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There are two main types of benefits in India - Statutory and Non-statutory. While the statutory benefits are mandatory, non-statutory benefits are perks or add-ons employers provide to retain and attract employees in India.
The statutory benefits include state insurance, provident funds, gratuity payments and others. While the non-statutory benefits are usually health insurance, travel allowances, and disability coverage.
The Statutory benefits in India include social security benefits and are mandatory according to Indian law.
Here are some of the common statutory benefits in India.
The Indian employment law splits social security benefits into two categories - the Employees’ State Insurance (ESI) and the Employees’ Provident Fund (EPF).
The Employees’ State Insurance (ESI) Act, 1948 applies to organizations that employ at least 10 people with their employees earning less than INR 21,000 monthly (approximately 286 USD).
The ESI Act in India requires a monthly contribution of 4.75% of employees’ wages to their ESI fund. Also, the employees make a contribution of 1.75% of their wages. This contribution entitles them to medical insurance in India.
Under this act, employees in organizations with a workforce strength of 20 or more employees and earning less than INR 15,000 (approximately 204 USD) monthly have an obligation to contribute 12% of their monthly wages. Also, employers contribute an equal amount to the EPF.
When employees retire, they receive payments with interest from the EPF.
The Employees’ Pension Scheme (EPS) is responsible for obtaining a percentage of employees’ income to provide pensions for employees above 58 years. When organizations make a contribution of 12% of the employee’s salary to the EPF, 8.33% of it is for the EPS.
The Employees’ Pension Scheme provides pension payments to employees for life. In the event of the death of the employee, a nominated person, usually a family member, receives the pension.
Employees who have worked in an organization for over five years, retired, or become disabled are eligible for gratuity benefits in India. Gratuity payments usually equal 15 days of wages for every employment year.
The gratuity scheme in India applies to employees working in mines, factories, or other establishments with 10 or more employees.
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Non-statutory benefits, also known as supplementary benefits are essentially add-ons or perks organizations provide to employees to retain or attract talent in India.
These benefits include different forms of insurance such as medical, life, accident insurance and more.
Every employee in India is entitled to receive benefits according to the Indian employment law. However, the benefits vary substantially across different industries, employment contracts and even states. For instance, the benefits of a tech professional in Bangalore will be very different from a factory worker's entitlement in a rural state in India.
Employers in India have an obligation to contribute a percentage of each employee’s salary to the Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS), and the Employees’ Deposit Linked Insurance Scheme. However, not all organizations in India are required to make this contribution. Read more here on how to hire a remote team in India.
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The four major types of employee benefits are health insurance, unemployment insurance, gratuity and Employee’s Provident Fund (EPF).
Gratuity is a lump sum employers pay their employees to show gratitude for the services provided over the years. Gratuity in India is subject to the Payment of Gratuity Act 1972. The Indian parliament passed this act on the 21st of August 1972.
Yes, the statutory bonus is a compulsory payment by law. The Payment of Bonus Act 1975 makes provisions for employers' payment of statutory bonuses.
Employees must work in an organization for at least five years to be eligible for gratuity in India. However, in unfortunate circumstances like disablement or death of employee, the five years eligibility condition does not apply.
Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.
