Benefits for Indian employees that are mandatory

Employee benefits in India include a wide range of offerings that an employer provides to its workforce beyond salary. These include both statutory and supplementary benefits. Statutory benefits are mandated by law and include contributions to the Employee Provident Fund (EPF), Employee State Insurance (ESI), Employees’ Pension Scheme, gratuity, maternity leaves, and more. On the other hand, supplementary or discretionary benefits are among the types of employee benefits that employers provide to attract or retain talent. These benefits include meal allowances, Leave Travel Allowance (LTA), Learning & Development, wellness programmes, and more. 

 Key takeaways

• Statutory Benefits are legally mandated, ensuring employee rights, such as EPF, ESI, and gratuity.

• Supplementary Benefits are voluntary benefits employers offer to improve employee satisfaction, like meal allowances and wellness programmes.

• Maternity Leave is a mandatory benefit for women, offering up to 26 weeks of paid leave, with nursing breaks for up to 15 months.

• Health & Wellness is an employee benefit in India that has gained importance, with mental health initiatives becoming a key focus for employee inclusivity.

• Supplementary Benefits like paternity leave and flexible work arrangements support employees' work-life balance and family needs.

• Pluxee provides comprehensive employee benefits, ensuring holistic employee well-being and engagement.

The difference between statutory and supplementary benefits 

When exploring employee benefits in India, it is important to understand the difference between statutory and supplementary benefits. The standard distinction between them are: 

 The statutory benefits ensure compliance and safeguard employees’ rights, whereas supplementary benefits give employers a competitive advantage and help create a happier working environment. By understanding the difference between the two, employers and employees can make more informed choices about their plans. 

What are statutory employee benefits in India?

Statutory benefits are state-mandated benefits to which employees in India are entitled under labour laws. Let’s have a look at what benefits are covered under this: 

1. Employees’ State Insurance (ESI)

The Employees’ State Insurance (ESI) scheme is a safety net offering coverage for employees across various industries for sickness, maternity, workplace injuries, and medical needs. It applies to various establishments, from factories and transport companies to hotels, cinemas, schools, and hospitals.

 You're eligible for ESI benefits if you work for a company with 10 or more employees and earn less than ₹21,000 per month. The funding comes from employers and employees—employers contribute 4.75% of your base salary, while employees chip in 1.75%. It’s a system designed to provide financial and medical security when you need it most.

2. Employees’ Provident Fund (EPF)

The EPF is a savings plan that helps employees in India build financial security. You can use it for major expenses like buying a home, paying off loans, or pursuing higher education. Alternatively, you can let it grow and withdraw it as a lump sum when you retire at 58.

 The fund also supports employees during tough times, such as unemployment for 60 days or in cases of an employee’s passing, where the benefits are passed to dependents. One of the biggest benefits? The EPF is tax-friendly—your contributions, the interest it earns, and the final payouts are all tax-free.

Both employees and employers contribute 12% of the employee’s gross monthly earnings. Of the employer’s share, 8.33% goes toward the Employees’ Pension Scheme (EPS), providing additional retirement benefits.

3. Employees’ Pension Scheme (EPS)

The EPS is a pension plan linked to the EPF that provides monthly payments after retirement at age 58. If a member passes away, their dependents receive the pension instead. Unlike the EPF, the EPS doesn’t earn interest, and its benefits are taxable. To qualify, employees need at least 10 years of service, with the maximum pensionable salary capped at ₹15,000 per month.

 Employers contribute 8.33% of the employee’s EPF share to fund the EPS, but their contributions are capped at ₹1,250 per month. Employees don’t pay any taxes toward this employee benefit in India.

4. Gratuity benefits

Gratuity is a token of appreciation for employees who’ve dedicated at least five years to a company. It’s paid when an employee retires, resigns, or becomes disabled, recognising their commitment and service. The gratuity amount equals 15 days of wages for every year of service beyond the fifth year. Employers use this formula to calculate it:

 For example, an employee earning ₹30,000 per month with 20 years of service would receive:

15 × 30,000 × 15/26 = ₹259,615

 In this case, the employer would pay ₹259,615 as a gratuity—offering financial security and a well-deserved acknowledgement of loyalty.

5. Public holidays

Public holidays in India are mostly regional, with only three national holidays observed across the country: Republic Day (January 26), Independence Day (August 15), and Gandhi Jayanti (October 2). 

 Since each state has its holiday calendar, employers often align leave policies with the holidays specific to an employee's home state. Public holidays vary drastically between states, ranging from roughly 18 to 28 days per year, depending on the state. 

6. Leave policies

In India, leave policies are determined by the state laws where the company’s legal entity is registered, not where the employee works—a unique approach compared to many other countries.

 Earned leave is a key entitlement for employees. Private sector workers typically receive a minimum of 15 days annually, though this can vary by state. Unused earned leave can usually be carried over to the following year, ensuring employees don’t lose their leave entitlement.

 Some employers go beyond statutory requirements and offer unlimited PTO. However, even with unlimited PTO, companies must carefully track leave to remain compliant with Indian labour laws. Interestingly, leave policies in the private sector tend to be uniform, meaning senior employees often receive the same leave benefits as their junior counterparts.

7. Paid maternity leave

India mandates that all employers offer maternity leave to eligible employees. To qualify, an employee must have worked for at least 80 days in the 12 months prior to taking leave.

 The national minimum for maternity leave is 26 weeks of paid leave for employees with fewer than two children and 12 weeks for those with two or more children. This also applies to adoption or surrogacy. Maternity leave can begin up to eight weeks before the due date. New mothers are entitled to at least two nursing breaks daily until their child is 15 months old. 

What are supplementary employee benefits in India?

Employers offer supplementary benefits to enhance employee satisfaction beyond statutory requirements. These are optional but can make a big difference in attracting and retaining talent. Here's a quick look at some popular supplementary benefits in India:

1. Meal allowance

Employers often provide a meal allowance or food coupons to ensure employees can have nutritious meals during work hours.

Read more: https://www.pluxee.in/blog/maximizing-workplace-happiness-the-value-of-meal-benefits-for-employees/

2. Leave & travel allowance

LTA covers expenses for employee reimbursement for travelling on vacation, offering financial support for personal trips.

3. Fuel & vehicle-related expenses

Many employers reimburse fuel or vehicle maintenance costs, particularly for employees commuting long distances.

Read more: https://www.pluxee.in/blog/what-are-fuel-cards-and-how-do-they-work/ 

4. Internet and mobile phone reimbursement 

With remote work becoming common, employers often cover internet and mobile phone bills to support seamless work-from-home setups.

5. Paternity leave

To support new fathers, many companies offer paternity leave, showing commitment to gender-inclusive policies.

6. Rewards and recognition 

From bonuses to employee awards, companies use recognition programmes to appreciate and motivate their workforce.

7. Books & periodicals

Some employers reimburse expenses for books and professional magazines to encourage continuous learning.

8. Learning & development

Employers invest in training programs, certifications, or workshops to upskill employees and boost their careers.

9. Health & wellness

This employee benefit in India includes gym memberships, counselling services, or wellness programs to ensure employees' physical and mental health. Mental health and well-being are priorities, with 55% of employers ranking mental health initiatives among their top three benefits for promoting inclusivity and empowerment. 

10. Flexible work arrangements

Options like remote work, flexible hours, or compressed workweeks give employees better work-life balance and autonomy. A study revealed that 71% of employees rated flexibility as a crucial benefit, underlining its growing importance in talent retention.

Offering competitive employee benefits in India

Employee benefits have evolved significantly in India, with a growing focus on enhancing employee well-being and ensuring work-life balance. Today’s workforce expects more than just salary; they seek comprehensive benefits that contribute to their overall quality of life.

Pluxee understands these changing needs and offers a range of competitive employee benefits to meet the demands of modern employees. From meal allowances and health & wellness programmes to flexible work arrangements, Pluxee ensures that employees are supported in every aspect of their professional and personal lives. With customised benefits packages that boost employee engagement and satisfaction, Pluxee helps businesses stay ahead of the curve by offering benefits beyond the basics. 

Read more: https://www.pluxee.in/blog/strategic-perks-for-success-designing-impactful-employee-benefit-programs/

Frequently Asked Questions (FAQs)

1. What are the mandatory employee benefits in India?

Mandatory employee benefits in India include Provident Fund (PF), Employees' State Insurance (ESI), gratuity, maternity leave, and paid public holidays, as defined by Indian labour laws.

2. What is LTA in salary?

LTA (Leave Travel Allowance) is a benefit provided by employers to employees for travel expenses incurred during vacation, typically exempt from tax under certain conditions.

3. What are the tax implications of employee benefits in India?

Employee benefits in India, such as medical reimbursements, LTA, and bonuses, have specific tax exemptions or deductions under the Income Tax Act, depending on the nature of the benefit and how it is utilised.