The complete guide to offering employee benefits in India

To comply with labor laws in India, employers must provide a comprehensive employee benefits package. Understanding these benefits helps you not only meet legal obligations but also provide robust support for your workforce in India. This guide offers information on the rules surrounding statutory employee benefits as well as supplementary employee benefits examples. 

What are employee benefits in India?

Employee benefits in India refer to the various forms of compensation and perks employers provide to their employees in addition to regular wages. They include statutory benefits, which are mandated by Indian law, and supplementary benefits, which are optional. Indian labor laws require employers to offer certain statutory benefits to protect workers’ financial, health, and personal interests.
Statutory vs. Supplementary Benefits: Unlike the US and other countries, India has a more defined set of legally required benefits, which employers must provide, such as contributions to the Employees’ Provident Fund and the Employee State Insurance Scheme. These benefits help safeguard employees' well-being, making them an integral part of the employee benefits program.

Statutory employee benefits in India

In India, the Ministry of Labour and Employment enforces labor laws and mandates statutory benefits for full-time employees. Failure to comply with these statutory benefits could result in fines or other legal consequences.

Note: These mandatory benefits are considered the minimum legal requirements. Employers can choose to offer more extensive benefits to attract and retain top talent.

Employees’ Provident Fund (EPF)

The Employees' Provident Fund (EPF) is a retirement-focused benefit where both employers and employees contribute. Employers contribute 12% of an employee’s salary, with a portion allocated to a pension scheme, ensuring retirement benefits in India. Employees also match this 12% monthly contribution.

Employee State Insurance Scheme (ESI)

The Employee State Insurance (ESI) scheme provides medical and disability coverage. Employers with 20 or more employees contribute 4.75% of wages, while employees contribute 1.75%. ESI covers benefits for:

• Medical care
• Sickness
• Maternity
• Disability
• Dependants
• Funeral expenses

Employees’ Pension Scheme (EPS)

The Employees' Pension Scheme (EPS) complements the EPF and focuses exclusively on retirement benefits. EPS contributions come from the employer’s EPF contributions, providing Indian workers with regular pensions after retirement or in the event of disability. This scheme differs from EPF in that the funds are used specifically for periodic pension payments rather than a lump-sum disbursement.

Employees’ Deposit Linked Insurance (EDLI)

The Employees’ Deposit Linked Insurance (EDLI) scheme provides life insurance to employees linked to their EPF contributions. Under EDLI, employers must make an EDLI contribution rate based on gross monthly earnings, providing financial security to the employee's family in the event of their death.

Statutory holidays

India mandates three national holidays, with additional paid leave usually provided by employers. India’s three national holidays are:

• Republic Day: January 26
• Independence Day: August 15
• Gandhi Jayanti (Mahatma Gandhi’s Birthday): October 2 

Since all other holidays vary by region, Indian employers generally allocate 10 days of paid holiday leave (in addition to vacation time) for employees to use however they’d like. 

Vacation entitlements

The exact leave policies vary among India’s 28 states, but employees are typically entitled to 15 days of earned leave annually. Leave can be carried over if unused, but there’s generally a 30-60-day cap. 

Sick leave

Indian labor laws allow its employees at least 12 days of paid sick leave per year. It can be used when an employee falls ill, but also to care for sick family members or bereavement purposes. 

Employees are also usually granted an additional allotment of “casual leave” days in case of unforeseen circumstances that require time away from work. 

Maternity leave

Pregnant employees who have worked with the same employer for 80 days in the last year are entitled to 26 weeks of paid leave for the first two children, with 12 extra weeks for each subsequent child. Employees can begin the leave 8 weeks before their child’s expected due date. The employee will receive 100% of their average salary during this period, and the employer will be responsible for this pay. The employee can extend leave without pay. 

India’s Maternity Benefit Act was amended in 2017 to require companies with more than 50 employees to provide subsidized nurseries for children up to 6 years old. 

Gratuity

If an employee serves at least five years of continuous service at the same company with 10 or more employees, they’re eligible for gratuity payments. Gratuity is doled out if an employee:

• Is eligible for pension payments
• Retires
• Resigns
• Passes away (payment would go to an employee’s nominee)
• Can’t work due to accident or illness

Gratuity rates are based on an employee’s last drawn salary and length of service, with payments accounting for 15 of a month’s working day.

Supplementary employee benefits in India

In addition to these required benefits, many Indian employers also provide additional benefit plans and perks to help them attract and retain employees. Some of the most common supplementary benefits are below.

Private health coverage

While all Indian employees are covered by public healthcare, some employers compete for top talent by offering group health insurance plans with more robust parental coverage.

Extended healthcare coverage may include things like physical therapy, dental, and optical coverage. Employers can give stipends for employees to seek their own private plans, or provide them with one directly.

Employee assistance programs (EAP)

Employee Assistance Programs (EAPs) offer counseling, legal advice, childcare, and financial planning services. They support employees in managing personal and professional challenges, improving their well-being and productivity.

Paternity leave and parental leave

While India doesn’t have statutory requirements for paternity leave, around half of companies offer some form of it. Some employers also provide up to six months of parental leave in addition to maternity leave provisions. 

Life insurance

Most Indian employers provide group term life insurance coverage, which provides financial protections to family members if an employee passes away. This benefit is generally provided as a fixed amount or as a multiple of an employee’s annual salary. 

Personal accident insurance

It’s also customary for companies hiring Indian employees to provide a group personal accident insurance policy. Coverage usually includes:

• Accidental death
• Permanent total disability
• Permanent partial disability
• Temporary total disability
• Medical expenses from an accident

This insurance is either provided on a graded basis, as a fixed amount, or 2 to 3 times an employee’s annual salary. 

Employee wellness programs

Employee wellness programs promote physical and mental health through fitness initiatives, health screenings, and wellness workshops. They reduce absenteeism, boost morale, and create a healthier workplace culture.

Short-term disability

Some employers offer what’s known as an employee income protection program, which provides up to 3 months’ pay to employees who are hospitalized due to a short-term disability and unable to work. An employee is usually provided with half this amount if a spouse is hospitalized. Most plans require a minimum group size of 1,000 lives. 

Paid time off

Many employers offer paid time off beyond India's statutory minimums to make their workplaces more attractive to top workers. Paid time off can include additional vacation time, extra parental leave, paid personal days, or flexible leave policies.

Additional employee perks

In addition to statutory and supplementary benefits, companies in India often provide additional perks to create a more attractive and supportive workplace. These fringe benefits help employers stand out in a competitive market and contribute to a positive work culture. Here are some common fringe benefits:

• Transportation stipends: Covers commuting expenses, easing the financial burden of travel and reducing stress associated with long commutes.
• Education assistance: Provides funding for further education or professional development, helping employees advance their skills and career goals.
• Flexible work: Allows remote work and flexible hours, giving employees the ability to balance personal and professional life while enhancing productivity and job satisfaction.
• Housing allowances: Offers financial support for housing costs, making it easier for employees to live near work or relocate comfortably.
• Subsidized cafeterias: Provides affordable or free meals on-site, promoting healthy eating, saving time, and fostering team connections.

Rippling: Offer affordable employee benefits in India

Running a global workforce isn't easy. It can be a challenge for global companies just to keep their benefits compliant—let alone managing offer letters, equipment, payroll, and everything else global employees and contractors need.

That's why, if you're going to hire employees, contractors, or remote workers in India, you need Rippling. Rippling makes it easy to onboard, manage, and pay employees and contractors around the world—in one system that helps keep you compliant with local employment laws and regulations.

We offer a native Employer of Record (EOR) service, which allows you to hire employees in India, enroll them in benefits, and run payroll in 90 seconds—even if you don't have a legal entity there.

Rippling’s EOR is built on top of our native payroll rails, which means that when the time comes to bring HR in-house, you can move from our EOR to Global Payroll through your own entities—in minutes.

FAQs on employee benefits in India

Where can I get quotes for employee benefits in India?

Rippling partners with brokers and insurance carriers around the world to give your Indian employees access to big business benefits at affordable prices—including health insurance, registered retirement savings plans, etc.

Who is entitled to benefits in India?

In India, statutory benefits like Employees’ Provident Fund, ESI, and gratuity apply to full-time employees. Independent contractors and part-time employees typically aren't eligible for these benefits unless stated in their contracts.

Can employees in India opt out of the Employees' State Insurance (ESI) scheme?

Employees can opt out of the ESI scheme under certain conditions, such as if their wages exceed the statutory eligibility limit, but employers must ensure they provide alternative medical insurance in such cases.