A company can offer two types of benefits - statutory (mandatory) and non-statutory (voluntary). Statutory benefits are mandated by the government and require compliance to avoid heavy penalties in the form of fines. These benefits are designed to protect an employee's best interests and must be strictly adhered to. They apply to both on-site, hybrid and remote workers. Some noteworthy ones include the Employee Provident Fund (EPF), Employee Pension Scheme (EPS), Employee State Insurance (ESI), Professional Tax and Income tax deductions. Indian labour law dictates the minimum requirements for statutory benefits, and one must stay updated with the rules by visiting the official government website.
With many positives and boasting a large, educated population, stable government, rising forex reserves, and high-value capital markets—India seems to be on a firm growth path (Source – Investopedia). These advantages make India an increasingly popular location for companies seeking skilled talent.
Read more: Why India is the right choice for offshoring
The downside is that competition for skilled professionals has intensified. To attract and retain top talent, companies must now adopt a strategic approach. That is where non-statutory benefits come in. Apart from a competitive salary, work-life balance and growth opportunities, an employee looks to improve their wellbeing and job satisfaction. According to Randstad India's Work Monitor 2025 survey, 72% of Indian professionals rank flexibility (hybrid work) above salary hikes, while 65% would quit over lack of belongingness.
This is especially true for millennials and Gen Z, who will form 70% of India's workforce by 2030. (Source: MoSPI Youth in India Report) Some of the values they prioritise are holistic well-being, flexibility, and purpose-driven work. Companies that leverage tailored benefits report 25-30% lower attrition and 1.8-2.5x higher employee engagement (Source - Willis Towers Watson, 2024).
Therefore, understanding employer obligations in India is crucial for any business operating in India. Additionally, these benefits showcase how an organisation values its staff and help build a positive brand experience.
Some increasingly popular non-statutory benefits include health insurance, flexi-hours, remote work and wellness programs.
Read more: What is remote working
One of the newest benefits offered is mental health counselling—a perk virtually unheard of a decade ago. While not legally required, these benefits should be communicated clearly and added to the offer letter or employment agreement to set clear expectations and avoid disputes. Unlike statutory benefits, these can be adjusted, expanded, or revoked. Employees may negotiate them before joining.
The Bottom Line? In India's talent-driven economy, offering additional benefits is no longer optional—they're a strategic imperative that directly impacts productivity, reputation and retention.
Let's now dive into the details of each one.
Statutory benefits
Provident Fund (EPF) and Pension Scheme (EPS) are some of India's most popular benefits for salaried employees. Apart from providing financial security, the contributions and the interest earned are exempt from taxation both for the payer and the payee. An employer with 20 or more employees must register for the EPF scheme. However, establishments with fewer than 20 employees can voluntarily register.
As per the current EPF regulations, 12 per cent of an employee's salary is contributed to the provident fund. The employer also contributes 12 per cent, of which 8.33 per cent is dispensed to the Employee Pension Scheme (EPS), and the remaining 3.67 per cent goes into the EPF account.
This can be better explained with the help of an example.
If a person earns 10,000 a month
To summarise - 1,567 goes into the EPF account (which earns interest and is withdrawable), 833 goes into the EPS (which can be withdrawn after reaching retirement age 58-60 years in India)
This is just an example. Please ensure you stay updated on the latest figures, as the government regularly updates these amounts.
Benefits of this scheme
EPF: Employees can withdraw a partial amount in case of emergencies. If an employee loses their job, they can withdraw 75% of their EPF balance after one month of unemployment. They can then withdraw the balance after two months.
EPS: This offers an employee peace of mind as one gets to plan for their financial future after retirement. Indian employees can withdraw after they turn 58-60 years old (the countrywide retirement age).
This amount is tax-deductible for an employer and reduces the company's taxable income. This is a low-cost pension solution with contributions capped at ₹15,000 (Approx. £140) – making it far more affordable than a private pension scheme.
While these schemes are primarily employee-centric, these benefits can help businesses maintain legal compliance, retain staff and provide tax relief advantages.
Gratuity
Gratuity is the amount an employer pays in recognition of continued service. The employee must have worked for at least 5 years with this employer to be eligible. Many employees in India depend on gratuity pay as part of their retiral benefits. Gratuity is an employee retention tool, as employees tend to stay put for at least 5 years. Offering gratuity is a necessary way for employers to stay on the right side of the law, especially following the guidelines set out in the Payment of Gratuity Act.
Employee State Insurance (ESI)
The employee state insurance scheme was launched under an act designed to protect an employee's best interests against redundancy or impact during sickness, maternity, disablement, etc., and to provide medical care to the person insured and their families. Generally, establishments with ten or more employees must register under ESIC. Employee insurance benefit in India is mandatory and covers those with earnings below ₹21,000 (Approx. £200). An employer usually contributes 3.25% of the employee's monthly gross wages. The employee contributes 0.75% of their salaries. Please ensure you stay updated on the latest figures, as the government regularly updates these amounts. We may not have updated it in this blog, so make sure you confirm these amounts.
The government of India has made registration to this scheme fairly easy with a simple online process through the ESI portal. The employer has to pay 6 months of contributions, as well as some necessary documentation. More details of this process are illustrated at the end of this blog.
Professional tax & Income tax deductions
Professional tax is a fixed amount deducted for employees who earn more than a certain amount. This is then deducted before wages are credited to the employee's account and is reflected on a payslip. Each county has a prescribed professional tax slab, and an employer must ensure that the slab follows the guidelines specified on the Indian professional tax website. It is important to note that there are different professional tax brackets for women and minorities.
This portal should help you with the answers you need.
Income tax deductions
TDS (Tax deducted at source) are mandatory deductions at the time of payment. This deduction is based on an employee's estimated annual income. If an employee is a high earner, they will pay a more significant percentage. These deductions should be reflected in an employee's payslip as well.
Paternity leave
Paternity leave is uncommon in most companies, but some large multinational organisations such as Google, Accenture, and IBM are changing the norm. Employees who have worked in an organisation for more than 80 days in 12 months are eligible for mandatory paternity leave. An organisation must pay the employees' wages during the leave period, and this time off cannot be deducted from the employee's annual leave bank. The employee is eligible for a 15-day leave within 6 months of the birth or adoption of a child, after which the leave lapses. In the case of adoption, paternity leave provisions only apply when the child is under the age of one.
Maternity leave
All expecting employees are entitled to maternity leave of 26 weeks for their first and second child. From the third child onward, they become eligible for 12 weeks instead. They can start maternity leave up to 8 weeks before the expected due date. In case of loss or a miscarriage, they are eligible for 12 weeks on proof of a medical certificate.
Employers mandatorily pay full wages to women on maternity leave. The rate is calculated using an average from the daily rate for wages earned three months before the leave begins. Employers must mandate a 6-week medical rest following delivery or loss of pregnancy.
In India, employees are typically entitled to 15-18 days of paid annual leave, along with 12 days of sick leave and 6 days of casual leave, as per standard labour practices.
Annual leave
Holiday leave is usually 15 days a year, depending on the employee's state of residence and the industry in which they work. Companies mandate these; however, employees can encash them should they choose to. This means employees receive monetary compensation for their unused leave days.
Casual leave
Casual leaves are typically six days per year. These leaves allow the employees some flexibility in case of unforeseen circumstances. While usually unplanned, taking these leaves requires clear communication and approval from management. The norm currently is casual leaves granted for at least half a day, with up to a maximum of three days per month.
Sick leave
In India, employees receive up to 12 days of paid sick leave annually. If an employee is absent for two or more working days, they may need to present a medical certificate.
Public holidays
India has only three national holidays which are mandated: Republic Day (26th January), Independence Day (15th August), and Gandhi Jayanti (2nd October). An organisation can select a further 14 public holidays from the government-approved calendar.
Minimum wage in India
The Indian parliament enacted the Minimum Wage Act in 1948 to set minimum wages for specific 'scheduled employment' categories across the country. It is as complex as it sounds - simply because India defines nearly 2,000 types of jobs with 400 or more employment categories, each with a different minimum wage. One must ensure they stay up to date with the latest amounts by checking updates on the Indian government website.
Non-Statutory employee benefits (Voluntary perks by employers)
Beyond statutory benefits, non-statutory perks go a long way in creating a positive work culture and retaining top talent. Employers have a significant opportunity to differentiate themselves by creating benefits that highlight their unique value proposition.
In order to understand how to curate the right benefits, we need to understand an Indian. As India is a collectivistic society, an individual's success is intertwined with family and community. While these benefits are largely offered to employees, they tend to focus on dependents, extended family, and the community.
Health insurance
Healthcare is a significant concern for employees in India. Out-of-pocket health expenses account for nearly two-thirds (62.6%) of India's total health expenditures – one of the highest in the world. Basic private medical insurance, while not statutory, is provided by many employers in India to help alleviate some of these stressors. These plans often include additional coverage for dental, vision, accident, disability, hospitalisation and long-term care. They may also extend coverage for the employee's spouse, children, and other dependents. Some popular health insurance providers in India are HDFC Life, Aviva Life and ICICI Prudential.
Retirement benefits (Pension schemes)
Though non-statutory, this saving scheme is backed by the Indian Government. It's a universal pension scheme open to all Indians, whether resident or overseas. It offers wide flexibility with withdrawals as well as a range of investment options such as bonds and govt. Unlike EPS, an employee can select the amount they would like to contribute. Securities make it a safe and stable choice to save for retirement. Many employers offer this scheme to their employees as their contribution (usually 10%) is tax-free. It has minimal admin, making it a hassle-free perk.
Flexible work arrangements
In order to help employees balance their professional and personal lives, reduce burnout and increase engagement, many companies now include remote work or flexible work as part of the employee contract.
Performance-based incentives & bonuses
As mentioned earlier, financial security is one of the major stressors for Indians. In order to alleviate some of this stress, many organisations have performance bonuses, stock options, and equity grants. Additionally, these benefits aim to reward employees who work long-term with the organisation by aligning their growth with that of the company.
Wellness programs
Many firms in India are investing in wellness programs such as gym memberships, yoga, mental health support and training programs. These can help improve employee satisfaction and productivity.
Transport allowance & meal coupons
Many companies supplement their benefits with office snacks, regular lunches and monthly social events. Additionally, many organisations offer coupons to their employees to redeem at supermarkets.
Childcare
Many employers now offer childcare benefits, including daycare options and part-time working hours.
Learning and advancement
Many firms offer advancement programs by offering funding for executive programs and certifications.
How to handle the paperwork and enrol employees in these schemes
Navigating through these legal challenges can be quite a mammoth task. We've compiled it in one place, so it's comprehensive for a beginner looking to build an offshore staffed team.
Some housekeeping basics
Ensure you set clear expectations with coherent communication and instructions to your employees. Make sure they are aware of the benefits they are entitled to. You will then need to collect important information from your employees – such as name, address, date of birth and identification documents. Finally, HR must ensure that up-to-date records of all enrolments and changes are maintained for future reference.
To register for EPF, visit the EPFO portal and sign up as a new establishment. After entering basic details and uploading documents, you'll receive a temporary number. Once verified, EPFO will issue your establishment code. Finally, generate employee UANs and remember to file monthly returns by the 15th of every month.
To register for Professional Tax (PT), first sign up as an employer on your state’s PT portal. Fill out Form 1/Form A with your business details and employee count, then upload the required documents like PAN and address proof. Pay the nominal fee (₹50–₹500, depending on the state), and you’ll receive your PT Enrolment Certificate (PTEC) within 7–15 days. Once registered, remember to file monthly or quarterly returns to remain compliant.
To register as an employer with ESIC, visit the official portal and complete Form-01 with your company details. Upload required documents, including PAN, proof of business registration, employee list with salaries, and bank information. After submission, note your 17-digit temporary registration number. Once ESIC verifies your application, you'll receive a permanent 17-digit Employer Code. Finally, use this code to log in and pay monthly contributions (4.75% by employer + 1.75% by employee) by the due date.
To begin TDS compliance, first obtain a TAN by applying on the NSDL TIN portal using Form 49B. Provide your business details, pay the ₹65 fee, and you'll receive your TAN via email within 2–3 days. Next, register on the Income Tax e-Filing portal using your PAN. For ongoing compliance, deduct TDS from applicable payments and file quarterly returns—Form 24Q for salaries and Form 26Q for non-salaries—by the due dates (31st July, October, January, and April) to avoid penalties. Consider professional assistance to streamline the process while you focus on core business operations.
These processes are as they stand today. Ensure you stay up to date with the latest rules by visiting the official websites of each one. These processes are complex and require a local entity, an understanding of local labour laws and compliance, the ability to run payroll as well as constant monitoring to ensure they are complied with.
Conclusion
Alternatively, we could just handle all this for you. We at Black Piano are Employers of Record for multiple businesses around the UK and have successfully built high-functioning teams. Unlike almost all other EOR services, we don’t just give you a platform to pay your staff and then step back. That's one small part of a much more comprehensive remote workforce solution that Black Piano provides. We help you recruit and interview candidates. We handle contracting, payroll and onboarding. And then, we take on the role of your remote HR team, keeping your new hires motivated, incentivised and retained.
Over the years, we have successfully navigated the cultural challenges and legal barriers that come with working in India. Far from being obstacles, these challenges have shaped our understanding of this vibrant market—one that is undergoing a remarkable transformation. As infrastructure modernises, policies evolve, and digital adoption accelerates, India stands at a unique ground, offering forward-thinking companies a chance to be part of its growth story in a meaningful way.
Read more: Why India
Let's chat more over a phone call. Get in touch, and let's see how we can build you a great remote team.
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