- Employee benefits in India split into statutory benefits the law requires (EPF, ESI, gratuity, statutory bonus, and paid leave) and supplementary perks employers add to compete.
- The four Labour Codes have been in force since November 21, 2025, with final central rules notified on May 8, 2026: wages must now be at least 50 percent of total pay, which raises PF, gratuity, and bonus costs.
- Fixed-term employees now earn gratuity pro-rata after just one year of continuous service and get parity of wages, benefits, and leave with permanent staff.
- Group health insurance that extends to family and parents, a predictable bonus, flexible work, and mental health support are what candidates expect beyond the legal minimum.
- Benefit costs vary with salary structure and role; for companies hiring without a local entity, an Employer of Record administers every statutory benefit and filing for you.
- Need help with employee benefits in India? Talk to an expert!
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Employee benefits in India go beyond the salary you deposit each month. Employers must provide statutory benefits such as provident fund, state insurance, gratuity, and paid leave, and competitive employers add health cover, wellness support, and flexible perks on top. For global companies hiring into India, these benefits carry registrations, contribution rates, and filing deadlines that are easy to underestimate.
This guide covers the benefits you are legally required to provide, the perks that make an offer competitive, what they cost, and how the four Labour Codes now in force change your obligations, all current as of July 2026.
What are the mandatory employee benefits in India?
Employee benefits in India fall into statutory benefits the law requires and supplementary perks employers add to compete. The core statutory benefits are provident fund, state insurance, pension, deposit-linked insurance, gratuity, statutory bonus, and paid leave. All are now governed by the four Labour Codes in force since November 21, 2025.
Here is what you must provide:
- Employees' Provident Fund (EPF): A retirement savings scheme where the employer and employee each contribute 12 percent of basic salary plus dearness allowance (a cost-of-living top-up, abbreviated DA). It is mandatory at 20 or more employees. Of the employer's 12 percent, 8.33 percent goes to the pension scheme on the ₹15,000 (about $176) wage ceiling and 3.67 percent to EPF. Governed by the Code on Social Security, 2020 (formerly the Employees' Provident Funds Act, 1952). See our guide to whether EPF is mandatory in India.
- Employees' State Insurance (ESI): Medical and cash benefits for lower-wage staff. The employee contributes 0.75 percent and the employer 3.25 percent of gross wages. It applies at 10 or more employees where monthly wages are ₹21,000 (about $247) or less, or ₹25,000 (about $295) for employees with disabilities. Governed by the Code on Social Security, 2020 (formerly the ESI Act, 1948).
- Employees' Pension Scheme (EPS): A monthly pension from age 58, funded by the 8.33 percent slice of the employer's EPF contribution on the wage ceiling. Employees need 10 years of service to qualify, and pension income is taxable.
- Employees' Deposit Linked Insurance (EDLI): Automatic life cover for every EPF member. The employer contributes 0.5 percent of wages on the ceiling, with a maximum assurance benefit of ₹7 lakh (about $8,200).
- Gratuity: A lump sum for length of service, calculated as (last drawn monthly salary times 15 times years of service) divided by 26. Permanent employees qualify after five years, while fixed-term employees now earn it pro-rata after one year of continuous service, with a cap of ₹20 lakh (about $23,500). Governed by the Code on Social Security, 2020 (formerly the Payment of Gratuity Act, 1972). Estimate payouts with our gratuity calculator, and see how payroll in India handles gratuity accruals for accurate cost planning.
- Statutory bonus: An annual bonus of 8.33 percent to 20 percent for employees whose basic plus DA is ₹21,000 (about $247) per month or less. The bonus is calculated on ₹7,000 (about $82) or the applicable state minimum wage, whichever is higher. Governed by the Code on Wages, 2019 (formerly the Payment of Bonus Act, 1965).
- Paid leave: Earned or annual leave of about 15 days (it varies by state, roughly 12 to 18), plus sick leave, casual leave, and public holidays. Maternity leave is 26 weeks for the first two children and 12 weeks for later children, and a creche facility is required at 50 or more employees. Build state-aligned policies with our holiday and leave policy calculator.
Several states also levy professional tax, a small state-level payroll tax capped at ₹2,500 (about $30) per year under Article 276 of the Constitution, though states such as Delhi and Uttar Pradesh levy none. Some states also require Labour Welfare Fund contributions. To see how these deductions flow into take-home pay, use our salary calculator.
| Benefit | Employer contribution | Employee contribution | Eligibility / ceiling |
|---|---|---|---|
| EPF (Provident Fund) | 12% of basic + DA (3.67% EPF, 8.33% EPS) | 12% of basic + DA | Mandatory at 20+ employees; ₹15,000 (about $176) wage ceiling |
| ESI (State Insurance) | 3.25% of gross | 0.75% of gross | At 10+ employees; wages ₹21,000 (about $247)/month or less |
| EDLI (life cover) | 0.50% of wages | None | Linked to EPF; maximum benefit ₹7 lakh (about $8,200) |
| Gratuity | 15 days' wages per year of service | None | 5 years for permanent staff; fixed-term pro-rata after 1 year; cap ₹20 lakh (about $23,500) |
| Statutory bonus | 8.33% to 20% of wages | None | Basic + DA ₹21,000 (about $247)/month or less |
| Maternity leave | 26 weeks paid (first two children) | None | Female employees with 80+ days service |
| Paid leave | Earned, sick, and casual leave | None | Per state Shops and Establishments Act |
How do the 2025 Labour Codes change employee benefits in India?
India's four Labour Codes have been in force since November 21, 2025, with final central rules notified on May 8, 2026. They replace 29 older laws and change how benefits are calculated. The two changes global employers feel most are the 50 percent wage rule and pro-rata gratuity for fixed-term staff.
What is the 50 percent wage rule?
Under the Code on Wages, 2019, basic pay plus dearness allowance plus any retaining allowance must be at least 50 percent of total remuneration. Where allowances exceed that half, the excess is added back into "wages" for calculating provident fund, gratuity, and bonus. In practice this raises the base your statutory contributions are built on, so benefit costs go up for salary structures that were heavy on allowances. Read our explainer on the new Labour Codes in India.
What changed for fixed-term employees?
The Code on Social Security, 2020 gives fixed-term employees gratuity on a pro-rata basis after just one year of continuous service, instead of the five years permanent staff must complete. Fixed-term employees also get parity of wages, benefits, and leave with permanent employees doing the same work. This makes short project contracts more expensive than many employers expect.
What else is new under the codes?
The codes broaden coverage in several ways that matter when you set up local payroll in India:
- Universal minimum wage: The Code on Wages extends a statutory minimum wage to all employees in all employment, not just the older list of scheduled jobs, and sets a national floor wage.
- Gig and platform workers: The Code on Social Security brings gig and platform workers into social security (life, disability, health, and old-age cover), funded partly by aggregator contributions.
- Mandatory wage slips: Employers must issue a wage slip to every employee, in physical or electronic form.
- Canteen facility: The Occupational Safety, Health and Working Conditions Code requires a canteen where 100 or more workers are employed.
How do employee benefits in India differ from the US?
India makes most benefits mandatory, while the United States leaves them largely to employer discretion. EPF, ESI, gratuity, statutory bonus, and paid leave are legal obligations in India with registrations, filing deadlines, and penalties attached, whereas US retirement matching, health cover, and paid leave are mostly competitive choices set by each employer.
| Benefit | India | United States |
|---|---|---|
| Retirement savings | Employees' Provident Fund (EPF), mandatory at 20+ employees | 401(k) plans, offered at employer discretion |
| Healthcare | ESI for eligible lower-wage staff, plus common employer group health insurance | Employer-sponsored health insurance, common but not federally required |
| Gratuity | Statutory lump sum for eligible employees | No direct equivalent |
| Paid leave | Set by labour codes and state regulations | Determined primarily by employer policy |
| Maternity leave | Up to 26 weeks paid for eligible employees | No federal paid maternity requirement |
The biggest surprise for US employers is how much is mandatory. Retirement is the clearest example: EPF is compulsory once you cross the employee threshold, with both sides contributing 12 percent of basic pay plus DA, while a US 401(k) is voluntary and the match is a recruiting lever rather than a legal duty. Health cover follows the same pattern, since ESI is mandated for lower-wage staff.
Compliance also works differently. Indian statutory benefits are tied to registrations, monthly contributions, and state-specific rules that vary across the country, so companies hiring employees in India need local payroll and compliance processes from the first hire. For companies hiring without a local entity, an Employer of Record in India administers these statutory benefits and contributions on your behalf.
What supplementary benefits do employers offer in India?
Supplementary benefits are optional perks employers add on top of statutory minimums to attract and keep talent. The most common in India are group health insurance, enhanced life and accident cover, the National Pension System, paternity and parental support, wellness programs, and allowances such as house rent, meals, and remote-work stipends.
Group health insurance
Private group health insurance is the most common supplementary benefit, because ESI only covers lower-wage staff. Coverage typically includes hospitalization and outpatient care for employees above the ESI threshold, and most plans extend to spouses, children, and parents.
Life, accident, and retirement add-ons
Enhanced life insurance supplements the basic EDLI cover, often at two to three times annual salary, and group personal accident insurance covers accidental death and dismemberment. The National Pension System is a voluntary, tax-efficient retirement scheme where employers can contribute up to 14 percent of basic salary plus DA under the new default tax regime (10 percent under the old regime) as of FY 2025-26, deductible under Section 80CCD(2), alongside mandatory EPF.
Leave, wellness, and allowances
Paternity leave is not legally required but is becoming standard, commonly two to three weeks. Wellness programs cover mental health counseling, health check-ups, and fitness benefits. Common allowances include:
- House Rent Allowance (HRA): A tax-efficient component that helps with housing costs and is one of the most valued allowances.
- Conveyance and meal benefits: Commuting reimbursements and digital meal cards.
- Remote-work and learning stipends: Home-office budgets and professional development or certification support.
- Employee stock ownership plans (ESOPs): Common in startups, giving employees equity in the company.
Setting up these perks correctly alongside statutory benefits is where Employer of Record services do the heavy lifting for global teams.
What benefits do employees in India expect?
Indian professionals weigh the full package, not just salary, when comparing offers. Group health insurance that extends to family and parents, a predictable annual bonus, flexible work, and, for technology and knowledge roles, a learning budget and mental health support are the benefits candidates increasingly expect from a competitive India offer.
| Benefit | Employee expectation |
|---|---|
| Health insurance | Essential |
| Family or parents coverage | Highly valued |
| Annual performance bonus | Common |
| Learning and development budget | Common in professional roles |
| Flexible work arrangements | Increasingly expected |
| Wellness and mental health support | Growing importance |
Group health insurance is now table stakes, and an offer without it stands out for the wrong reasons. Coverage that extends to a spouse, children, and parents is one of the most valued benefits in India, where supporting aging parents is a common financial responsibility. Matching local norms, not just the legal minimum, is what makes an India offer competitive against well-funded domestic employers. An employee cost calculator helps you budget these benefits before you extend an offer.
How much do employee benefits in India cost?
Employee benefit costs in India depend on the salary structure, headcount, and the perks you add on top of the statutory minimum. Mandatory contributions such as EPF, ESI, gratuity provisioning, and statutory bonus are set percentages of pay, and optional benefits like group health insurance and wellness add more depending on coverage. The table below breaks down the mandatory employer costs.
| Benefit component | Employer cost | Notes |
|---|---|---|
| EPF (Provident Fund) | 12% of basic + DA | 8.33% goes to pension (EPS) |
| ESI (State Insurance) | 3.25% of gross wages | Only for employees below the wage threshold |
| Gratuity provision | About 4.81% of basic | Accrued annually, paid after the service period |
| Statutory bonus | 8.33% to 20% | For eligible employees below the wage cap |
| EDLI (life cover) | 0.50% of wages | Capped at a small monthly amount |
Because the Code on Wages, 2019 requires basic pay to be at least 50 percent of total remuneration, allowance-heavy structures now carry higher statutory costs than they used to. Manufacturing or construction roles often carry higher insurance premiums than IT and services. For a full breakdown by role and salary, use our employee cost calculator or read how EOR costs in India are structured. If you are weighing your setup options, our overview of what an EOR does explains where these costs sit.
How do you enroll employee benefits and stay compliant in India?
To offer compliant benefits in India, register on the Shram Suvidha Portal, enroll for EPF at 20 or more employees and ESI at 10 or more, generate a Universal Account Number for each hire, and remit PF and ESI by the 15th of the following month. The four Labour Codes consolidated 29 laws into four, simplifying registration.
Registration and enrollment
A single Shram Suvidha registration now replaces several older separate registrations. Collect each employee's Aadhaar number (the national ID), bank details, and PAN card (the tax ID), generate a Universal Account Number, and link it to Aadhaar, which is required for EPF and ESI. Issue appointment letters that clearly list all social security entitlements. Handling this across states from day one is why many global companies run payroll in India through a partner.
Ongoing requirements
Submit monthly PF and ESI contributions, process the annual statutory bonus, and keep digital records of attendance, wages, and contributions. Late payments and missed filings attract financial penalties and interest under the Labour Codes, and serious violations can carry imprisonment, so timely remittance matters. If you are concerned about creating a taxable presence, take our Permanent Establishment risk quiz, and use our employee misclassification check before you engage contractors.
What are the 2026 trends in employee benefits in India?
India's benefits expectations in 2026 center on personalization and wellbeing. Flexible benefit plans that let employees choose how to spend a benefits budget, mental health and wellness support, more inclusive coverage such as domestic partners and parents, eldercare and family support, and professional development budgets are what competitive employers now offer.
Flexible benefit plans and wellness
Cafeteria-style plans let employees pick what matters most, whether extra insurance, gym memberships, wellness programs, or learning budgets, and technology companies and Global Capability Centers are leading the shift. Mental health support has moved from a perk to an expectation, with employee assistance programs, therapy apps, and counseling now standard in competitive packages.
Inclusive coverage and family support
Progressive employers extend health insurance to domestic partners, not just married spouses, and some cover a wider range of medical needs. With many employees supporting both children and aging parents, eldercare leave and extended family health coverage are becoming key retention drivers, alongside learning budgets and certification support for skilled roles. For more on hiring norms in India, see Wisemonk's India research.
How does Wisemonk simplify employee benefits in India?
Wisemonk is an India-native Employer of Record (EOR) that hires employees on our own Indian entity on your behalf and administers every statutory benefit, EPF, ESI, gratuity, bonus, and insurance, so you can offer a compliant, competitive India package without setting up a local entity.
Hire and pay in India without a local entity
Wisemonk EOR handles EPF, ESI, gratuity, statutory bonus, insurance, and every filing for your India team, with dedicated on-ground HR support and transparent pricing from $99 per employee per month. We support 300+ global clients, manage 2,000+ employees, process $20M+ in payroll, and hold a 4.8/5 rating on G2. Beyond EOR in India, we also handle managed payroll, background verification, equipment procurement, and Global Capability Center setup.
Frequently asked questions
Which employee benefits are legally mandatory in India?
Employers must provide EPF (retirement savings), ESI (health cover for lower-wage staff), gratuity, statutory bonus, maternity leave of 26 weeks, and paid annual, sick, and casual leave. Requirements depend on company size and salary thresholds, all now governed by the four Labour Codes.
Is gratuity mandatory in India, and when does it apply?
Yes. Gratuity is mandatory at 10 or more employees. Permanent employees qualify after five years of continuous service, while fixed-term employees now earn it pro-rata after just one year under the Code on Social Security, 2020. The cap is ₹20 lakh (about $23,500).
Is it mandatory to provide health insurance to employees in India?
ESI is mandatory at 10 or more employees where someone earns ₹21,000 (about $247) per month or less, and eligible employees cannot opt out. Because ESI stops above that wage, most employers add private group health insurance for higher-earning staff to stay competitive.
Do independent contractors receive employee benefits in India?
No. Genuine independent contractors do not receive EPF, ESI, gratuity, or paid leave. But misclassifying an employee as a contractor is risky: authorities can reclassify the relationship and impose back contributions and penalties. If a worker functions like an employee, treat them as one.
Can foreign companies provide employee benefits in India without a local entity?
Yes. Wisemonk EOR hires staff on its own Indian entity on your behalf and administers EPF, ESI, gratuity, insurance, and statutory filings, so you can offer compliant benefits without incorporating. This is the fastest route for a small or distributed team in India.
Can I pay 50% basic and 50% benefits to employees in India?
Not below half. Under the Code on Wages, 2019, basic pay plus dearness allowance (and any retaining allowance) must be at least 50% of total remuneration. If you load the rest into allowances so basic falls under 50%, the excess is treated as wages anyway and raises your EPF, gratuity, and bonus costs. In practice, structure basic plus DA at roughly 50% of CTC.
Is a salary above 21,000 eligible for statutory bonus in India?
Statutory bonus is mandatory only for employees whose basic plus dearness allowance is 21,000 rupees per month or less. Above that threshold it is not legally required, though employers may still pay a discretionary bonus to stay competitive. For eligible employees the bonus is 8.33% to 20%, calculated on 7,000 rupees or the applicable state minimum wage, whichever is higher.
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