MEETING the compelling need of their employees, progressive organisations allow the reimbursement of expenses incurred by them on their own or family members’ medical treatment. Such reimbursements, allowed either through the insurance companies or by the organisations themselves, are usually quite generous and provide huge relief to the salaried people by providing substantial subsidy on overall medical expenses.

Such assistance by the organisations includes both the inpatient expenses incurred by the employees on hospitalisation as well as on purchase of medicines in cases of outpatient medical treatment. Hospitals that possess the aforesaid facilities themselves reimburse to their employees both the expenses sustained by them on inpatient or outpatient medical treatment.

In cases where the hospitalisation expenses run into hundreds of thousands or even millions of rupees, it is unrealistic to expect an employee drawing a monthly salary as low as, say, Rs22,000 to bear this cost. Hence, these benefits given by the employers provide a big relief to their employees who don’t have to worry about the daunting task of arranging for the huge funds to cater to their own or the families’ medical treatment; a responsibility that basically the government should own and meet.

The benefits mentioned above have remained exempted from tax since the time the companies started operating in Pakistan. Surprisingly, in the federal budget for 2021-22, the perquisites allowed to the employees by the companies in order to help them in meeting medical needs have been taxed to their detriment.

Besides, the education assistance and meals subsidy given to the employees by their employers have also been taxed. All these benefits will be taxed at the employees’ applicable rate of income tax.

It is pertinent to mention that the workers of industrial and commercial establishments all over Pakistan have been able to achieve the facility of meal subsidy through persistent efforts over many decades of collective bargaining with their respective employers.

When the said benefits will be taxed, the employees will not only suffer hardship, but may tend to avoid incurring expenses due to the fear of tax, and this in turn will have a calamitous effect on the health of the employees and their families.

The federal government’s failure to review the budget proposals will have disastrous impact on employee compensation and take-home salary.

Parvez Rahim
Karachi

Published in Dawn, June 25th, 2021