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.
In this article, we’ll walk you through all the benefits and important details that you’re legally required to provide when hiring employees in India.
Introduction to Employee Benefits in India
Benefits vary widely in India depending on the employee’s state of residence, the industry they work in, their employment contract, their duration of service, and the size of the organization they’re employed by.
But Indian labor law dictates that there are some statutory employee benefits that must be provided in certain circumstances.
Statutory Employee Benefits in India
These benefits include the Employees’ Provident Fund (EFP), Employees’ State Insurance (ESI), the Employees’ Pension Scheme (EPS), gratuity, paid leave, and paid leave for national holidays.
Here’s a deeper look at what this means for both employers and employees.
- Employees' Provident Fund (EPF): This is a source of social security that’s available to all Indian employees to provide assistance with such things as purchasing a house or attending college. Companies with 20 or more people must contribute to the EFP, and workers contribute as well.
- Employees’ State Insurance (ESI): This covers medical coverage for qualifying employees in most industries. It’s funded by government, employer, and employee contributions.
- Employees’ Pension Scheme (EPS): The EPS provides monthly payments to employees who worked for at least ten years and are eligible for benefits once they turn 58.
- Gratuity: Employees in India who’ve worked for a company for more than five years and then retire, resign, or become disabled are eligible for gratuity. These payments amount to 15 days of wages for each year of employment after five years.
- Leave: Annual leave varies based on employment type, but workers typically receive 15 days of paid leave per year — not including public holidays. Here’s a look at types of leave in India:
- Sick leave: Employees who’ve been with the same company for at least three months receive 12 days of paid sick leave per year, but the worker must provide a medical certificate.
- Maternity and paternity leave: Birth-giving employees are entitled to 26 weeks of paid maternity leave once they’ve worked at least 80 days for a company with 10 or more employees. Paternity leave isn’t as common, but many companies allow married male employees to take 15 days of paid leave within six months of childbirth or adoption.
- Public holidays: The number of paid public holidays varies by state and company policy; however, there are three national holidays when government offices close and most private companies do as well. Most businesses provide full-time employees with 10-14 paid public holidays.
Learn more about paid leave laws in India.
Who is Entitled to Statutory Benefits in India?
Here’s a brief overview of eligibility for benefits in India.
- Employees: Full-time and many part-time employees are generally entitled to the EPF, ESI, EPS, gratuity, and paid leave.
- Contractors and freelancers: Independent contractors and freelancers don’t typically receive statutory employee benefits. However, if a contractor's working conditions resemble those of a full-time employee, they can be reclassified as employees and become eligible for benefits.
- Employer size-based eligibility:
- The EPF is mandatory for establishments employing 20 or more people.
- ESI is applicable to establishments with 10 or more employees earning INR 21,000 or less per month.
- Gratuity is applicable to businesses with 10 or more employees.
- Duration-based eligibility: Certain benefits require employees to have completed a minimum period of continuous service. For example, employees must have worked for at least five years to be eligible for gratuity.
Common Allowances and Additional Benefits to Attract Talent
Although not required by labor laws, employers in India often provide employees with additional benefits.
One of the most common is House Rent Allowance (HRA), a contribution provided to an employee to cover the cost of living in rented housing.
A portion of HRA is excluded from taxation; however, if an employee receiving HRA owns their home and doesn’t pay rent, then the HRA collected is entirely taxable.
Private life insurance and accidental death and dismemberment coverage is a commonly offered benefit that helps employers stand out among applicants.
Employee stock ownership plans are also increasing in popularity in India, particularly within the tech industry.
These are some other employee benefits in India that companies can offer to compete in this competitive job market:
- Private health insurance
- Transportation stipends
- Sick leave for family members
- Educational assistance benefits
- Adoption assistance
- Meal vouchers
- Remote work stipend
- Reimbursement for mobile bills
- Flexible work arrangements
- Professional development opportunities
How to Enroll Indian Team Members in Employee Benefit Schemes
Enrolling employees in Indian benefits is a critical part of compliance, as well as an essential part of providing an appealing work environment.
However, with the various types of benefits your company must legally provide — as well as any additional ones you may offer — enrollment can be complex, especially since benefits vary depending on the size of your company and the state or states where it operates.
If you partner with an Employer of Record (EOR) like RemoFirst, we can handle this complicated process for you since we’re experts on benefits in India, but here’s a general overview of how to get your Indian team members enrolled.
1. Register your business.
Your company must be registered with the appropriate Indian government bodies to be able to provide statutory benefits. For example, to offer the required EPF benefits, your company must be registered with the Employees’ Provident Fund Organisation, which can be done via the National Government Services Portal.
2. Collect employee information.
Gather the relevant employee data and documentation, which includes employees’ full names, their dates of birth, Aadhaar (Indian identification) number, bank details, and other information. You also need to collect employment-related information like company start date, salary, and job role to determine workers’ eligibility for benefits.
3. Submit applications.
Once you have this information, you can enroll employees in Indian benefit schemes, but it’s important to note that every scheme is a little different. For instance, to register employees for EPF, you must generate a universal account number for each individual and link it to their Aadhaar and their bank accounts. Many of these benefits enrollments can be done online through the relevant government portals.
Compliance and Legal Considerations
If you want to hire remote employees in India, you need to provide accurate employee benefits.
Failure to accurately comply with these or other Indian labor laws can result in financial penalties, legal issues, operational disruptions, and even reputational damage that can make it difficult to hire in the country again.
Here are some simple tips to help you remain compliant:
- Register your business with the proper authorities, including the EPFO, Employees’ State Insurance Corporation, and the Central Board of Direct Taxes.
- Stay up to date on Indian labor laws as they change.
- Maintain accurate records, including employment contracts, benefits enrollments, and tax filings.
- Pay taxes on time and make timely contributions to benefit schemes.
- Conduct regular audits of your HR and payroll systems to identify any issues.
That’s a lot to do while also running and growing your business while managing remote employees. That’s why it’s a good idea to work with an EOR that’ll manage all these compliance issues on your behalf at affordable rates.
How to Compliantly Employ Top Indian Talent
Hiring remote workers in India gives you access to a massive pool of skilled and educated professionals. However, as we’ve mentioned above, navigating the country’s complex benefits laws alone can be a challenge — especially if your company doesn’t have a legal presence there.
That’s where an EOR comes in. RemoFirst allows companies to employ workers in 185+ countries, including India, and we make it easy to onboard new hires, manage payroll, and stay compliant with local regulations, taxes, and benefits requirements.
Book a demo to learn how we can simplify your international hiring.
.png)
.png)
