Medical allowance in Bangladesh is the fixed amount of money an employer pays to its employees as a part of the salary to meet their medical needs. Like other employee benefits, such as overtime compensation, housing allowance, sick leaves, and paid vacation, medical allowance is also an essential part of retaining talent in the competitive job market of Bangladesh.
It offers the employees a dedicated fund to cover medical expenses and predictability in financial planning. Grounded on a legal basis like the Bangladesh Labor Act or Bangladesh Labor Rules, medical allowance ensures employees’ rights and well-being.
What Are the Government Regulations on Medical Allowance?
Medical allowance regulations in Bangladesh are governed by administrative laws. For instance, the Bangladesh Labor Act, 2006 (BLA) and the Bangladesh Labour Rules (BLR). However, they don’t explicitly mention the medical allowance.
As for medical allowance for government employees in Bangladesh, according to recent policy updates, all categories of government employees will be entitled to a monthly medical allowance at a rate of 1,500 BDT. Any additional medical costs beyond this amount can’t be claimed back for reimbursement.
In recent times, medical allowance for retired government employees has been updated. All retired government employees above 65 years are now entitled to 2,500 BDT per month as medical allowance. Government employees below 65 years old will continue to receive a medical allowance of 1500 BDT per month.
In the private sector, medical allowance is set by their own policies. However, they have to adhere to the tax exemption regulation. In this regard, any medical allowance that surpasses 10% of the basic salary or 120,000 yearly will be subject to taxation.
Who Is Eligible for Medical Allowance in Bangladesh?
Medical allowances are means to support the medical expenses of the employees and their dependents. In Bangladesh, various groups of employees are entitled to have a medical allowance. Below is a quick overview.
- Government employees: All types of government employees are eligible for medical allowance in Bangladesh.
- Members of parliament: Members of parliament including their family members will be entitled to get a medical allowance.
- Ministers: Ministers, Ministers of State, Deputy Ministers and their families can get the benefits of medical allowances.
- Retired government employees: All pensioners can get a fixed amount of money as medical allowance.
- Spouse and disabled children of retired civil servants: The government has decided to provide medical allowance to retired civil service employees’ spouses and disabled children after their death and the full withdrawal of their pension.
Is Medical Allowance Taxable in Bangladesh?
Yes, medical allowance is taxable in Bangladesh. However, that depends on the amount and specific conditions. According to the Bangladesh tax ordinance, there can be tax exemption on medical allowance in Bangladesh if it does not exceed the lesser of the following two limits.
- 10% of the basic wage or
- Up to 120,000 BDT per annum
That means any medical allowance that surpasses 120,000 BDT annually or 10% of the basic salary is exempted from the tax. These exemptions are applicable to all working taxpayers.
How Is Medical Allowance Managed in the Private Sector?
In the private sector of Bangladesh, companies typically manage the medical allowance with guidelines that comply with tax laws. There are no specific rules mandated for medical allowance of the private sector. According to existing laws, a company can pay 10% of the employee’s basic salary or a maximum amount of 120,000 BDT as medical allowance. If the allowance provided to the employees exceeds this limit, any additional pay will be subject to taxation.
But in contrast to the private sector, public sector employees receive a fixed medical allowance. In the private sector the amount of medical allowance varies widely. They mainly get the allowance based on the company’s internal policies. The private sector offers more flexibility in allowance and has to adhere to tax exemption policies.
How Is Medical Allowance Calculated in Bangladesh?
Medical allowance calculation in Bangladesh is mainly based on the amount or rate provided to employees. For government sectors, this amount is fixed. Here, the amount of the medical allowance will be added to the basic salary of government employees. For private sectors, the amount can vary depending on the company policies and industry factors. In the private sector, the medical allowance amount is calculated based on the basic salary.
Let’s say, your basic salary is 50,000 BDT per month.
Then 10% of the basic salary as medical allowance will be,
Medical Allowance= 50,000 x 10% = 5,000 BDT per month
Now,
Annual medical allowance= 5,000 × 12 = 60,000 BDT per year
As you see, the 60,000 BDT per year does not exceed the tax-exempt limit of 120,000 BDT per year. So, your tax-free medical allowance will be 60,000 BDT per year.
How Can HR and Payroll Software Help Manage Medical Allowances Effectively?
HR and payroll software automate the medical allowance calculations and simplify the management. This effective software ensures tax compliance, reduces errors, and allows customization based on company policies.
What Are the Medical Leave Rules in Bangladesh?
Medical leave rules are mainly governed by the Bangladesh Labor Act 2006. Based on this rule, the employees have the right to get 14 days of paid sick leave every year. However, it includes some conditions. They are as follows.
- Employees who have worked fully for one year will be only eligible for this paid leave.
- A medical certificate issued by the registered medical practitioner will be required to be eligible for the leave.
- Employees won’t be allowed to carry over the unused sick leave to the next year.
- Employers will pay 100% of employees’ regular wages during the sick leave.
Why Should Employers Offer Medical Allowance?
Medical allowance is one of the employee benefits that serves as a dedicated fund to manage the routine healthcare experience of the employees. This helps to reduce the financial burden of medical costs and enhance job satisfaction. As medical allowance is a fixed amount in some cases, it offers a predictable support system to the employees to cover their medical expenses.
Moreover, offering medical allowance also demonstrates the commitment of the company to ensure employee wellbeing. It leads to higher job satisfaction and enhances employee loyalty & retention.
Final Words
In essence, it is crucial for both employers and employees to understand the calculations and regulations of medical allowance in Bangladesh. Medical allowance helps to provide the necessary support for healthcare needs of employees. Both government and private sector employees benefit from this. Employers should remain up to date on the legal requirements to offer clear medical benefits ensuring compliance. As for the employees, they should stay informed to optimize their medical benefits.
