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Employee benefits in India
Learn about the robust employee benefits in India, from healthcare to retirement savings. Get the facts.
Quick Overview
Notable:
- Private medical insurance is an essential benefit in India, and 100% of employers provide it
- India spends relatively little of its GDP on healthcare and there is a massive gap in access to healthcare between rural and urban living citizens. While about three quarters of Indians live in rural areas, only about one third of doctors and nurses are in rural areas.
- Basic salary is usually less than 50% of total compensation in India
- Flexible benefits schemes are becoming more prevalent with 20%+ of employers adopting the concept
Statutory Benefits include:
- Employee State Insurance (ESI) offers disability and medical coverage, but only covers those with a salary below INR 21,000, or about £200
- No unemployment coverage
- Employees’ Provident Fund (EPF): lump sum retirement benefit, accumulation of contributions with interest (employer contribution: 3.67%; employee contribution: 12%)
- Employees’ Pension Scheme (EPS): monthly pension calculated based on pensionable salary and years of service (employer contribution: 8.33%; employee contribution: None)
Employers typically provide:
- Supplementary private medical insurance
- Supplementary DC pension plan
- Supplementary life insurance, AD&D, travel insurance for accident and sickness
Other common benefits include:
- Dearness allowance is provided by many government agencies to assist employees when salaries are not rising at the same pace as inflation. Private companies are more suited to combat inflation with regular salary increments
- Employers competing for talent typically would provide more rich benefit packages including Earned Wage Access, Meal Subsidies, Commuting Subsidies, and flexible benefit schemes
- Buy/Sell holiday
- Transportation stipends
Benefits Summary
Benefits coverage standards can differ greatly across countries. The table below shows what statutory, market standard and great coverage look like for each benefit.
- No statutory requirement
- 90+% of all employers provide business travel insurance, which is tax-free
- NA
- Employee State Insurance (ESI) Includes both disability and medical insurance
- Employer contribution: 3.25%
- Employee contribution: 0.75%
- Only covers those with a salary below INR 21,000, or about £200
- Because statutory healthcare only covers low-income employees, 100% employers provide supplemental medical insurance
- Coverage typically includes inpatient hospitalisation, surgery and medical management for employees and all dependents.
- Median coverage level is INR 400,000
- Telehealth service
About 20+% of employers provide fully paid for dental and vision coverage as a part of their Medical Insurance offering
Excellent private medical coverage limit is INR 1,000,000
40+% of employers co-pay claims up to 20%
Some employers provide coverage for retirees.
Employees can ‘Top Up’ their medical insurance by selecting additional coverage
- €50/ month wellbeing budget
- EPF & EPS contributions include retirement, death and disability
- Employees’ Provident Fund (EPF): lump sum benefit, accumulation of contributions with interest
- Employer contribution: 3.67%
- Employee contribution: 12%
- Employees’ Pension Scheme (EPS): monthly pension calculated based on pensionable salary and years of service
- Employer contribution: 8.33%
- Employee contribution: None
- 25+% of employers provide a jointly funded Defined Contribution (DC) plan. Coverage is voluntary.
- 10%+ of employers provide a fully employer funded Defined Benefit (DB) plan.
- EPF & EPS contributions include retirement, death and disability
- No statutory unemployment insurance
- 90+% of employers fully fund supplemental life insurance, and 95+% of employers fully fund supplemental accidental death & disability (AD&D) plans.
- Payout is of 3x gross annual salary with the option to voluntarily top-up.
- Payout of 4x - 10x gross annual salary with the option to voluntarily top-up
- Every organisation with more than 50 employees must provide a childcare facility within a set distance and allow carers to visit up to 4 times a day.
- 70+% of employers offer further childcare benefits, including subsidies, reimbursements and flexible working hours.
- Some large multinational organisations offer on-site childcare
- No statutory requirement
- Many employers offer office snacks, company events and socials, happy hours, volunteer and community engagement initiatives.
- Daily breakfast in office
- In office snacks, beverages, and salads
- Weekly socials/happy hours
- Free lunch a few days a week
- INDR 5,000 / month meal budget
- No statutory requirement
- Partial reimbursement of tuition fees or an annual learning and development budget of up to INR 50,000
- Reimbursement of tuition fees, or an annual learning and development budget of between INR 50,000 and INR 100,000
- No statutory requirement
- Employee Discounts
- Purchase of holidays
- Commuting vouchers
- 10% of employers provide a housing subsidy
- 20% of employers provide 0% interest loans
- £100 - £200 / month Flex Benefits Allowance
- Late Night Taxis & Transportation stipends
- Earned Wage Access
- Financial Advice
- Employee Stock Options Scheme
Policies Summary
Policy coverage standards can differ greatly across countries. The table below shows what statutory, market standard and great policy coverage look like for each benefit.
- None
- 1 day/week
- Fully Hybrid/Remote and the option of a “Work from Anywhere” scheme.
- 12 days plus public holidays (about 18)
- Statutory is standard
- N/A
- None
- 90+% of employers offer paternity leave.
- N/A
- 12 days full pay
- 70% for up to 91 days in a year
- 80% of wages for up to 2 years when suffering from specific chronic conditions
- Statutory is standard
- N/A
- 26 weeks at 100% of pay
- 65+% of employers provide expanded maternity and adoption leave.
- N/A
Benefits
1. Healthcare / Private Medical Insurance
Employee State Insurance (ESI) Includes both disability and medical insurance. The employer contribution is 3.25% of employee base salary, and the employee contribution is 0.75% of base salary, but it only covers low-income employees (income below INR 21,000, or about £200). Statutory coverage, public healthcare facilities and their reach are considered highly inadequate. Private medical insurance is therefore an essential employee benefit in India.
Coverage typically includes inpatient hospitalisation, surgery and medical management for employees and all dependents. The coverage limit is typically between INR 100,000 - INR 1,000,000, but typically coverage limit is INR 400,000. Most employers include a telehealth service.
To support rising costs under spiralling medical inflation, many employers (40+%) also offer a co-payment/co-insurance arrangement, supporting up to 20% of the cost of claims.
Group health insurance plans are tax deductible up to INR 25,000 (INR 50,000 for employees over the age of 60).
Trends:
- Enhanced care for mental illness and chronic care
- Flexible coverage which allows employees the option of a “Modular Top-Up” for things like fertility treatment
Some popular providers include:
- Star Health and Allied Insurance
- Max Bupa Health Insurance
- ManipalCigna Health Insurance
- Bajaj Allianz General Insurance
- New India Assurance
2. Life Insurance & Disability
Statutory death benefits are covered by the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS). EPF & EPS contributions include retirement, death and disability. The following covers short term and long term disability, as well as accidental death and dismemberment.
In the case of normal retirement, EPF is a lump sum payout of accumulated contributions with interest (employer contribution: 3.67%; employee contribution: 12%). In the case of early death, accumulated funds are paid out to a beneficiary.
The EPS is calculated based on pensionable salary and years of service (employer contribution: 8.33%; employee contribution: none). It provides a monthly widow’s pension equal to the deceased’s pension that they would have received had they retired on the date of death. It is paid out until the widow’s death or remarriage. Dependents also receive a monthly portion and funeral expenses are supported up to INR 10,000.
90+% of employers are fully funding supplemental life insurance, which includes accidental death & dismemberment (AD&D) and is tax-advantaged. Payout is typically 2x - 4x gross annual salary with the option to voluntarily top-up.
Trend:
- Organisations are increasingly offering critical illness as a life insurance rider
Some popular providers include:
- HDFC Life
- SBI Life
- Bajaj Allianz
- Aviva Life
- ICICI Prudential
3. Retirement
Statutory pension is provided by the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS). EPF & EPS contributions include retirement, death and disability.
The EPF is a defined contribution plan (DC) and a lump sum retirement benefit, paid out as an accumulation of contributions with interest (employer contribution: 3.67%; employee contribution: 12%). The EPS is a Defined Benefit (DB), pay-as-you-go plan, calculated based on pensionable salary and years of service and paid monthly (employer contribution: 8.33%; employee contribution: none). Membership in EPF and EPS are mandatory for employees earning under INR 15,000 /month (most employees are members).
Statutory retirement contributions are low overall. This is in part because contributions work out to about 17% of basic salary, and basic salary is usually less than 50% of total compensation so this effectively means only 8% contribution. EPS also has an upper limit of INR 15,000 of pensionable salary. Therefore many employers are opting to support employees with supplemental Defined Contribution (DC) arrangements, either through superannuation funds or NPS (National Pension Scheme) Corporate Sector Plans.
About 25+% of employers provide a jointly funded Defined Contribution (DC) plan, through which coverage is voluntary. Contributions are typically up to 15% for a superannuation plan or up to 10% for an NPS plan (for both employer and employee). Both are tax advantaged. Payout varies depending on age, but is typically a combination of annuity and lump-sum. About 10+% of employers provide a fully employer funded Defined Benefit (DB) plan.
Some popular providers include:
- HDFC Life
- SBI Life
- Bajaj Allianz
- Aviva Life
- ICICI Prudential
Policies
1. Annual Leave
Employees are guaranteed 12 days statutory holiday, plus public holidays, which vary by state but there are typically about 18 public holiday days.
2. Sick pay
Sick leave varies by state, but is generally 12 days per year.
Sickness benefit pertains more to short term disability. The administration and calculation of Sickness Benefit (SB) is highly complex, but essentially offers 70% of wages payable to workers for up to 91 days in a year. Employees also have a right to Extended Sickness Benefit (ESB), which consists of 80% of wages for up to 2 years when one receives a diagnosis from a set list of chronic conditions.
3. Maternity & Paternity
Statutory maternity leave is 26 weeks at 100% of pay. Adoption leave is 12 weeks (for adoption of a child under 3 months) at 100% of pay. Otherwise there is no statutory paternity or parental leave.
65+% of employers provide expanded maternity, paternity and adoption leave. This leave ranges from 25 - 120 additional days, and can be unpaid, partially paid or fully paid. Around one third of employers offer fully paid supplemental parental leave, one third offer unpaid, and the rest offer a partial pay. Most offer flexibility in working from home and returning to work.
90+% of employers offer paternity leave, and 60+% of employers offer supplemental adoption leave.