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SOCIAL SECURITY MEASURES PROVIDED BY THE LIFE

INSURANCE CORPORATION OF INDIA TO ITS EMPLOYEES

Submitted by

KRISHNA.B.A

BC0150010

Project Submitted to

Professor Ruchi Singh


Associate Professor of Law

TAMIL NADU NATIONAL LAW SCHOOL


(A State University established by Act No. 9 of 2012)
NavalurKuttapattu, Srirangam (TK), Tiruchirappalli – 620009.

MARCH 2018
DECLARATION

I KRISHNA.B.A, Register Number BC0150010, hereby declare that this project work

entitled “SOCIAL SECURITY MEASURES PROVIDED BY THE LIFE INSURANCE

CORPORATION OF INDIA TO ITS EMPLOYEES” has been originally carried out

by me under the guidance and supervision of Professor Ruchi Singh, Associate

Professor of Law, Tamil Nadu National Law School, Tiruchirappalli - 620 009. This work

has not been submitted either in whole or in part of any Degree / Diploma at any University.

Place : Tiruchirappalli

Date : 13/03/2018 (--------------------------------------)


TABLE OF CONTENTS

1. INTRODUCTION

2. LIFE INSURANCE CORPORATION OF INDIA

3. SOCIAL SECURITY MEASURES PROVIDED BY THE LIFE

INSURANCE CORPORATION OF INDIA

4. CONCLUSION
INTRODUCTION

Social Security is defined as the “Social security is the protection that a society provides to
individuals and households to ensure access to health care and to guarantee income security,
particularly in cases of old age, unemployment, sickness, invalidity, work injury, maternity or
loss of a breadwinner.”1 Thus, we can infer that social security is the measure of protection
financially provided to the worker and his family to ensure that the person can have a decent
standard of living during his lifetime. Common measures of social security provided in India
includes provident fund, pension and such allowances. According to ILO conventions, social
security is a basic right of every employee or worker in the world.

Social Security had arisen as a welfare measure for protecting the workers in the organisation
after their retirement in order to protect the basic standards of living of the workers once they
retire from their jobs. Since 1943, the concept of social security became widely popular in
India and steps were taken to implement a comprehensive social security scheme in the
country after the outbreak of World War II. This is because since the World War II,
industrialisation had taken place on a large scale and as a consequence the labour and related
problems also had arisen.2 The trade unions already existed in the country even before the
1940s and the rise in industrialisation made it necessary to introduce a scheme of social
security to the workers. The initial few years were spent in contemplation but the post World
War and Independence period oversaw a lot of progress in this particular regard.3

Nowadays, almost all government sectors provide Social security measures and even some
private sector corporations provide some social security measures to the employees in order
to maintain a minimum standard of living.4

1
ILO, Facts on Social Security www.ilo.org, http://www.ilo.org/wcmsp5/groups/public/---dgreports/---
dcomm/documents/publication/wcms_067588.pdf (last visited Feb 4, 2018).
2
A. N. Agarwala, The Social Security Movement in India, 56 The Economic Journal 568–582 (1946).
3
A. N. Agarwala, The Social Security Movement in India, 56 ECON. J. 568–582 (1946).
4
Id.
LIFE INSURANCE CORPORATION OF INDIA

The Life Insurance Corporation of India is one of India’s biggest Insurance companies. It is
headquartered in Mumbai and is the largest Insurance Companies. It was established in the
year 1956. The LIC is a government of India undertaking and it has grown into the market
leader in Life Insurance and has diversified its activities over the years into credit card
facilities and other markets including the stock market with investments in such fields of
business and capital venture.

The Life Insurance Corporation of India has almost 25 crore people associated with it in
some capacity of work or any connection with the Insurance giant and the person.

In recent times, the Life Insurance Corporation of India has been the leader in the Life
Insurance business with a net worth of over 2 lakh crores. Its Chairman is Mr. V.K. Sharma
and it has 114,773 people employed in the organisation throughout India. The organisation
has more than one lakh people soliciting with the public on behalf of LIC all over the
Country.5

A typical branch has around 55-60 workers in Chennai with around 50-55 permanent workers
and around 4-5 temporary workers of which 2/3rd of them can be graded as skilled workers
who have an undergraduate degree. The other two are manual labourers such as cleaners and
scavengers who do manual jobs within a particular branch. This is the general picture in a
large majority of offices in Chennai.

Since the Life Insurance Corporation of India is a public sector industry, it provides a range
of benefits to its employees. It is the intention of the researcher to know these benefits and
also analyse the social security benefits provided by the Life Insurance Corporation of India
to its employees.

It is the biggest government sector insurance agency which has maintained its position even
after liberalisation was introduced. It has maintained its dominance in the Indian Insurance
sector for a long time and is known for a more liberal outlook towards its clientele and its
employees.

5
Life Insurance Corporation of India - History, , https://www.licindia.in/Top-Links/about-us/History (last visited
Mar 3, 2018).
SOCIAL SECURITY MEASURES PROVIDED BY THE LIFE INSURANCE
CORPORATION OF INDIA TO ITS EMPLOYEES

The Life Insurance Corporation of India gives quite a few benefits to its workers. The
minimum grade pay for an employee in the organisation is 11,060 and the maximum grade
pay is 32,795 and for the rank of a marketing officer, the grade pay is INR 21,795.

The social security measures provided by LIC are quite numerous. One good example can be
the Leave Transmission Concession scheme provided by the organisation to its employees.
Under this scheme, the employees travel expenses will be reimbursed provided they travel
within the boundaries of India and also provided they give proof of their travel such as travel
tickets and other such proof.

The Social Security measures provided by the Life Insurance Corporation of India to its
employees are listed below:

1. Provident Fund
2. Pension
3. Gratuity pay
4. Group Insurance Schemes
5. Preventive Health Check up schemes
6. Paid leaves for the employees
7. Leave Travel Concession provided to the employees
1. PROVIDENT FUND

Provident Fund is the most common and famous form of social security measure known in
India. It is a well known fact that most people choose government jobs in India because of the
availability of provident fund. Provident fund is a lumpsum payment which is made to the
employee at the time he retires from the organisation. A small percentage of the salary will be
deducted monthly for the purpose of provident fund. For provident fund, the employees are
credited 10% of their salary and this is added to their provident fund account. They are then
paid this amount. The provident fund contribution is made by the employer, the Life
Insurance Corporation of India itself.

2. PENSIONS

Pensions are provided by the Life Insurance Corporation of India to its employees. The Life
Insurance Corporation of India (Employees) PENSION RULES 1995. These rules are
applicable were in the service of the Corporation before the notified date and continue to be
in the service of the Corporation on or after the notified date (28.06.1995) and exercise an
option in writing within one hundred and twenty days from the notified date to become
member of the Fund. The employee must authorise the authorise the trust of the Provident
Fund to transfer the entire contribution of the Corporation to their Provident Fund along with
the interest accrued thereon to the credit of the Fund constituted for the purpose or they join
the service of the Corporation on or after the notified date i.e. 28.06.1995;but before 01-04-
2010.

The employee has an option to subscribe to the pension fund. The option is open to the
employee for a period of 90 days from the date of appointment. The decision to subscribe to
the pension fund must be final. Under the Rules, an employee is eligible for pension once the
employee completes 20 years of service in the organisation

There are four types of pensions provided by the Life Insurance Corporation of India under
the Life Insurance Corporation of India (Employees) PENSION RULES 1995. They are:

i. Superannuation Pension:- Superannuation pension shall be granted to an


employee who has retired on his attaining the age specified.
ii. Pension on Voluntary Retirement: At any time after an employee has completed
twenty years of qualifying service he may, by giving notice of not less than ninety
days, in writing to the appointing authority, retire from service.
iii. Invalid pension: invalid pensions are given to those employees who have rendered
a minimum of ten years and they should retire on account of any mental or
physical infirmity which permanently incapacitates him from service. The
employee should produce a medical certificate regarding the same.
The calculation of the rate of pension is as follows:
a. Rules or of the Staff Regulations after completing a qualifying service of not less than
thirty three years the amount of basic pension shall be calculated at fifty per cent of
the average emoluments. It includes basic pay, last 10 months pay and 1.Basic Pay &
2. Allowances which count for the purposes of making contribution to the Provident
Fund and payment of dearness allowance.
b. In the case of an employee retiring before completing a qualifying service of thirty-
three years, but after completing a qualifying service of ten years, the amount of
pension shall be proportionate to the amount of pension admissible under these rules
and in no case the amount of pension shall be less than the amount of minimum
pension specified in these rules.
3. Gratuity
Gratuity is the lump sum which is given to the employees at the end of their tenure of
employment. It is the lump sum which is given to the employee when he retires from service.
In the Life Insurance Corporation of India, gratuity is paid to the employees who successfully
work till their retirement will receive their gratuity payment when they retire.
For providing gratuity payment to the employees, the employees are classified into four
classes of workers namely Class I, Class II, Class III and Class IV officers. There are
differences in how all the classes of workers are afforded gratuity. The benefits afforded are
as follows:
Class I officers and Class II Officers
On retirement of the employee
a. Gratuity
b. PL Encashment
c. Additional Gratuity
d. Commutation of Pension for those who opted for Pension.
e. Employees contribution of PF.
f. Corporation Contribution of PF.
g. Savings portion of GSLI.
On Death of the Employee
a. Group Gratuity
b. Lumpsum in lieu of PL Encashment
c. Additional Gratuity
d. GTIS if opted
e. Employees contribution of PF
f. Corporation Contribution of PF for PF Optees only.
g. Risk and Savings Portion of GSLI
h. Group Insurance if opted
Class III officers and Class IV officers
On Voluntary Retirement or Retirement
a. Gratuity
b. PL Encashment
c. Free Insurance
d. Commutation of Pension (for Pension Optees only)
e. Employees contribution of PF Corporation
f. Contribution of PF (for PF Optees only)
g. Savings Portion of GSLI

On Death of the Employee


a. Group Gratuity
b. Lump sum in lieu of PL Encashment
c. Term Assurance
d. GTIS if opted
e. Employees contribution of PF
f. Corporation Contribution of PF (for PF Optees only)
g. Risk and Savings Portion of GSLI
h. Group Insurance -2004 if opted

Gratuity payment is only for Officers who have completed 5 years of continuous service in
the case of retirement.6 In the case of death or disability, the officer must have completed a
minimum of five years service in the organisation. Payment of Gratuity payable shall be at
the rate of 15 days last drawn salary. For the purpose of calculating gratuity, a month is

6
Payment of Gratuity Act, 1972
considered to have 26 days. In the case of resignation by the Officer, then he must have
provided continuous service of at least 15 years.
4. Group Insurance Schemes

Under this, the employees are given insurance coverage by the Life Insurance Corporation of
India by itself. Under this the employees are given Insurance coverage by the Corporation on
the basis of a few parameters such as permanency of their position ranging from trainees,
employees under probation and also to permanent employees on the basis of date of joining
the office.

Under this, there are eight different schemes under which each one is for specific cadre of
employees. They are:

a. Group Term Insurance Schemes

This scheme is for those employees who are confirmed or on probation within the
organisation. The scheme is an annual scheme which starts on 1st February and ends on 31st
January. The basis for deciding includes basic pay, fixed allowance, technical allowance and
graduation allowance.

The premium is deducted from the salary. This scheme is optional and it requires the consent
of the employee.

b. Group Medi-Claim Policy

This policy is for the confirmed employees only. Under this scheme, the family of the
employee is covered. Duration of the scheme is from 1st March to April 31st. the basis for
deciding includes the following factors namely, basic pay, fixed allowance, technical
allowance and graduation allowance. This scheme is compulsory for all the confirmed
employees and the employee is required to give the details of his family. The premium is
deducted from the salary of the employee every month.

c. Group Personal Accident Benefit Policy

This policy includes trainees, probationary, apprentice and confirmed employees of the
organisation. The annual duration of the scheme starts from 1st September till 31st August.
It is provided on the basis of actual pay/basic pay of the employee. The employer bears
the premium so no deduction is done off the salary of the employee. This is scheme is for
all the employees.

d. Group Insurance Scheme for Outstanding Vehicle Loan

Under this scheme, the outstanding vehicle loans of confirmed employees. The schemes
duration is from 1st September till 31st August. The salary deduction is made for the
month of August alone. The basis for providing is done based on the age of the employee
and the outstanding amount of the loan.

e. Group Personal Accident Benefit policy.

This policy is compulsory for all the employees and under this scheme, if the employee is
involved in a serious accident, then the scheme is applicable to them. The term of this
particular scheme is from 2nd September to 1st September of a calendar year. It is
applicable to all the employees in the organisation; trainees, probationary, apprentice and
confirmed employees of the organisation. The payment of premium is borne by the
employer. The condition under which the sum assured is payable is detailed below:

 Loss of limbs, sight (both), loss of one eye and one limb, 100% of the amount is paid.
 For the loss of one eye or one limb, it is 50% of the amount.
 For permanent total disablement, it is 100% of the sum assured.

On the basis of basic pay, the sum insured differs.

 For employees earning above INR 50,310 and above, the sum insured is INR
25,00,000.
 For employees earning between INR 35,300 to INR 50,809, the sum assured is INR
20,00,000.
 For employees earning between INR 24,800 to INR 35,299, the sum assured is INR
15,00,000.
 For employees earning below INR 24,800, the sum insured is INR 10,00,000.

f. Group Medi-Claim policy.

This policy helps in reducing the financial burden on the employee in case the employee or
one of the dependants of the employee is hospitalised. This medi-claim policy helps the
employee to recoup the expenditure spent on medical services availed during the time of
illness and hospitalisation.

The premium which is deducted from the salary of the employee for this purpose is subject to
exception from tax under Section 80 (D) of the Income Tax Act, 1961. This scheme is
applicable to the family members of the employee such as spouse, parents and children but
not for in laws. The premium is deducted from the salary of the employee. The claim along
with relevant documents must be submitted within 20 days from the date of discharge of the
claimant.

Sum insured

Salary bracket Sum insured

Below INR 42,195 INR 3,00,000

INR 42,196 – INR 58,689 INR 4,00,000

INR 58,690 and + INR 6,00,000

PAID LEAVES FOR THE EMPLOYEES AND ITS ENCASHMENT.

Furthermore, the concept of paid leave is also provided for the employees in the organisation.
If an employee is working for a period of 10 days, then he gets to take a day of paid leave.
Such paid leaves or absences are kept account of and they are carried forward from year to
year. The employee can accumulate such paid leaves for a specific period of time and they
can also encash them at the time of retirement. The employee at the time of retirement gets
the paid leave gross amount as a lump sum at the time of retirement along with the provident
fund amount. In case the employees are not taking any holidays and are sincere, the employee
can accumulate paid leaves upto a period of 270 days. After that it can be encashed once
every two years.

Once every 2 years, 15 days of paid holidays can be encashed. This encashment of paid
holidays is liable to income tax.
LEAVE TRAVEL CONCESSION TO THE EMPLOYEES.

The Leave Travel Concession or LTC is applicable only to those employees who are
permanent employees of the organisation. It is applicable to the family of the employee
including dependent parents and in-laws provided they are not included by any other family
member have not included them. The term “family” shall mean an employee’s wife or
husband, as the case may be, and parents, legitimate/legally adopted children and step
children wholly dependent on the employee. Parents who have a pension of above INR
2,550/- per month are not considered as dependents of the employee. Declaration to the effect
that the parents are either residing with him or residing with his family and are dependent on
the employee must be obtained from the employee who is claiming LTC benefits for parents.
The combined income of parents is to be taken for determining eligibility under the LTC
rules. A widowed female employee may claim LTC benefit either for her parents or her
parents-in-law who reside with her and are dependent on her.

Officers of the rank of DM and above who are entitled to travel by Air while on tour may
also travel by Air on LTC along with the eligible members of the family.

An employee who is unable to avail of LTC during the particular block of two years may
carry forward the unavailed LTC to the next year block.

An employee and his family may travel together or independently and Leave Travel

Concession in respect of the journeys of either shall not depend upon the journeys of the
other. The members of the employee’s family may also travel together or separately.
Provided the return journey of the employee or each member of his family shall be completed
within six months from the date of commencement of the outward journey of the employee or
member of the family, as the case may be.

In order to avail Leave Travel Concession, the employee must first apply for LTC as per the
steps and must make the travel within six months from the date of applying. The employee
can take his family along with himself and they will also be covered under the scheme. In
order to successfully avail, the employee must produce proof of travel such as train or air
tickets etc, for obtaining maximum benefit under the scheme.
CONCLUSION
The employees of LIC get a lot of benefits in the name of social security. Even though they
have to provide a small part of their salary for the contributions, they still are paying a small
price so as to make their futures secure. The employees are entitled to a wide range of
benefits such as provident fund, gratuity pay, accident coverage and even concessions for
holidays which covers the family of the employee. In the aspect of insurance coverage, the
Life Insurance Corporation of India has provided good welfare measures. The Life Insurance
Corporation of India has policies which are applicable to the employees and these are
specifically for the employees alone. These policies cover a wide range of situations such as
accident and some even apply to the whole family of the employee.
The employees also have paid leave which means that if they apply for a paid leave, they can
take a holiday on that day and still get paid. If the employee does not take any paid leaves,
the employee can encash such paid leaves once every two years and enjoy the monetary
benefits arising out of their own effort and labour. Like a corporation properly following
labour laws, they also provide for payments in the case of any disablement which the
employee suffers during the time of his employment in the organisation. The compensation
provided in such cases is adequate.
It is also observed that some of the benefits availed by the employees is decided by their
basic pay and some of the other benefits afforded by the corporation depends upon the class
and rank of the officer in the organisation.
The Life Insurance Corporation of India has also provided for paying vehicle loans of the
employees after considering the situation of the debt. They also have provided for Group
Insurance for the employees and this is also applicable to their families which they should
promptly apply and avail in case the employees are hospitalised. They should apply within
20 days to avail this scheme.
The Life Insurance Corporation of India has provided its employees with really good social
security measures. Even while working, the employees are subject to increments and are even
provided an incentive for arriving to work on time in the form of Sodexo meal passes also.
The Insurance Corporation of India provides very good social security measures for its
employees and in case an employee completes more than 28 years of continuous service in
the Insurance Corporation of India, that employee can retire with a lumpsum amount and will
get pension based on his years of service in the organisation. That employee can get to retire
with a pension amount which will be more than adequate to ensure a basic standard of living.
BIBLIOGRAPHY

1. A. N. Agarwala, The Social Security Movement in India, 56 THE ECONOMIC JOURNAL


568–582 (1946).
2. Life Insurance Corporation of India - History, , https://www.licindia.in/Top-
Links/about-us/History (last visited Mar 3, 2018).
3. Payment of Gratuity Act, 1972
4. Life Insurance Corporation of India - History, https://www.licindia.in/Top-
Links/about-us/History (last visited Feb 18, 2018).

5. Law Journal Library - HeinOnline.org, ,


http://heinonline.org/HOL/Page?handle=hein.journals/intlr85&div=46&start_page=2
99&collection=journals&set_as_cursor=0&men_tab=srchresults# (last visited Feb 18,
2018).
6. Life Insurance Corporation of India (Employees) PENSION RULES 1995.