What is Employer-Employee Insurance?

An employer employee insurance is a benefit provided by the employer for the employees of the company. When businesses offer health benefits, it acts as a tool for employee retention and also provides the required financial backing to the employees along with a fixed compensation. Let’s get into the comprehensive details about employer employee insurance policy.

Employer Employee Insurance Policy

When an employee receives health insurance as a result of the premium paid by the employer, this arrangement is better known as employer-employee insurance. The employer has total ownership of the policy and reserves the complete right to modify or deactivate the policy as per his/her wishes. The employee is only the beneficiary of the policy and has no right over the policy authority.

Typically, the employer pays the premium for the policy and the health insurance is an employment benefit. The employer may also extend the health insurance to the immediate family members of the employees with an additional premium cost to be paid by the employees or even without charges in some cases. The insurance covers for health benefits of employees to provide rewarding employment benefits that provide peace of mind to the employees and secure them financially. Besides, financial security, employee insurance policy is focused on building organizational strength by motivating the employees to work better and creating an attitude of responsibility among the employees.

Who is eligible to buy Employer Employee Insurance?

For companies to buy Employer Employee Insurance, the following eligibility criteria should be followed:

• The company should have a minimum of 5 employees.
• Any companies which are under sole proprietors, private, or public sector, or any business registered under the Companies Act, 2013 are eligible for employer-employee insurance.
• The companies should have a maximum of 51% combined shareholding of employees, which is inclusive of immediate family members such as spouses, children or parents, in-laws, and other extended relatives.
• There should be a valid proven financial relationship shared between the employee and the employer. The employee should have a record of employment with the employer and have a monthly payment noted as pay slips.

Benefits of Employer Employee Insurance Policy

Typically, employer employee tax benefits are widely considered, there are also several other benefits to both the employer as well as employees when providing corporate health insurance to the employees. Let’s explore the benefits individually for both the employers and employees.

Benefits for Employer

• Increases employee retention: With an employee insurance policy, the employees feel more valued by the company as it reflects the health of the employees is a priority to the company. This increases employee retention and prevents the employees from switching to another job. This also acts as a source of motivation for the employees and makes them more productive and efficient.
• Tax deduction: The complete premium paid by the employers for all the employees can be categorized as business expense which can be easily claimed as tax deductions under Section 37(1) of the Income Tax Act. This tax benefit persuades more employers to provide health benefits to their employees.
• Recruiting top talent: The highly talent professionals in the market generally prefer to join companies providing health insurance along with considering the increment or raise in salary. In several cases, this acts as a decisive factor for most aspiring employees. So, employer-employee insurance is required to recruit top talent for the company.
• Builds strong relationship with employees: When companies offer health insurance as support against any unexpected medical emergencies, this strengthens the respect employees have for the employers and consequentially builds a foundation to strengthen the relationship between them.
• Better work efficiency: With health insurance, the employees feel more confident and secure due to financial security against any unpredicted health emergencies. This inherently motivates the employees and instills the approach to deliver better results for the company, thereby, increasing work efficiency.

Benefits for Employees:

• Individual health benefits: With corporate health insurance, the employees get secure against any unexpected health emergency as it covers the hospitalization costs, and medical treatment including surgeries, ensuring employees focus on recovery over financial burden. Some employers also provide personal accident cover for security against any unexpected accidents.
• Family cover: With employer-employee insurance, the immediate family members of the employees such as spouse, children, and parents are also covered against any unprecedented health emergency. Several employers provide this coverage free of cost or by asking the employees to contribute a nominal premium amount.
• Tax deductions: The premium paid by the employees for the employer employee insurance can be claimed as deductions under Section 80 C of the Income Tax Act upto a certain fixed limit of contribution to the premium.
• Financial security: The employees get complete financial security from any unexpected health emergency as the expenses for treatment and hospitalization are covered. The complete premium is paid by the employers, or only a nominal contribution is anticipated from the employees. Further, this adds to the increase in savings, thereby adding to the financial security of the employees.

Employer Employee Insurance Tax Benefits

The employer employee insurance provides health benefits and financial security for the employees and benefits the employer with a positive result-driven work-culture. Alongside the other benefits, both the employers and employees have tax benefits from the employer employee insurance.

For employers

The employers can claim tax deductions for the complete premium amount paid for employer employee insurance under Section 17(3) of the Income Tax Act. The complete amount of the premium amount can be considered as business expenses and filed for deductions. This tax benefit ensures more companies are providing health benefits to the employees and helping them with financial security against any unexpected health crisis.

For employees

In cases when the employees contribute towards the premium of employer-employee insurance, they can claim tax deductions under Section 80C of the Income Tax Act. The exemption limit for deductions claimed under tax benefits cannot exceed up to ₹1.5 lakh per financial year. However, the amount also includes other items such as investments, provident funds, other insurance premiums, and some specific savings instruments.

Conclusion

The employer-employee insurance is an employment benefit offered to the employees of the company, where the employer pays the insurance premium. Several employers also offer health insurance policy for the dependents of the employees (includes spouses, children, or parents) inclusive or by a nominal contribution of premium from the employees. The employee insurance policy motivates the employees and drives a positive work culture, thereby increasing employee retention. With coverage for hospitalization and medical treatment, the employer-employee insurance policy ensures financial security of the employees, increasing their overall productivity and efficiency. Further, the employer as well as employee can claim tax benefits for the premium paid.