Employee Benefits in India

Employee Benefits in India

  1. Employee Benefits in India

The key to the success of any business lies in how it treats its employees. Driven employees are truly an invaluable asset. That’s why they’re referred to as human resources or human capital. As such, all business owners have a vested interest in taking care of their employees, and ensuring they get the right opportunities to support business growth. As a part of creating a conducive work environment for employees, employers provide certain employee benefits. Whether you are a foreign business owner wanting to expand in India, or an emerging entrepreneur starting their first venture, you should be well-versed with the employee benefits in India.

This will help you retain employees, stay at par with the marketplace practices w.r.t employee benefits, and also create an atmosphere for nurturing business growth.

  1. Mandatory Employee Benefits in India

Looking into employee benefits is not optional. To provide job security and safety, the government has announced certain mandatory employee benefits.


2.1 Minimum Wages

This employee benefit ensures no employee is paid a wage / salary below the Minimum Wages Act 1984. The minimum wage w.e.f June 2017 is INR 176 per day (INR 4,576 per month). The Minimum Wage Act keeps getting refined as cost of living rises, and is there to protect ALL employees, no matter the position or prestige.


2.2 Provident Fund

Employee Provident Fund, a retirement benefit for employees, is mandatory for employees whose basic salary falls below INR 15,000. In EPF,and employee record services in India, the employee is allocated a certain percentage of their salary (typically 12%) and the employer reciprocates in amount. Together, the total amount goes into an authority-maintained provident fund, which the employee can either withdraw (subject to certain rules) before maturity or collect in full on retirement.


2.3 Employee State Insurance

Employee State Insurance is an employee benefit that is mandatory for employers if an employee’s gross monthly salary is less than INR 21,000. This insurance ascertains that an employee can handle unforeseen medical expenses or sudden injuries or even maternity charges. The employee state insurance in india  is categorized under co employment services in india


2.4 Labour Welfare Fund

The Labour Welfare Fund is a state-owned initiative which requires that all employers should contribute to providing various services, benefits and facilities to their employers. This employee benefit provides employees with better social security, improved working conditions, and if certain criteria are met, concessions to employees applying for a loan. Both the employer and employee can contribute to LWF, but majorly, employers only contribute on behalf of their employees. The LWF contribution comes from a percentage of the employee’s salary before it is paid. For every contribution made by an employer, the employee contributes double. For instance, if an employee contributes INR 3,000, then the employer will contribute INR 6,000. In effect, INR 9,000 will be contributed to this employee benefit.


2.5 Holidays

As per the Factories Act / Shop Act, this mandatory employee benefit grants an employee a minimum of 8 holidays every year. These include national holidays like Independence Day, or Republic Day.


2.6 Leaves

As per this employee benefit, an employee earns 1 day off for every 20 working days. Of course, this number is often higher in most organisations, and some organisations also adjust paid or half pay leaves. Unplanned leaves for personal reasons are counted separately from sick leaves, of which a typical employee gets 15 leaves.


2.7 Maternity Leave

Taking co employment services into consideration.The employee benefit gives expecting women or mothers of new-born children 26 weeks off, for 2 children in all.


2.8 Gratuity

This particular benefit came into the picture after the Payment of Gratuity Act 1972. Gratuity is separate from pension, which is a part of the retirement benefit. Gratuity simply is an amount paid to an employee at the end of their employment as a token of appreciation for their work. The formula for calculating gratuity is

(15 X Your last drawn salary X the working tenure) / 30

For example, if you have a basic salary of Rs 30,000 and have worked at the company for 7 years, then the amount would be Rs 1,05,000.

  1. Employee Benefits and Employee Productivity

In addition to the mandatory employee benefits, some companies also provide additional benefits as under:

  1. Superannuation (pension fund) as a retirement benefit.
  2. Medical Insurance, apart from the Employee State Insurance.
  3. Travel allowances.
  4. Paternity leaves for fathers.
  5. Advance against salary.
  6. Loan against salary.
  7. Remote working.
  8. Flexible work hours.

Employee benefits make an employee feel protected at work. Sometimes, an employee may even jump ship because their employer does not provide a safety net that’s needed by employees so they can do their best work.

Imagine if an employee has to struggle to get leaves in times of emergency, or feels tensed before retirement because they can’t provide for themselves in their sunset years. Why would they take on more work and challenges for you? It would be wrong to expect it!

Overall, employee benefits in India are progressing. All the professional employer organizations in India ,are leaning more in the favour of employees and are proven to retain employees better and draw peak performance. They are a necessary part of an employee’s salary structure. If you need assistance in setting up employee benefits for your team, or are in a fix about salary structures, we can help. Under our shared services, we provide accounting, taxation, salary structure and payroll management, and other tools for you to get the best from your team.