Employee Benefits in India: What Are the Legal Requirements?

Offering a generous benefits package can make all the difference when it comes to hiring and retaining the best talent for your global team. 

In fact, a 2020 survey by Fractl found that 88% of job seekers consider health, dental, and vision insurance an important benefit when deciding whether to accept a job offer. Other benefits that can sway their decision include parental leave, daycare services, gym memberships, and wellness perks, such as yoga classes. 

Therefore, benefits are a crucial aspect of employee compensation that can help attract and retain talented employees — especially in a country like India, where employee benefits have become a key point of negotiation as the job market becomes more competitive.

The Indian employee benefits landscape includes a variety of benefits, including health insurance, paid leave, retirement benefits, and more. In this article, we’ll walk you through the benefits you’re legally required to provide when hiring employees in India.

Legally required employment benefits in India

Indian labor laws dictate the minimum requirements for statutory benefits, including minimum wages, paid leave, and health insurance. 

Compared to other countries, Indian employee benefits are less comprehensive in some respects, but they have improved in recent years.

Minimum wages in India vary by state and are updated periodically. When hiring remote employees in India, you’ll need to check the minimum wage in the state where your employee lives. 

The following benefits are mandatory for all Indian employees, including remote employees:

• The Employees’ Provident Fund, Employees’ Pension Scheme, and Employees’ Deposit Linked Insurance are all funded by matching employee and employer contributions.
• All employees earning up to INR 21,000 per month (or INR 25,000 per month for employees with disabilities) are entitled to the Employee State Insurance Scheme. This covers medical costs for dependent family members, disability compensation — including short-term disability and long-term disability insurance — widows’ and children’s pensions, and other benefits. The scheme is funded by government, employer, and employee contributions.
• Statutory leave varies by state and is regulated by each state’s Shops and Establishments Act or the Factories Act (the prevailing Act will be the one the company has registered under). These Acts cover sick leave, vacation leave, national holidays, and other types of leave such as bereavement leave.
• Birth-giving employees in India are entitled to 26 weeks of paid maternity leave. In addition, the Maternity Benefits Amendment Act requires employers with more than 50 employees to provide daycare facilities for children up to six years old. Although Indian law doesn’t provide for paternity leave, many companies offer it in order to attract the best employees.
• Indian employment laws foresee compensatory days off for working on holidays and overtime pay of at least two times the employee’s salary.

Working hours and paid time off in India

The standard workweek in India is 48 hours, equivalent to 9.6 hours per day, five days a week. All work in excess of 48 hours a week must be paid as overtime and is regulated by employment contracts, calculated at a minimum of 200% of the regular pay rate.

The regulations regarding paid leave in India are set in the employment contract as a minimum of 15 days of paid holiday a year once the employee has completed 240 days of employment. However, many employers include additional leave days in the contract, along with rules on how many days can be carried over to the following year, as this can help them attract and retain top talent.

Employees must request paid time off at least 15 days prior to the start of the leave and receive approval from the employer, the works committee, and their manager.

How to enroll your Indian team members in employee benefit schemes

As an employer, it’s your responsibility to provide clear and concise instructions to your employees regarding the enrollment process and offer assistance as needed. You must also ensure compliance with any legal requirements related to employee benefits in India.

The process of enrolling employees in benefit schemes in India may vary depending on the employee benefits packages your company offers or state regulations. However, generally, the process involves the following steps:

1. Communication: Inform your employees about the benefits they’re entitled to and provide clear instructions on how to enroll in benefits programs.
2. Collection of information: You’ll need to collect personal information from your employees, such as their name, address, date of birth, and other relevant information. If you’re providing insurance benefits — such as medical insurance — you may also require information on their dependents.
3. Filling out forms: Provide your employees with the necessary forms to enroll in the benefits scheme. The forms may include information on the specific benefits the employee wishes to opt in or out of.
4. Submission of forms: Once the employee has completed the forms, they will submit them to you.
5. Confirmation: Verify the information the employee provided and confirm their enrollment in the benefits program.
6. Communication of benefits: Once enrolled, you can communicate the details of the benefits program to the employees, including any restrictions or limitations. Be sure to share copies of any important documents, such as insurance policies, with them.
7. Maintenance of records: Human resources should maintain accurate records of employee enrollment in benefits programs, including the benefits selected and any changes made over time.

Attract top Indian talent with the right benefits package.

Hopefully, by now, you have a better understanding of the benefits you’ll be legally required to offer your employees in India. However, if you want to be a competitive employer, you’ll probably want to design a benefits package that goes above and beyond the minimum requirements. For example, you could include additional parental leave, supplementary social security payments, life insurance plans, or stock options. 

With global employment becoming an increasingly popular way to find talented employees, you might be considering India as a place to look for your next hire. If so, you’ll need to make sure your company complies with local labor laws, as failure to do so could put you at risk of fines and even jail time.

To avoid the pitfalls of hiring remote talent in India, many companies turn to an employer of record (EOR) like RemoFirst. RemoFirst can help you expand your business by hiring employees in India on your behalf, relieving you of the burden of managing benefits, payroll, and other compliance issues in a foreign country. 

Need more information about hiring employees in India? Check out our India country guide to learn more about hiring Indian talent, or visit our partner Uplers if you're looking to source remote Indian talent.