Can you get your job insured? Here's everything you need to know

India has an unemployment insurance scheme of its own. On being laid off, a worker can get financial assistance to help them tide over a drop in income till they find their next job.

Can you get your job insured? Here's everything you need to know

India is facing its worst crisis in living memory because of the ongoing coronavirus pandemic. For the first time since 1980, the economy has shrunk. The nation-wide lockdown brought nearly all commercial activity to a close, putting livelihoods at risk. The markets have been shaken badly and demand has dipped, which has had a knock-on effect on business cash flow. 

The result? Many companies have been driven to the brink of bankruptcy. To stay afloat, they have had to resort to lay-offs.

In a telling sign of the state of affairs, the country’s Labour Force Participation Rate (LFPR) registered a record low of 38.7% in April 2020, according to media reports. Unorganised migrant workers and daily wagers have been hit particularly hard. According to the latest figures released by the Centre for Monitoring Indian Economy (CMIE), youngsters in the age group of 20–30 years accounted for 27 million lost jobs in April 2020. 

Faced with an existential crisis, a large number of families are dipping into their savings or selling their valuables to meet their living expenses. Though the government has announced a slew of measures, including relaxing restrictions on withdrawing funds from the Employees’ Provident Fund (EPF), many are hoping for unemployment benefits that could have protected their retirement savings.

In the US, for example, the Social Security Administration (SSA) guarantees unemployed individuals financial support up to a certain percentage of their income. Several countries in Europe also provide unemployment benefits to their citizens – often up to 90% of the last drawn salary. 

What may come as a surprise to many is that unemployment insurance has been available in India for quite some time. In case you’re wondering, this isn't the add-on job loss cover that many general insurers offer!

Related: Do you need to insure your job?

What is unemployment insurance?

As the name suggests, unemployment insurance provides compensation to workers who have been laid off or fired for reasons beyond their control. This is done as part of the government’s obligation to maintain social harmony. However, unemployment insurance is paid only to workers who are otherwise willing and able to work. It does not apply to those who have quit their jobs voluntarily or are self-employed.

What constitutes loss of job?

Not every pink slip qualifies for coverage under unemployment insurance. If you were fired during probation or terminated due to poor performance, you may not be able to avail of unemployment benefit. Similarly, if you opt for voluntary retirement, you will not get any compensation. Unemployment due to lock-outs, strikes, or imprisonment also make you ineligible for relief.

Unemployment insurance in India

In India, unemployment insurance is provided only by the government. The Employee State Insurance Corporation (ESIC) administers it under the provisions of the Employee State Insurance (ESI) Act. If you are a salaried professional, you can opt for coverage under one of two different unemployment insurance programmes – Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) or Atal Beemit Vyakti Kalyan Yojana (ABVKY). 

Rajiv Gandhi Shramik Kalyan Yojana (RGSKY)

Introduced in 2005, RGSKY was India’s first unemployment insurance scheme. If a company goes out of business, downsizes or on account of disability, workers can claim unemployment allowance under this scheme. However, a waiting period of 1 month is applicable before a claim can be filed. On the other hand, the claim must be filed no later than 6 months from the last date of employment. 

  • Eligibility: You need to be a member of the Employees' State Insurance Corporation (ESIC) for a minimum of 5 years before becoming eligible for RGSKY scheme. 
  • How to enrol: Submit the duly filled application form to the local ESIC office along with a certificate from your former employer certifying that the company in question is no longer operational. 
  • Fee/premium: The premium for RGSKY scheme is your ESI contribution as per the existing rate of 4% of which 0.75% is employee's contribution and 3.25% is the employer's contribution. 
  • Payout: 50% of your existing wage calculated on the basis of the average of the last four ESI contributions. 
  • Period: The unemployment benefit can be claimed for a maximum period of one year. Once you resume working, the benefits under the RGSKY are discontinued.

For more information: https://www.esic.nic.in/

Atal Bimit Vyakti Kalyan Yojana (ABVKY)

ABVKY was implemented in 2018 on a pilot basis for a period of two years. This scheme, too, was launched by the Employees' State Insurance Corporation (ESIC) to financially help the workers in the event of being laid off. It must be borne in mind that if an individual works at two different jobs, they can claim unemployment benefit only if they lose both jobs. A beneficiary of ABVKY cannot simultaneously apply for aid under any other unemployment insurance scheme.

  • Eligibility: You need to be a member of the Employees' State Insurance Corporation (ESIC) and be working for at least two years to be eligible for ABVKY scheme. 
  • How to enrol: Submit the duly filled application form to the local ESIC office along with an affidavit. 
  • ​Fee/premium: The premium for ABVKY scheme is your ESI contribution as per the existing rate of 4% of which 0.75% is employee's contribution and 3.25% is the employer's contribution.
  • Payout: 25% of your average daily salary for the preceding four contributing periods, where each contributing period is equal to six months.
  • Period: The unemployment benefit can be claimed for a maximum period of 90 days. If you find another job during this time, you will have to forgo the remainder of the monthly payments. This benefit can be claimed only once in your lifetime. 

For more information visit this website - https://www.esic.nic.in/

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Add-on unemployment insurance covers

Add-on covers are available on a host of general insurance products, including home, health, and car insurance. They are, however, much more limited in scope and coverage. For example, the cover will only take care of the three biggest EMIs of the policyholder up to a maximum of 50% of their income. There is also a waiting period of 1–3 months before a claim can be made. A major sticking point is proving that the policyholder was asked to leave their job because of reasons beyond their control. Insurance companies can demand a written letter from the employer certifying that this was indeed the case.

Related: 5 Ways you can get the most out of your 9-to-5 job and build wealth

Final words

Given the stressful situation that most unemployed people are finding themselves in, unemployment insurance can be a godsend. It can take the pressure off the individual till they can get back on their feet. However, there is a need to create greater awareness about these unemployment schemes. Such schemes can help lakhs of unemployed individuals transition to the next phase of their career without losing the roof over their heads. Lost your job? Here are 5 things you must not do