab.
Under section 80(D)
Increase in premium
depends on previous
year claims
experience for current
insurer (i.e. claim ratio)
INSURANCE
7
is the minimum numbers in the group required to be
considered for group health insurance by India Insurance
Regulator (IRDA).
Cost of group health insurance can be considered as business
expense and hence corporate can save Income tax on the pre-
mium. However, this expense does not come input GST credit.
Pre-existing diseases can also be covered under the plan
which are not covered under an individual policy.
In group policy, the additions and deletions of employees are
done on a pro-rata basis.

These are one of the most primary and big-ticket employee benefits/welfare benefits that an employer can
choose to provide to its employees and mostly employers fund the hospitalization via an insurance policy, which
is primarily an indemnity product! The health coverage may cover just the employee or spouse and children.
Some firms cover the employee’s parents as well. As critical and important this benefits it the administratively this
is a big challenge to initiate, execute and sustain.
Elements for designing and executing your own program
The whole customer experience in group health insurance is driven by a triad between insurer, Third party
administrator and insurance broker. Insurance broker is the balancing or the administrative force on TPA and
insurance company’s customer promise and delivery standard. Apart from just a watchman or external
administrator the insurance broker can offer great amount of value addition in the whole experience and the
administration of group insurance. Before you can compare your Premiums and Benefits, you need to know why
you need to choose the right insurance broker. Some of these key value facets are explained herewith-
Structuring the Group Health Insurance plan
1 Select right insurance partners
2 Figuring out the numbers
Employee Communication
3
4
Experts led customer service5
Leverage technology
7

The Insurance brokers represents their clients to Insurer and not the other way around. They are bound
by the Insurance Regulator to perform as per the terms laid to them. They need to protect the interest
of client (you) at every step of insurance, be it buying or claims assistance.
Now, because they are experienced and have worked with various clients, they know the best practices
and hence can help you set up the right insurance program for your organisation with an ease, saving
your time and effort and other nitty gritties!
Typically, you should expect the following from any employee benefit Insurance broker:
By working with an authorized Insurance broker like Ethika, all these check points can be taken
care of, and you will end up saving your time and in return get a selection of quotes from top
insurance companies.
• Personalized quotes from a broad selection of top insurers and Side-by-side comparisons of
plan rates and benefits
• Special online platforms for enrollment of employees
• Personal and unbiased claim assistance
• Consulting on Benefit Strategy including benchmarking and alignment to corporate benefit
• Audit of existing benefit structure with recommendations for optimisation, consolidation, plan
design and cost containment
• RFP Management and in-depth carrier analysis from financials to account management to
support services
• Recommendations on specific benefits or unique situations
• Renewal analysis and negotiation and support on escalated questions or issues
• Strategy to minimise the health risk by increasing the employee engagement
Basic Covers
The range of benefit that can be included in this simple term of a Group health insurance can range-
Number of members covered-
a. Self
b. Self+ spouse
c. Self+ Spouse + Children
d. Self+ Spouse + Children+ parents
Select right insurance partners
How to Choose Right Insurance Broker
1/
Figuring out the numbers2/

Extent of benefits
a. Maternity benefits
b. Dental benefits
c. OPD benefits
d. Pharmacy reimbursements
e. Room cost capping
f. Health check benefit
g. Domiciliary care reimbursement
As with all things, Indian employer health benefit is shifting from that usual traditional all-expenses paid
inpatient indemnity to other ways of risk or cost sharing, like high deductible plans or co-pay insurance
plans.
The sum assured varies amongst employers but usually, a minimum sum assured is above Rs 200,000 to
each employee. Some corporates keep a provision for a corporate buffer amount for discretionary cover-
age if an employee exhausts the sum assured. Various combinations of benefit limits and privileges in
room types are included in the benefit design at various levels of staff. With rising medical inflation,
improved access to healthcare and rich coverage in benefits, claim costs have been rising steadily.
While taking the policy one must ensure with its broker or insurer that the below covers are provided:
• 30 Days waiting period is waived off
• 1,2,3 years waiting period is waved
• Pre-existing disease waiting period is waived
• 90 days new born baby waiting period is waived
• 9 months maternity waiting period is waived
• Pre and post hospitalisation cover are provided
• Maternity is covered
Statistics shows that more than 35% of the corporates offer cover equal to
or more than 3 Lakhs as sum insured. In India 85% of the ailments get
treated within 3 lakhs sum insured. Apparently, this seems to be an
adequate cover.
70% of the Employers in IT and ITES industry provide
Group Mediclaim cover to employees.70%
95%
95% of those Employer provide Pre-existing Coverage
under group Mediclaim.
CLAIM RATIO- THE CLAIMS RATIO
IS THE PERCENTAGE OF CLAIMS
COSTS INCURRED IN RELATION
TO THE PREMIUMS EARNED. THE
CLAIMS RATIO IS EQUAL TO THE
CLAIMS RATE DIVIDED BY THE
RISK PREMIUM RATE.
9

Sum insured per person
Demography of group
Coverage and add-on offered in the policy
Claim ratio
Premiums Indian market are very competitive compared to world market and have been driven more by
prior year premiums rather than claims experience. As a result, organizations/employers have had a good
ride, as they were able to pass the risk to insurance companies and enjoyed a great range of benefits
without getting impacted by high claim ratio. (The ratio between the total claims made by the group at the
end of the policy vs the premium paid by the corporate without tax.). Insurance companies have been
facing claim ratios of more than 120%.
Actions have consequences- since most of the coverage is the indemnity, insurers have tried to control
costs by various methods like, identifying fraud investigation, network restrictions, and putting sub-limits.
Need of the hour is to focus on the managing the indemnity care where the insurers can manage the
healthcare delivery. With the unavoidable rise in premiums in the near future, the employers must explore
some alternate strategies like:
High deductibles: Deductibles means the cost which the insurance company will not pay. The claimant
is supposed to bear that cost and over and above that falls under the insurance coverage.
Stop-loss arrangements like co-payment, disease wise caps.
Introduction of waiting periods for pre-existing diseases, etc. (benefits restriction).
Flip side of applying these measures is if not communicate properly these changes in policy terms are
perceived negatively by employees. Consequently, many employers either simply bear the cost of an
increased premium year after year or face the risk of diminished employee satisfaction. There is an urgent
need to develop long-term measures and metrics which would help in containing costs and ensuring the
effective management of health benefits.
Companies should consider a flexible benefits strategy and the kind of structure that would be most
appropriate in the context of employee satisfaction, expense control, and revenue growth.
What impacts your premium ?
WHEN OPTING FOR A NEW PLAN, ONE OF
THE MAIN CHALLENGES PEOPLE FACE IS
UNDERSTANDING HEALTH INSURANCE
TERMINOLOGY. YOU’LL FIND A GLOSSARY
OF HEALTH INSURANCE TERMS IN THE
RESOURCES SECTION OF OUR WEBSITE
ONLINE @ WWW.ETHIKA.CO.IN

Certain restrictions can be built into policy to avail the optimize the premium to coverage benefit of the policy.
Room Rent Clause: Generally, in this clause room rent is restricted by linking limits to the percentage of sum
insured. Instead, it would be appropriate to customize room rent clause for considering the private room or
sharing room.
Co-payment Clause: This clause brings prudence in employees. Employees will question hospital for treatment
and charges, since certain amount will also be paid out of pockets of employees. Percentage of co-payment by
employee shall be nominal. A normal co-payment of 10% of claim can reduce the claims of company by more
than 15% to 20% at the end of year.
Disease Wise Cap: It is recommended that a limit of average cost of treatment is applied on the most common
ailments like Cataract, Piles, Hernia, Hysterectomy, Gall Bladder, Kidney stones etc. This way claims can be
minimized and those who need financial support for serious ailments which create burden on the pocket get the
necessary support.
Maternity Cap: Normal limit for maternity cover is 50,000 per claim both for normal and C-section delivery. An
appropriate segregated limit will also save the claims
Deductibles: To restrict small value claims and thereby reduce the premium of the next year deductibles clause
must be appropriately designed. It’s a clause where a flat nominal amount of say Rs 1000 or Rs 2000 is applied
as deductibles per claim. However, it is advisable to apply this clause to those claims where co-payment is not
applied
Preferred Hospital Network: Some of the insurers have a pre-negotiated tariff with some of the top hospitals
which is less than the average cost of the treatment elsewhere. Overall, claims can be drastically brought down
by encouraging members of the policy to opt for the preferred hospitals, which can be encouraged by removing
the co-payment or the deductible clause with respect to the treatment in the preferred hospitals. Also, the com-
pany can work with the insurer or its broker to arrange the cashless treatments in the preferred hospitals. Increas-
ing the room tariff limit in the preferred hospitals is also one more way of encouraging the employees to opt for
preferred hospitals.
How to exercise claim control
The room rent restriction is probably the most misunderstood clause in the
group health insurance policy. If the room rent is restricted to Rs.3000 per day
in the policy and the total bill is let’s say Rs.1 lac after three days of admission
with room rent of Rs.5000/- then normally one will assume the claim payable
would be Rs.94000 after deduction of Rs.6000 ( 2000*3 days). But the claim
payable is the proportionate between the actual room rent of Rs.5000 and
room rent eligibility of Rs.3000. In this case it is 60% ie.
60000/-. Hence if not communicated properly the employee
will be shocked to see this kind of reduction and will have a
negative opinion on the overall benefit program of company.
11

Outpatient treatment can be covered: There are insurers who offer claims for outpatient treatment as well.
However, one must know that premium for outpatient treatment is as high as 80% of the sum insured.
Hence, it is advisable to review overall benefits offered before opting for outpatient treatment and it should be
opted only in the rare cases.
Internal congenital exclusion to be waived off: This is a very important aspect to be considered while
negotiating the premium. Normally this exclusion is a part of the standard exclusions. So, it is important to
specifically exclude while negotiation. (For any queries on Internal Congenital exclusion, please feel free to
reach Ethika Insurance Broking Private Limited)
Corporate Buffer: Corporate buffer clause is very helpful in high value claims arising out of the accidents or
any major illness (including pre-existing). This can be limited to any member of the family or with per incident
limit or restricted to only critical illness.
Worldwide coverage: If your employees frequently travel to other countries, you can opt in for a worldwide
coverage.
Other Clauses to be noted
Late submission clause
Late intimation clause
Customary and reasonable charges
Short scale additions and deletions
Terrorism Cover: It is better to ensure that the policy is clear on the hospital admission arising because of
any unforeseen terrorism attack.
Premium payment in installments: Some insurers allow the option to pay the premium in two or four
installments.
Three year policies: Some insurer allow the possibility of fixing up the premium for three years, to avoid
negotiations every year.
Portability from group to retail: Some insurers allow the possibility of porting the benefits to retail policy
when the employee resigns. This will enable him not to loose the continuity benefits when he shifts to a
individual plan.
Extra covers that can be added
DO YOU KNOW?
SOME OF THE INSURERS STARTED REJECTING THE CLAIMS IF
THE CLAIMS HAVE BEEN SUBMITTED LATE AND WHILE MOST
OF THEM STARTED DEDUCTING THE CLAIM AMOUNT BY 10%
IRDAI HAS COME OUT STRONGLY FOR THIS CASE ON THE
INSURERS. IN A RECENT CIRCULAR THEY HAVE ADVISED ALL
THE INSURERS TO REFRAIN FROM REJECTING THE CLAIMS
OVER LATE SUBMISSION OF CLAIM.

Less than 8% of employees avail the Insurance benefits. Many of them may not be even aware that such
benefits are available, that’s why proper employee communication is important, it increases the overall
perceived benefit among employees about the benefit program offered by employer.
The Importance of Employee Benefit Communication is “The “Most important part of a company’s HR
function. The employees should be aware of the overall compensation and not just the cash value of the
salary! That’s where benefit communication plays its part by helping the employees to understand the value
of their employment.
A good, thought through employee benefit communication program is important as it tells the employees
what options are available, what to choose wisely, what mistakes to avoid, like not selecting the plans that
will later lead to increased out of pocket costs putting burden on their pockets.
When your employee is having questions about the claims, most of the Insurance brokers, direct them to
contact the health insurance company’s customer service department or third-party administrator. If
employees feel that their concerns are not addressed, only then they will contact your health insurance
broker for help (if you worked with one) and because of his or her relationship with the health insurance
company, your broker can help you understand how your benefits work and may be able to suggest ways to
clear up billing disputes.
Outsourcing the management of your Benefits program has several advantages. Crucial personnel need not
be burdened with additional, unfamiliar responsibilities and your employees are assured of timely,
professional assistance and compassion. Most of the Insurance Brokers provides the above service.
Ethika believes in ‘serve to care and serve with compassion’. We are sensitive to claimant’s losses and his
expectations from an insurer. Our exposure to diverse cases of claims redressal has shown us that each
claim is unique in terms of conditions and requirements. We direct all questions or concerns raised by your
employees to us and therefore, are in better position to have control on the process.
Leverage technology-Most of the Insurance brokers including Ethika offer you a complimentary enrollment
tool so that you can manage the enrollment period* online seamlessly and conveniently. With an online
platform, the new employee can be onboarded. The premium for additions and deletions is generally
calculated on prorated basis and the credit or debit is made in the CD balance account. one can see the
balance anytime online for their policies. Online tool helps in managing the policies, adding or deleting the
members without any hassle just with a click !
EMPLOYEE MAY RECEIVE CONFIRMATION OF APPROVAL FOR THE
COVERAGE RIGHT AWAY, BUT THE INSURER ENDORSEMENT AND
CARD USUALLY TAKES ONE MONTH. IN SOME CASES, IT MAY
TAKE LONGER. REMEMBER THAT THE ENDORSEMENT IS NOT
SENT TO INSURER RIGHT AWAY AFTER APPROVAL. IF EMPLOYEE
ENROLS BY THE 15TH DAY OF THE MONTH, THE ENDORSEMENT
COVERAGE DETAILS WILL BE SENT ON THE FIRST DAY OF THE
NEXT MONTH. THE ENDORSEMENT IS DONE ONLY WHEN THERE
IS ENOUGH BALANCE IN ADVANCE PREMIUM DEPOSIT ACCOUNT
MAINTAINED BY INSURER FOR THE EMPLOYEE.
Leverage technology3/
Employee Communication4/
Experts Led Customer Support5/
13

In India, only 50% of the employers include parents of the employees while covering them under Group
Insurance. Out of these 50% employers who include parents, 25% of them collect premium from employees
and act only as a facilitator by arranging group policy. Only 25% of employers bear the cost of the premium.
Premium payable is decided based on many factors and most important among those is previous year
claims. With people who are aged and with the pre-existing disease it is very natural that the frequency of
claims will be high and most of the times intensity, in other words, the amount of claim is also high. So,
should the employer forget about including parental insurance as part of employee benefits? The answer is
a “No”. A strategic approach towards designing the group policy will help in bringing down premium cost
and at the same time extend the benefit of group insurance to the parents of the employee.
Case Scenarios –
Following are configurations and scenarios to be considered while designing the structure of group
insurance policy to minimize the premium cost.
Case 1: Where employer bears the cost of the premium and is not collecting
any amount from the employees.
Employers who are including parents of the employees in group insurance and paying premium from their
pockets shall take following steps while designing the policy. They must focus on ensuring the claims are
not very high in the current year so that next year the premium will not be high.
Exercising sub limits on employee cover: The employer must work with its broker to design the policy in
such a way that the employees should take standard/benchmark benefits and not luxury benefits from the
policy. The policy must contain in built limits with respect to diseases. It should include most common
ailment intervention like cataract surgery, piles surgery, hernia surgery, hysterectomy, Hydrocele correction,
Joint Replacements, Gall bladder stone surgery, appendicitis surgery, etc which are not costly. Also,
insertion of a clause that only average standard cost is allowed and anything above that will not be allowed.
Eg: For day care/ short stay procedures, like cataract, BPH surgery, for employee or the dependents, it is
important to consider that the treatment cost can vary significantly depending on the facility where it is
INSURING EMPLOYEES PARENTS

undertaken. Due to lack of standardization of cost across hospitals, a cataract surgery in a private hospital
will cost around 10,000, however same procedure will cost 20,000 in a multispeciality hospital. So, in this
case, only 10,000 will be allowed on submission of actual bills!
Setting a lower limit on claims: The policy must be structured in a way where employees can claim
expenses which are painful to the pocket and not for the sake of claiming. The employer must set a mini-
mum limit for seeking claim say 3,500/- this way all small claims below 3,500/- will be curbed and employ-
ees will not be visiting as inpatient just for the sake of claiming.
Hospitalization in preferred hospitals: Just setting up of minimum limit of claim is not enough. There
can be a possibility that hospitals will misrepresent and join hands with employees to fetch money. There-
fore, it’s important to include a clause that encourages employees to avail services in preferred hospitals.
A clause stating that employees who are availing services in preferred hospitals will get 100% claim and
those who are availing at other hospitals will be getting only partial claim say 70% of bill amount. It will
encourage employees to avail services in preferred hospitals and if employee chooses other hospitals, it will
reduce the claim to 30%.
Preferred hospitals are those hospitals that do not have the tendencies to overcharge or inﬂate the bills or
misguide the patients to draw money. Employer as a company can also work with different hospitals to get
discounted rate of consultation in return for adding their hospital in preferred list. A list of preferred hospitals
must be added to the policy.
An employer can take service of an insurance broker to get these clauses placed in policy and the claim
settlements.
For any query in this regard please feel free to reach Ethika Insurance Broking Private Limited
Case 2: Where employee bears the cost of premium fully or partially
In a scenario where the employer does not want to bear the cost of premium fully or partially it can act as
facilitating vehicle.
Run effective campaign to enroll: Company as an employer must run a campaign to encourage most of
its employees if not all, to enroll for group insurance with parental insurance.
The campaign must be driven to inform the beneﬁts of such enrollment and how the company is support-
ing by choosing the best broker, including appropriate clauses and dealing with the best insurance provider.
Such campaign if lead by CEO or HR head will have more positive impact on the employees. Certain
insurance brokers also create and run a campaign for its clients.
Ensure portability of policy: Employer while negotiating with insurance provider must ensure that the
employee who is paying the premium must be allowed to carry forward the policy when he is moving to
another company. This facility of carrying forward is called portability of policy.
Portability of policy can be a group to an individual or a group to a group. To know more about portability of
policy feel free to reach Ethika Insurance Broking Private Limited.
Care for your parents with no worries of medical expenses- Reach out to us to know more about parental
insurance.
15

Case 3: When neither case 1 or case 2 is possible:
Facilitate senior citizen health insurance:
It’s well said that if you can’t help by contribution, you can still help by giving an idea or a direction. Similarly,
employers who can’t afford to support ﬁnancially at least, can support their employees by arranging a facility
to take the right decision. If parent’s health is taken care of, employee’s half the diversion is taken care off.
In case an employer chooses not to spend any amount on medical expenses of employee’s parents, it can
at least encourage its employees to take senior citizen health insurance policy for their parents. An employer
on the behalf of its employees seeks quotes for such policy and with the help of its insurance broker,
support its employees to get the best insurance plan.
There are various plans and beneﬁts offered by many insurers. Some of the plans are specially designed for
people suffering from ailments like high blood pressure, diabetes, obesity etc.,
The main challenge is that the individual Health insurance is only for healthy people. One must declare the
family history and current health conditions while taking the policy. The insurer, then decides to cover or
reject the proposal. Even if they decide to cover the existing ailments, it gets covered after certain waiting
period. This makes tough for senior citizens to get the appropriate health cover.
Senior citizen health insurance policy is designed to serve the health needs of senior people who have
crossed 60 yrs. of age. These policies cover hospital charges and medical expenses incurred due to sick-
ness or injury due to an accident. More over in senior citizen health policies the waiting period set for pre-ex-
isting diseases is also lower than the regular individual health policies.
Certain Banks also offers Group Mediclaim policies for its customers and the premium are relatively lesser
than the normal retail policies. Employers can tie up with banks and offer those policies to the employees.
More over employees can claim additional tax deductions under section 80D for the premium paid for the
health policy taken for parents also.

Section 80D benefit:
A deduction of Rs. 25,000 can be claimed for insurance of self, spouse
and dependent children. An additional deduction for insurance of
parents is available to the extent of Rs 25,000 if they are less than 60
years of age or Rs 50,000 (has been increased in Budget 2018 from Rs
30,000) if parents are more than 60 years old. In case, a taxpayers age
and parents age are 60 years or above, the maximum deduction available
under this section is to the extent of Rs. 100,000.
Example: Rajesh’s age is 65 and his father’s age is 90. In this case, the
maximum deduction Rajesh can claim under section 80D is Rs. 100,000.
From FY 2015-16 a cumulative additional deduction of Rs. 5,000 is
allowed for the preventive health check up to the individuals.
OTHER BENEFIT POLICIES
With employment opportunities galore and an open war for talent, employers are trying to find innovative
ways to win over the 60% of the population that is under the age of 25. Indian companies historically have
provided-employee benefits such as health coverage, leave benefits and statutory retirement programmes.
These were fairly standard in old economy sectors dominated by manufacturing firms, engineering compa-
nies, government-owned enterprises and others. They were targeting a generation which believed and
adhered to the concept of lifelong employment. However, as economy has opened up and more cross
functional career options are available; HR managers have started to develop flexible yet relevant employee
benefits to attract and retain employees. A few of the employee benefits that are commonly offered in India
are listed below:
Employees’ Provident Fund
A statutory, hybrid, interest guarantee retirement plan administered and supervised by a government entity
called the Employees’ Provident Fund Organization (EPFO). The defined contribution portion of the plan
allows for an employee and an employer contribution. The employees contribute up to 12% of basic salary
with an option of paying an additional 12% contribution. The employers also pay 12% of basic salary, out of
which 8.33% is used to fund the pension portion of the provident fund, called the Employee Pension
Scheme. The remaining 3.67% is deposited into the employee’s Provident Fund account. Interest is credited
at a rate that is announced by EPFO each year in consultation with the government. Employers pay an
additional 1.61% to EPFO partly as an administration charge and partly to buy life insurance for the employ-
ees.
The general view of the market is that EPFO has not provided a satisfactory service to its members.
Consequently, companies, certain classes of employee and even specific employees are trying to take
advantage of a clause in the governing legislation to opt out of the plan. However, such applications must be
approved by EPFO, and this is a very cumbersome process. If a company does overcome the administrative
obstacles and opts out through a private retirement trust, the trust must match the annual interest provided
by EPFO. It must be noted that the interest credited by the EPFO is gross of charges and the employer pays
80D
17

D those charges through an additional 1.61% levy. In a trust fund, the investment management fees will reduce
the interest that can be credited to employee balances. This makes the interest credited by the private trust
very difficult to achieve without taking an investment risk that the employer will have to underwrite. These
conspire as the major deterrents for the employers setting up the private provident fund trusts.
Private plans
There are several types of retirement plans available in India, depending on benefits offered:
Superannuation plans:
Superannuation plans are optional retirement plans that are often offered to the selected employees. They
can be defined benefit or defined contribution in the nature. However, they are not very popular with the
because they are not portable, have a very long vesting period and the funds cannot be withdrawn before a
certain age. Indian companies use this product as a long-term incentive benefit for middle and senior
management. Funding for these products is usually through insurance products, and the insurance
companies take care of the administration, compliance and investment management. Recently, the
insurance regulator issued instructions because of which new members may not be admitted until the
regulator has announced new regulations governing the plans. Once those regulations are released, the
insurers will need to restructure their products to be complying before the employers can offer the benefits to
new employees
Pension plans:
Legacy pension plans in India are limited to certain industries (like banks, mines, plantation, railways and
others) or were created in other cases because of union pressures. Very few private companies sponsor
pension plans in India.
NPS
One of the significant changes that are taking place in relation to the retirement benefits is the introduction of
the National Pension Scheme (NPS). Let’s understand further!
NPS is a universal defined contribution retirement scheme, funded by employee contributions only. However,
the NPS regulator has announced an option described as a payroll deduction, whereby the employer can
make contributions on behalf of employees and claim them as a business expense. Meanwhile, the
employee may also claim a personal tax exemption for the contribution made by the employer on his behalf.
The deduction is available only up to a certain limit specified by the income tax authorities.
Types of NPS:
• Tier I: Mandatory, a basic account with limitations of withdrawal as follows:
1. Before attaining 60 years (Before retirement): Only 20%of contribution can be withdrawn while the rest
80% must be necessarily used to buy an annuity from a life insurer
2. After attaining 60 years (After retirement): 60% contribution can be withdrawn and the rest 40% must be
used to purchase an annuity from a life insurer

LIC pension fund
HDFC pension management company
ICICI Prudential pension fund
Reliance capital pension fund
SBI pension fund
Kotak Mahindra pension fund
DSP BlackRock fund
UTI retirement solution retirement fund
You can change your investment choices once a year!
You can even change your scheme and funds manager
as well.
Tier II: Voluntary saving scheme and withdrawal can be limitless
Who can join NPS and what is the process?
Indian citizens aged between 18-60 years can join NPS. One need to comply with know your customer
(KYC) norms! NRI’s can also join NPS, however, the account will be closed if there is any change in
citizenship status!
Several financial entities, private and public banks and other authorized branches are enrolled as a point as
presence (POP), at these designated places, anyone between the age bracket of 18-60 can go and open an
NPS account! To access the list of all the authorized POP’s near you, you can visit the website of the
Pension Fund Regulatory and Development Authority (PFRDA)
You need to fill in the registration form and submit the necessary document (ID’s) at the POP
After enrollment in NPS, a 12-digit card is Issued to every account holder which is called a Permanent
Retirement Account Number (PRAN)
You cannot open multiple NPS accounts, limited to only 1 account per person
Management of funds in NPS?
Pension funds manager registered by PFRDA manage the money invested in NPS. The list of fund
managers is as follows:
Investment options in NPS:
NPS offers two options-
Active:
Where in the investor decides where the money should be invested from the following option (Either one of
the following or a combination)
1. Asset E: 50 % investment in stocks
2. Asset C: Investment in fixed income instrument other than government securities
3. Asset G: Investment in the only govt. securities
Auto choice:
Default option where the money is automatically invested in line with the age of the scheme holder.
19

Key facts:
An employee’s own contribution is eligible for a tax deduction up to 10% of salary- Under section 80 CCD of
income tax act with a ceiling of 1.5 lakh under section 80 C and 80 CCE
NPS is a pension scheme and you are expected to stay invested until your retirement and in case you
decide to opt out before 60 years, you can only withdraw only 20% accumulated, rest 80% is used to buy
an annuity
If the scheme holder dies before 60 years, the entire accumulated amount will be paid to the
nominee/legal heir
You can withdraw the money by submitting a withdrawal application to the POP along with all the
relevant document
ESIC
Employee state insurance corporation (ESIC) is a comprehensive insurance system that safeguards the
employee is situations like disability, sickness, maternity as well as in case of the demise. All the benefits
administered are in line with the International labour organisation. ESIC administers the ESI (Employee state
insurance).
Benefits offered by ESIC
The contribution of the employee is as per his/her ability; however, medical benefit is based on the need! ESI
provides the medical care to the self and the family from the day of entering the insurable employment.
Various benefits provided are:
• Sickness benefit
• Medical benefit
• Maternity benefit
• Disablement benefit
• Funeral expenses
• Benefits to dependents
ESIC also provides monthly unemployment allowance for a maximum of 24th months in case of involuntary
loss of employment/permanent invalidity due to non-employment injury.
Current coverage includes the following:
• Non-seasonal factories employing 10 or more persons- under
Section 2(12)
• Shops, hotels, restaurants, cinemas, road motor transport undertakings,
newspaper establishments employing 10 or more persons- under
Section 1(5)
• Further, under section 1(5), the scheme has been extended to private
medical and educational intuitions employing 10* or more in certain
states/UTs
• Existing wage limit for coverage is Rs 21000/month.
Apart from the worker, the care is also provided to the immediate
dependants!
Who is covered?

Group Personal Accident Insurance
What is a Group Personal Accident Insurance?
Personal accident insurance covers the risk of bodily injuries arising directly from an accident
that was caused by external, violent and visible means and results in death or disablement
either permanent or temporary.
Group Personal Accident policy can be taken over and above a WC policy to provide extra
benefit to the employees as compensation payable under WC is quite less. It is a benefits
policy and cannot be a substitute for a WC policy.
Why it is necessary?
Unfortunate accidents have a knack of throwing the financial footing of a whole family out of
kilter for a long time and the number of people getting injured in a traffic or other accidents is
staggering. Being a breadwinner of the family, an accident can create serious financial
problems by ruining the comfort and security one works so hard to provide. That’s why it is
important to be well prepared for all these situations. One way to secure your financial and
mental outcome is to go for “Personal accident insurance”.
The employee and the employer pay their mutual yet mandatory contribution in the scheme.
The employer pays a certain percentage of the wages being paid to the employee whereas the employee
pays the percentage that is lower than the employer.
Currently, the employee’s contribution is 1.75% of the wages whereas the employer’s rate is 4.75% of the
wages being paid. In certain new industry sectors added, the rate paid by the employee is 1% whereas the
employer pays 3% for the first 24 months of the employment.
The contribution is generally collected by the employer after deducting the employee contribution from the
paid wages and total collection (Employee + employer) is paid to the ESIC by the mid of the coming month.
The ESI is now notified in 526 districts in 34 states and UTs, yet to be implemented in Arunachal Pradesh
and Lakshadweep.
How it works:
21

Who can buy it?
It is a comprehensive cover for small as well as large companies, irrespective of the size (Big/small),
it can be customized to meet the requirements of any group.
Key points:
• Benefits the employees in case of any unforeseen event
• Payable if the insured dies or sustains any bodily injury resulting solely and directly from accident caused
by external, violent and visible means whether due to employment or otherwise
• Will not come into force in case of occupational diseases
• The employer can choose the sum insured which can be a multiple of the salary or a graded cover
according to the designation.
• PA is a benefits policy and not under any Act, compensations are benefits offered to the employees
• Not payable if the workman was under the influence of drinks/drugs or regulations i.e. negligence
Coverage offered?
Accident death:
In case of the demise after an unfortunate accident, the principal amount is paid by the insurer.
Disability (Total/permanent partial):
Insurer pays the compensation up to sum assured in case if the insured is partially/permanent
disabled in an accident and continues to be so till 1 year.
Reimbursement of charges:
1. Ambulance charges: In case the insured is met with an accident and is taken to a facility by an
ambulance, the ambulance charges are reimbursed.
2. Charges for transportation of mortal remains: Charges are reimbursed in case the body is to be
transferred from accident site to the health care facility/residence/crematorium ground.
Weekly compensation:
Insurer pays a weekly compensation to the policyholder in case he/she is fully disabled for a
temporary time in an accident.
Compensation for broken bones:
Policy clearly states which bones are covered, and based on that, the policyholder is given a lump
sum account.
What is not covered?
• Pregnancy/childbirth
• An injury caused by the influence of drugs/alcohol
• Natural death
• An injury caused by radioactivity
• War/nuclear unrest
How does the claim process work?
Claim processing is divided into 3 parts:
Need to inform the insured about any sustained accident
The claim is registered, and the insurance company send a checklist of documents that
need to be submitted
Intimation, processing, settlement!

Documents needed:
In case of disability:
1. Claim form
2. Police FIR
3. Related medical reports
4. Disability certificate by attending health practitioner
along with a statement
5. Sick leave certificate by the employer
Documents needed:
In case of Death:
1. Claim form 2. Police FIR 3. Post-mortem report 4. Death certificate 5. Salary Slips
6. Letter from HR 7. In case the payment is to be made to the beneficiary: Notarized affidavit or
succession certificate
Approved
A cheque is sent
to the insured
Rejected
A rejection letter is sent out
to the insured/HR/Contact person
After submission of the required documents,
the claim is processed, it will either be:
Group Insurance Scheme in Lieu Of EDLI
EPF EDLI
The average monthly wages drawn (subject to a maximum of Rs 15,000),
during the twelve months preceding the month in which the employee
dies, is multiplied by 30 times plus 50 percent of the average balance in
the account of the deceased in the provident fund during the preceding
12 months or during the period of his membership, whichever is less.
The minimum payable will now be Rs 2.5 lakh while the maximum will be
Rs 6 lakh.
The scheme is linked to the EPF and EPS savings scheme.
All the employees who subscribe to the EPF scheme
automatically get enrolled in the EDLI scheme.
What is EDLI?
The EDLI scheme was launched in 1976, and is available to all employers who provide EPF provision to
their employees. The scheme offers life insurance coverage to the employees.
The contribution @0.5% of each employee’s salary is payable by the Employer to the Provident Fund
Authorities.
23

The Better Alternative
The employer can opt out of the scheme under Section 17 (2A) only if it has opted for a better insurance
policy from a approved Life Insurance company for its employee.
Advantages To The Employer
The premium payable by the employer is usually less than the total contribution being paid by the employer
to PF Department, particularly when the salary level is high and average age of the group is low.
Settlement of claim is quicker; Insurance company requires only the death certiﬁcate and the Claim Form
from the employer.
Claim amount received by employee is tax exempted.
Premium paid by the employer is treated as normal business expenses for Income-Tax purpose.
Premium is determined by the geographical location, nature of business, age of employee. Usually the
premium is between 0.5% to 1 % of sum insured.
Advantages to the Employee
Each employee is covered for a sum assured ranging between 5,000 to 2,00,000 depending upon the
current salary and service put in from day one irrespective of the actual balance in the Provident Fund.
Alternatively every employee/ worker can be covered for a uniform sum assured which will be decided
depending upon the group size.
Claim amount can be ﬁxed at 6.1 lacs without linking it to his salary. Where as in earlier case, the employee
was getting anywhere in between 2.5 lacs to 6 lacs depending on his salary.
Steps to Introduce the Scheme
Put up notice for the knowledge of the employees that you are going in for LIC’s Scheme in lieu of EDLI.
Apply to the Regional Provident Fund Commissioner under Sec.17 (2A) of the E.P.F. and M.P. Act 1952 to
exempt you from EDLI Scheme. The application should be accompanied by the prescribed requirements
including the Rules of the Proposed Group Insurance scheme. Central PF Commissioner has authorized the
R.P.F.C. to grant exemption from the 1st of the month in which the application for relaxation is submitted.
Insurance company also offers necessary guidance to the employers for seeking relaxation.vv

Gratuity, a beneﬁt payable under the “The payment of Gratuity Act”, is the amount paid by the employer to
an employee who has been working for 5 or more years in a company/organisation. Gratuity can also be
paid before the completion of 5 years in the following cases:
• There is a demise of the employee
• Employee disability due to any disease or accident
How does Gratuity Payment Work?
An employer can take a group gratuity plan from an insurance provider or choose to pay the employees
from his/her own pocket!
For an organisation to be covered by the payment of Gratuity Act, it has to employee at least 10 people on
a single day in preceding 12 months. The organisation will remain covered thereafter even if the number of
employees falls below 10 as well.
Gratuity
25

How to calculate Gratuity?
Gratuity is calculated by the formula:
(15 X last drawn salary X tenure of working) divided by 26
Here last drawn salary means basic salary including dearness allowance.
To make it simple,
• An employment for 6 years 8 months will give the gratuity amount for 8 years and
• An employment of 6 years 2 months will give the gratuity for 6 years!
What is the approach a company can adopt in funding
Gratuity?
Companies need to recognise a liability in their financial statements with respect to the gratuity accrued to
their employees. The liability is calculated by carrying out an actuarial valuation as per the provisions of AS
15 or Ind AS 19. Though a liability is recorded in the financial statements, currently companies are not
required to set aside funds to back these liabilities. Therefore, many companies run ‘unfunded’ gratuity
schemes where there are no backing assets. A scheme where funds have been set aside is referred to as
a ‘funded’ scheme.
The current regulatory framework in India does not prescribe the amount to be maintained and companies
can choose to maintain a level of funding that they are comfortable with. Companies are also free to
choose the amount of contributions they want to make into the fund.
Funding with an insurance company (an insurer) usually involves purchasing a special insurance policy,
generally referred to as ‘Group Gratuity Scheme’ or a similar name. This contract works as follows:
1. An employer needs to pay a regular premium to the insurer and in turn, the insurer agrees to pay
gratuity to the employees when the need arises (When employees leave the service-Retirement/Resigna-
tion/Demise)
2. From the premium received, the insurer deducts ‘risk premium’ to ensure something called ‘future
service gratuity’ (see below) and the balance is ‘contribution’, which is deposited to the employer’s gratu-
ity fund.
3. The gratuity fund is like a mutual fund or a bank account from the employer’s perspective. The fund
belongs to the employer (to the gratuity trust, to be precise), and the insurer manages the fund on behalf
of the employer and administers the payments.
4. One important thing to understand is that the insurer pays gratuity from the employer’s gratuity fund.
Therefore, any shortfall in the fund will need to be met by the employer, not the insurer.
That means for the number of months in last year of service, anything above 6
months is rounded off to the next number whereas anything below 6 months is
rounded off to the previous lower number. Still, an employer can pay more
gratuity to its employee however, the amount cannot exceed more than 20 lac,
an amount restricted by the Gratuity Act! Employees need to nominate someone
to receive a gratuity in case of any unforeseen event (like Demise) by filling the
form “F” at the time of joining the organisation.

Steps to transfer the liability to the insurer?
Step 1: Create a Trust to administer the gratuity scheme
The employer first creates a trust and appoints trustees to administer the gratuity scheme. However, it may
be noted that the trust may or may not be created by the employer. Therefore, under the Policy, either
Trustees or the employer can be a Policyholder.
Step 2: Contribution based on actuarial advice
The policyholder makes an initial and annual contribution to insurance company towards gratuity liability,
which can be paid at the time of issuance of a policy or during the 1st 5 policy years in not more than five
instalments.
These payments would normally be based on the actuarial advice to the Trustees by an Independent
consulting actuary (who is not employed by the insurer).
Step 3: Choose the Investment Strategy
The Policyholder can invest the contributions in any of the investment funds managed by Insurer. Upon
choosing the fund, a unit account is opened and managed for the policyholder in which units are allocated
following the receipt of contributions and cancelled for the purpose of paying gratuity benefit and charges.
Units will be deducted from the unit account to pay out the policy charges and the gratuity benefit amount
(other than the life insurance benefit) determined by the trustees.
A member on either leaving service due to retirement/ resignation or demise/disability during the service, or
any other such event that may terminate the employment after five years, the Insurance company will pay
the benefit by redeeming the units in the investment funds to pay the gratuity benefit.
The condition of continuous service of five years is not necessary if the termination of employment is due to
death or disablement. The contributions and benefits under the product will be applicable as per scheme
rules.
Please note that the maximum liability of the company shall be limited to the unit account value of the policy.
By law, the gratuity amount is calculated as 15 days of salary for each year of service. however, if an
employee dies in service, the gratuity is calculated as 15 days of salary for each year of ‘potential’ service till
retirement. Therefore, in case of demise, gratuity amount is calculated not just on past service rendered by
the employee, but also ‘future’ service that the employee could have rendered if he or she had worked till
retirement. Therefore, the employer is liable to pay an extra 15 days of salary for each year of future service.
The extra payout is insured by paying a risk premium and in case of death is called as future service gratuity
By ensuring future service gratuity, the employer transfers the liability to the insurer. The liability for past
service gratuity stays with the employer.
By getting into a contract with an insurer, an employer can avail the following benefits:
• Contributions paid to an approved gratuity fund are tax-deductible up to a certain limit
• Investment income earned in the fund is also tax-free
• By investing with an insurance company, employers can invest in certain asset classes which are other-
wise restricted if the fund is managed internally, such as equity
• Benefits administration, investment advice, funding advice are provided by the insurer
Advantages to consider for funding a gratuity scheme
Deciding whether to fund gratuity liabilities is a long-term strategic decision and a lot of issues need to be
considered. We list down some important ‘generic’ issues, which would be applicable to most companies
contemplating funding their gratuity schemes.
What is future service gratuity?
27

TAX
Tax benefits
From an employer’s perspective, there are three types of tax benefits on offer if the gratuity scheme is
funded:
• Annually, an amount equal to 8.33% of basic salaries can be paid into a gratuity fund as a tax-deductible
expense.
• If the gratuity liabilities are funded for the first time, a contribution of 8.33% for each year of past service
of an employee can be paid into the gratuity fund as a tax-deductible expense.
• Interest or investment income earned within the gratuity fund is also tax-free.
A carefully planned funding strategy can significantly reduce the tax bill of a company. However, tax
benefits are not the only consideration for deciding whether to fund a gratuity scheme.
Opportunity cost
For funding gratuity liabilities, companies will need to find cash from within the business and commit to a
gratuity trust. Arguably, the most important consideration would be the alternative ways that cash could
be put to use and the return that cash would generate and for how long.
When making such a comparison, one thing to remember is that since the interest earned within a gratuity
fund is tax-free. Therefore, an expected return of 10% pa is equivalent to 14% pa pre-tax return, after
grossing up for tax at 30%.
An example – if a company can invest excess cash into a project that could generate a return of 20% pa
for the shareholders consistently for several years and the expected return in gratuity fund is 10% pa (14%
pre-tax), then using that cash for gratuity scheme funding would not seem to be an attractive proposition.
If the cash is just generating interest income at the bank rate, say 5%, then it would be better off backing
gratuity.
Excess cash can be returned to shareholders as dividends, but this option will generally be less attractive
than funding, given the tax benefits.
Liquidity management
If liabilities are unfunded, companies will need to pay off the gratuities to leaving employees as and when
they leave. Therefore, the amount companies would pay could vary greatly from year to year as the
number of people leaving will be uncertain. This would be a concern for small or mid-size companies
where the resignation of just a few senior employees, with high salary and service, could create a strain on
their cash flow positions. On the other hand, if a scheme is ‘scientifically’ (or actuarially) funded, the fund
will build up during the years when no major payouts are paid and then used when large payoffs are
required to be paid.
Cashflow stability
For new companies, the gratuity payments to employees would be few and low. However, gratuity
payouts increase nearly exponentially as employees age and work longer. By having the liabilities funded,
companies can replace the rapidly increasingly gratuity payouts with a relatively stable stream of contribu-
tions into the fund.

Cost management
Once funds are set aside to back the gratuity liabilities, a thoughtful investment strategy could go a
long way in enhancing the returns and therefore reducing the costs for the employer. Although
there is no single strategy that would suit all companies, there are a few things to consider:
• Companies can save on investment management expenses by managing the assets in-house.
This is suitable for large companies who can afford to set up an investment management team
in-house.
• Small and medium-sized companies would be better off by having a third-party asset manager
(such as an insurance company) to manage the funds. This strategy would also help in companies
get access to asset classes which they may not be allowed to invest in if managing the fund
in-house (e.g. equities).
Ultimately, the decision to fund will depend on how important the above factors are for the compa-
ny, for meeting their overall business objectives. Generally, new companies often overlook this
issue as there are other more pressing issues to consider. However, even for small and new com-
panies, there is a lot to gain from better liquidity and stability. Larger companies will have a lot to
gain from the tax beneﬁts on offer.
Documents:
• Age of Employee
• Date of Birth of employee
• Date of Joining.
• Salary + DA.
• Age of retirement.
29

Gratuity Expense is recognised from the day employee joins the company
because the gratuity benefits start accruing as soon as the employee
starts his/her service. Gratuity provision needs to be made for each
employee as on the balance sheet date, irrespective of whether the
employee has completed 5 years or not. Also, there is no vesting condition
on demise, hence employer is liable to pay gratuity in case of demise even
if the employee has not completed 5 years of service.
Is Gratuity Provision required if an employee
have not completed 5 years?
5
Actuarial valuation considers the likelihood that gratuity benefit payment may not arise if an employee
resigns or retires before the vesting date. Thus, the provision for gratuity is reduced to that extent.
The cost of retirement benefits is accounted for in the period during which qualifying services are
rendered as gratuity liability starts accruing.
Contribution consists of two parts
Past service - The contributions to provide for the past service liability of the
employees can be made based on Actuarial valuation done by Bajaj Allianz. The
Past Service contribution can be paid in lump sum or in easy instalments
(Maximum 5 instalments).
Annual Contribution - The Annual contribution will be calculated actuarially
every year after considering the funds and liability position on the annual
renewal date.
What are the charges for transferring the fund management to the
insurance company?
1) For future service gratuity - Insurer will charge the mortality rate which is like
life insurance policies. Usually, Rs.1 per 1000 sum insured.
2) Fund Management Charge – usually 0.5% to 1.25% per year
3) Premium allocation charge – Usually around 0% to 2%
For more information/questions, please get in touch with our representatives!

The Workmen (Employee’s) Compensation Policy
In an unfortunate event of an Employee suffering a bodily injury (temporary or permanent), or death during
employment, Employer is legally liable to pay compensation to the Employee under the Employee’s Com-
pensation Act 1923, The Fatal Accidents Act 1855, and at Common Law.
The policy covers statutory liability of an employer as per above laws for the death of or physical injury or
occupational diseases sustained by the workmen arising out of and in course of employment. The Act
provides a very wide meaning for the term 'arising out of and in course of employment' (for example a
workman starting from his house to the work place is treated as in course of employment). Death of or
injuries arising out of an employee's own negligence are also treated as 'arising out of employment'
• The Beneﬁts under Common Law the liability is unlimited
• The Employees covered under ESI Act need not be covered under this policy
• Additionally, legal costs and expenses incurred can be covered with the Insurers consent
• Death
• Permanent total disablement
• Permanent partial disablement
• Temporary disablement
• Occupational Diseases
• Policy can also be extended to include medical expenditure
for necessary treatment
• Policy can be extended to cover the Contractors Employees
EXCLUSIONS:
COVER FOR:
• The Insured's liability to contractors’ employees
(unless speciﬁcally declared and covered)
• Any liability of the Insured which attaches by an agreement,
but which would not have attached in the absence of such agreement
• This insurance does not cover any interest and/or penalty which
may be imposed on an insured because of the failure to comply with the
requirements of the said Workmen's Compensation Act, 1923 as amended Premium
• Premium rates are based on the nature of duties performed and based on
annual estimated wages disbursed to the workmen
31

Group Personal Accident policy
The number of people getting injured in a traffic or other accidents is
staggering. And it is not as if these accidents are confined to the streets. It
could happen at the office or God forbid, at home, the place where we feel
the safest. Unfortunate accidents have a knack of throwing the financial
footing of a whole family out of kilter for a long time.
If we are a breadwinner, an accident can create serious financial problems
for our family. It can ruin the comfort and security we work so hard to provide
them. Just think of it, who will help them settle the financial commitments in our absence or in case of
our disability to earn any more, temporarily or permanently? We need to be prepared.
Personal accident insurance covers the risk of bodily injuries arising directly from an accident that was
caused by external, violent and visible means and results in death or disablement.
Group Personal Accident policy is a benefit policy and cannot be a substitute for a WC policy. Group
Personal Accident policy can be taken over and above a WC policy to provide extra benefit for the
employees as compensation payable under WC is quite less.
WORKERS COMPENSATION
DIFFERENCE BETWEEN WC AND GPA POLICY
WORKERS GROUP PERSONAL
ACCIDENT POLICY
A policy to protect the employer against his
liability from the workmen compensation act as
well as Fatal Accidents and common Law.
Payable for accidents/diseases arising out of
and during course of employment.
Payable even if the workman was under the
influence of drinks/drugs or he has disobeyed
safety Regulation i.e. out of the employees
negligence.
Compensation that would be due us fixed by
the Tariff. It is calculated on the basis of the
severity of the event, The age of the employee
and wage of the employee.
A policy benefits the employees in case of an
event.
Payable if the insured dies or sustains any
body injury resulting solely and directly from
accident caused by external violent or visible
means whether due to employment or
otherwise.
Not be payable under the personal accident
cover.
An employer can choose the sum insured
which can be a multiple of the salary or a
graded cover according to the designation.

While Fire Insurance also
covers damage to assets
from explosions, damage to
boiler or pressure plant itself
is not covered in the Fire
policy. Damage to boiler and
pressure plant due to an
explosion can only be
covered through this policy.
The policy provides
coverage for all types of
boilers and other pressure
plants.
*Open Enrollment period:
This is typically when the
new policy is taken or when
the renewal is done. This has
a cycle of one year. All the
employees have the option of
enrolling into the policy by adding or
deleting, making changes in the
dependents list, opting in or opting out of
optional covers. Once the submission is
done, the coverage freezes for one year and no
mid-term changes are allowed.
Qualifying Event enrollment period
This is when a new employee is joins or when an
existing employee want to add his newly wed
spouse or new born baby. Employee cannot make
any changes in the existing dependents list.
Advance premium deposit with insurer:
As per section 64Vb clause by regulator, the insurer
can provide the risk coverage only when he has
received the premium. To meet this clause, the
insurer maintains an advance premium deposit for
group policies. If the advance premium is
adequately maintained, the employee will be given
coverage from day 1 of joining. If the premium is not
adequate, the coverage will start from the date of
receipt of premium at the insurers end. Hence, it is
advisable to maintain sufficient advance premium
deposit balance with the insurer. The enrollment tool
should be capable of showing you the advance
premium balance available at any point of time.
Group Term Life
What is Group Term Insurance?
A type of insurance coverage offered to a group of
people. This coverage will provide a monetary
benefit to the beneficiaries if the covered individual
dies during the defined covered period.
As with other types of group benefits, group term
life insurance is generally cheaper than individual
policy coverage. For this reason, the group term
life insurance is often a key component in
employee benefit packages.
The premiums are based on the company's
deaths experience, proposed sum assured, range
of employees' ages and the occupation of the
employees.
Why is Group Term Life Insurance Important?
Most of us do not use insurance as a risk
management tool. Insurance is still used to save
taxes or make savings. Therefore, most of us buy
investment-based plans, which have a meagre
sum assured. In case of untimely death of a
person these policies are unable to provide
enough corpus, which can replace the income of
the person.
A Group Term Life cover supplements the sum
assured taken by an employee and provides
financial relief to the family in case of the
employee’s untimely death.
Salient Features of the Policy:
• One master policy issued covering all members
of the group
• One-year renewable plan
• Minimum 10 Employees to consider it as group
• Sum assured is payable on death (either due to
natural causes or accidents)
• Addition and deletion of group members on
pro-rata basis
• No health tests required for group members up
to a defined sum assured limit which is called
‘Free Cover Limit’. Health tests applicable to
members who have sum assured above the Free
Cover Limit
33

FAQs
Can the member carry the
policy on leaving the group?
No, all beneﬁts under the plan are terminated
when a member leaves the group.
Can the Sum Assured be changed midterm?
No, sum assured cannot be changed midterm
unless the sum assured for the whole group or
the hierarchy is being revised. Sum assured can
also be changed if any person has been
promoted during the policy duration and the new
designation enjoys a higher sum assured.
Information Required by Insurers to Quote:
Insurers require the following information for each
member of the group:
• Date of birth
• Date of Joining
• Designation
• Proposed Sum Assured
• Declaration of any deaths in the three
previous years
CONCLUSION:
What do I do now?
Contact us to help you in choosing the right EBP,
Let’s create the right package together!
ETHIKA INSURANCE BROKING PVT. LTD.
No. 1-88/136, Plot No. 88, 1st Floor, Gachibowli,
Hyderabad, 500 032, Telangana
www.ethika.co.in
Hyderabad | Mumbai | Bengaluru

This Book presents the guidelines to Employee Benefits Insurance, the best practices, all the related
questions and their answers! The relevant concepts in employee insurance and examples to help the
readers understand and complement the core content!
This book is meant for people and practitioners looking to start in the area of employee benefits
(compensation and benefits). We have started from basic building blocks that go into making a
comprehensive employee risk coverage. Though this book highlights the different configuration that an
organization employee insurance/benefits plan can have, Its not a substitute for a custom consult that
takes into account the unique environment of each organization or all the variables financial situation a
business can encounter during the course of its running directly impacting such schemes. Please reach
out to us directly in case of help in creating a wonderful benefits bouquet for your people.
Copyright disclaimer:
All rights reserved. No part of this E-book may be reproduced in any form by an electronic or mechanical
means, including information storage and retrieval systems, without permission in writing from Ethika,
in case the content created is for general awareness, the writer needs to link back the content to the
source or provide due credit!
Susheel has been associated with insurance providers and
intermediaries for about a decade or so. Worked as sales
professional looking into direct B2B marketing, channel marketing,
institutional and government contracts. With his passion for learning
and improving, and share those forward he has set up Ethika that will
be a differentiator in Indian insurance space. A people person who
does not shy away from tough questions.
Susheel is essentially is a professor and business coach rolled into
one. He has got equally impressive credentials to back that standing
as he has been associated with Insurance Institute of India and has a
degree in Electrical and Electronics Engineering. He is also a certified
Happiness Coach, Berkeley method of wellbeing California and wants
to help companies have a better and happy workforce, his motivator
to create ethika.
You can connect with him
About Book
ISBN 978-93-88435-13-0
FOR YOUR COMPANY
Employee Benefits Insruance
ETHIKA'S GUIDE TO BUY
SUSHEEL AGARWAL
AUTHOR
susheel.agarwal@ethika.co.in
/susheel.agarwal.2 /susheelagarwal
susheel.agarwal@ethika.co.in +91 8498-094600

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