Guide to employee benefits in India

Companies can no longer entice employees with a competitive salary package. They must increase the additional employee benefits in India to create a favourable work environment for employee satisfaction and performance growth.

Some of the reasons why additional employee benefits should be a top priority include -

• These benefits help attract the top talent pool from around the world, as the current needs of new-age employees are financial security and health and well-being.

• With the provision of employee-centric benefits, businesses and employers can also successfully retain their employees for long-term expansion.

• Additional employee benefits in India also boost employee morale, directly impacting their efficiency and productivity. This directly impacts the employer’s growth and profitability.

• Employee benefits like a group health insurance policy encourage employees to participate in preventive care, which in turn will reduce absenteeism from the office, reducing the risk of operational inefficiencies.

One of the mandatory employee benefits in India is called statutory benefits. These are a set of benefits that are applicable to the employees under their rights and privileges offered in the country.

Depending on the company size and other factors, every employer must provide the applicable statutory benefits to their employees. Let us look at some of them below.

ESIC Benefits for Employees

ESIC, also known as Employees’ State Insurance, is a social security scheme implemented by the Indian Government which extends medical assistance to employees.

Some of the inclusions under this scheme include medical benefits, disability benefits, dependents cover, and cash allowance benefits during sickness.

This scheme is mandatory for all employers with more than 10 employees within their team and a salary package of less than ₹21,000. In some states, the employee limit may be more than 20.

PF Benefits for Employees

The Provident Fund, or PF, is another mandatory employee savings scheme in which both an employer and an employee contribute 12% each to the overall contribution.

The employer deducts the employee's contribution from their monthly salary to add to the PF account, which grows with interest.

The monthly PF contributions add up to a significant amount over time, providing employees with a financial back-up in times of need. Additionally, it helps save up financial resources for the second innings of life post-retirement.

Maternity Leave India Policy

Under the Maternity Benefit Act 1961, employers with a team of 10 members must provide paid maternity leave to their female employees to comply with the law.

Female employees are eligible for 26 weeks of paid maternity leave for up to 2 childbirths. This leave can be divided into pre-natal and post-natal periods of 8 weeks and 18 weeks, respectively.

Employers are also responsible for the overall health, fitness, and growth of employees on the job, in addition to workplace well-being and a favourable working environment.

Thus, many employers offer additional employee perks with the provision of various medical benefits, and some of the common ones are as follows -

Employer-Employee Insurance

For small, medium, and large companies, employee well-being and retention are prime priorities.

To ensure employee satisfaction and motivation, employers often provide employees with group mediclaim policy coverage. This allows the employees to benefit from financial assistance during emergencies without much hassle.

Moreover, within employer-provided medical insurance, employees can also add riders to the base policy coverage and include their dependents under the same coverage at an additional premium.

Employee Wellness Programs

Other than group insurance, employers also plan and implement different wellness programs for their employees to keep their overall health and well-being in check.

These programs include gym memberships, stress-management sessions, healthcare screenings, yoga sessions, vaccine drives, etc.

In addition, some employers also provide different development and training programs and meal programs for a small contribution, usually on a subscription basis.

Paternity Leave India Policy

Many employers are adopting the provision of paid paternity leave of up to 15 days before or within 6 months after child delivery to support the mother in any way. These leaves are not cumulated with the overall leave balance allotted to the employee.

Additionally, this leave is also applicable for child adoption, and no refusal for the same shall be entertained.

Annual Leave India Policy

Along with the mandatory public holidays where employees get an off, all employees are eligible for a leave balance of around 15-18 paid annual leaves every year. Employers can either implement it for the financial year (April - March) or a calendar year (January - December).

Employers can either add the unused leave balance to the next year’s leave balance or cancel them out at the end of the mentioned period.

Period/Menstruation Leave India Policy

One of the most recent employee benefits in India for mental and physical well-being is the provision of paid period leave for women employees.

This is not a common practice around India as yet. However, many employers are actively incorporating this leave policy to help female employees with the required rest days during their menstruation cycle.

Employee Stock Ownership Plan

An ESOP or Employee Stock Ownership Plan is an additional employee benefit offered by employers. With this plan, employees can receive ownership interest in the company they work for in the form of stocks.

This benefit scheme encourages employees to work harder and more efficiently as they have partial ownership (based on the number of shares purchased) in the company.

Employee Referral Program

Employers offer an employee referral scheme/program to encourage employees to refer and earn monetary compensation for bringing required qualified candidates to the organisations.

Within this program, any employee who refers a candidate for a particular job is rewarded with a lump sum amount if and when the referred candidate is added to the company payroll.

Employee Allowances

Employers offer their employees various kinds of allowances based on their job roles and responsibilities. These allowances are added to the basic salary to provide the employee with the necessary support to complete these job requirements.

Some of the common allowances include dearness allowance, paid time off, overtime allowance, conveyance allowance, flexible working routine, etc.

Leave Encashment on Retirement

Many employers in India offer the benefit of leave encashment to their employees, especially upon retirement, to help them continue their day-to-day lives without a monetary strain. With this benefit, employees can request cash compensation against their unused leaves.

Leave encashment is commonly offered to employees who are retiring soon but is not a mandatory practice in India.

Gratuity

Gratuity is a mandatory employee benefit in India under the Payment of Gratuity Act 1972. It is a payment made to the employees who retire, resign, or face death and permanent disability.

The main eligibility requirement for gratuity is that an employee must have at least 5 years of continuous service with the same employer. The calculation is done using the formula (15 x last salary x working tenure in years) / 30.

This provides the employees with a significant lump sum to support their second-inning lifestyle with ease.

Bonus

As per the Payment of Bonus Act 1965, all employers with a team of 20 workers or above must pay their employees a bonus of at least 8.3% of their earned salaries. This practice is optional, except for certain establishments, but is highly recommended for all.

Employers commonly offer bonuses as a performance incentive and set their own general eligibility criteria. The additional bonus compensation helps employees who wish to retire with ample funds to plan their lives ahead.

Having the correct knowledge and implementation of the various employee benefits in India can help both employers and employees design and implement effective programs and schemes for mutual growth.

Whether you choose a group mediclaim policy to extend health insurance benefits to your employees with a financial safety net or a referral program to motivate the team, the options are endless.

With Tata AIG group health insurance plans, you can explore extensive coverage, customise as required, and enjoy seamless services and 24x7 customer support to keep you and your employees safe and happy.

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Is health insurance for employees mandatory in India?

Yes, according to the Insurance Regulatory and Development Authority, Government of India, and Ministry of Home Affairs, corporations must now offer health insurance to their employees for their well-being.

Why should employers offer employee benefits in India?

Some of the common reasons why employers must offer various employee benefits in India are to attract new top talent, retain existing employees, motivate the team, provide non-monetary support to their employees, maintain a promising company image, and so on.

With employee benefits, other than the employers, employees also benefit from better financial and well-being support, new growth and development opportunities, etc.

Is relocation allowance a common practice for employers?

Relocation allowances or benefits are not standard practice in India. Companies commonly offer this allowance to employees in critical roles that require frequent relocation. Under this allowance, employees receive monetary support against their relocation expenses.