Employee Benefits in India: A Complete 2026 Guide

Employee benefits in India are the non-wage compensation an employer provides in addition to base salary. They fall into two categories: statutory benefits mandated under Indian labour law, and voluntary benefits an employer chooses to offer to attract and retain talent.

The statutory framework changed on 21 November 2025, when the Government of India brought all four labour codes into effect: the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Occupational Safety, Health and Working Conditions Code 2020. These four codes consolidate 29 earlier central labour laws. The Social Security (Central) Rules were notified on 8 May 2026. Full operational rollout of the Codes is being phased in through 2026 as state-level rules are finalised.

This guide sets out what Indian employers must provide by law in 2026, what leading employers add on top, how each benefit is taxed, and what an employee benefits package typically costs. It is written and published by Plum, an IRDAI-licensed group health insurance and employee benefits broker.

What are employee benefits in India?

Employee benefits in India are all forms of non-wage compensation an employer provides in addition to base salary. They serve three purposes: statutory compliance, social security and financial protection for the employee, and employer branding for the purpose of attraction and retention.

Indian employers work with two distinct categories.

Statutory (mandatory) benefits are the ones an employer must provide by law. They include contributions to the Employees' Provident Fund, coverage under the Employees' State Insurance scheme where applicable, gratuity on separation after qualifying service, maternity benefit, paid leave, statutory bonus for eligible employees, and professional tax deduction and remittance.

Voluntary (supplementary) benefits are the ones an employer chooses to offer to be competitive in the talent market. Common categories include group health insurance for the employee and their family, group term life and group personal accident cover, wellness and preventive care programmes, flex benefits allowances, meal cards, retirement top-ups through the National Pension System, employee stock options, and learning and development allowances.

A significant share of the Indian labour force is informal and falls outside the reach of the statutory framework as historically constituted. The 2025 labour codes extend social security coverage to gig and platform workers for the first time under central law, and the Government has stated that social security coverage rose from approximately 19 percent of the workforce in 2015 to more than 64 percent by 2025.

What changed under India's new labour codes in 2025?

India's four labour codes came into effect on 21 November 2025. They replaced 29 central labour statutes with a single consolidated framework. The four codes are:

• Code on Wages 2019, which subsumes the Payment of Wages Act 1936, the Minimum Wages Act 1948, the Payment of Bonus Act 1965, and the Equal Remuneration Act 1976.
• Code on Social Security 2020, which subsumes the Employees' Provident Fund Act 1952, the Employees' State Insurance Act 1948, the Payment of Gratuity Act 1972, the Maternity Benefit Act 1961, and six other statutes.
• Industrial Relations Code 2020, which consolidates the Industrial Disputes Act 1947 and two related statutes.
• Occupational Safety, Health and Working Conditions Code 2020, which consolidates the Factories Act 1948 and 12 other safety and working-conditions statutes.

The Social Security (Central) Rules were notified on 8 May 2026. Draft central rules for the other three codes were placed for public consultation in December 2025. State-level rules are being finalised through 2026.

Five changes matter for the benefits landscape.

First, a uniform definition of wages. Under the Code on Wages, basic pay plus dearness allowance must equal at least 50 percent of total remuneration. The Ministry of Labour and Employment confirmed in its March 2026 FAQ that the 50 percent rule applies from 21 November 2025. For many salary structures where basic sits below 50 percent of cost to company, this raises the base on which the Employees' Provident Fund contribution, gratuity, and statutory bonus are calculated.

Second, mandatory appointment letters for every worker. Employers must issue a written appointment letter setting out the terms of engagement, which had previously been discretionary in much of the private sector.

Third, timely wages. Wages must be paid within a period notified by the appropriate government. Delay attracts penalties.

Fourth, statutory coverage for gig and platform workers under central law for the first time, through a dedicated Social Security Fund. Aggregators contribute between 1 and 2 percent of annual turnover, capped at 5 percent of what they pay their gig workers. The mechanism is examined in more detail below.

Fifth, mandatory free annual health check-ups for every worker aged 40 and above, funded by the employer.

During the transition, the provisions of the earlier acts and their subsidiary rules continue to apply where the new codes do not yet have operative central or state rules. Employers should track state-level notifications through 2026, because the applicable framework in any given month can differ by state and by type of establishment.

Statutory benefits at a glance

The table below summarises the seven principal statutory employee benefits in India, effective under the labour codes from 21 November 2025.

Source: Code on Wages 2019, Code on Social Security 2020, Occupational Safety, Health and Working Conditions Code 2020. Effective 21 November 2025.

For a visual reference card of the same data suitable for embedding at the top of the page or as the social share image, see the Statutory employee benefits in India, at a glance SVG supplied with this guide.

What is the Employees' Provident Fund (EPF) in India?

The Employees' Provident Fund is a defined-contribution retirement savings scheme administered by the Employees' Provident Fund Organisation. It applies to establishments with 20 or more employees. Contributions are made by both the employee and the employer at 12 percent each of wages, where wages under the current rules mean basic pay plus dearness allowance.

The statutory wage ceiling for mandatory contribution is ₹15,000 per month, which caps the mandatory contribution at ₹1,800 per month per side. Contribution on wages above the ceiling is voluntary, and many employers extend contributions on the actual basic and dearness allowance (referred to as uncapped provident fund) as a retention feature.

The employer's 12 percent share is split. Of the 12 percent, 8.33 percent is directed to the Employees' Pension Scheme (subject to the same ₹15,000 wage ceiling, capping the pension contribution at ₹1,250 per month), and the remaining 3.67 percent goes into the Provident Fund account. On top of the 12 percent, the employer pays 0.5 percent as Employees' Deposit Linked Insurance and approximately 0.5 percent as administrative charges. The total employer outgo for provident fund contribution is therefore approximately 13 percent of the wage base up to the ceiling.

Under the Code on Social Security 2020, the Provident Fund provisions of the Employees' Provident Funds and Miscellaneous Provisions Act 1952 are subsumed into a single social security code. Full operational rollout of the Code's provident fund provisions is being phased in through 2026. The ₹15,000 wage ceiling has remained unchanged for several years and is under judicial review as of 2026. The applicable rules continue until the Central Government notifies a revision.

Common compliance errors are the wage ceiling being applied to gross salary rather than basic plus dearness allowance, and Employees' Pension Scheme contributions being computed above the ₹1,250 monthly cap. Payroll systems should apply the 50 percent rule from the Code on Wages when computing the wage base.

What is the Employees' State Insurance (ESI) scheme?

The Employees' State Insurance scheme is a contributory social security scheme administered by the Employees' State Insurance Corporation. It provides medical care, cash sickness benefit, maternity benefit, disablement benefit, and dependants' benefit for insured employees and their families.

The scheme applies to establishments with 10 or more employees in most states (20 or more in Maharashtra and Chandigarh, which have a higher threshold). It covers employees whose gross monthly wages are ₹21,000 or less. The wage ceiling for employees with disabilities is ₹25,000 per month.

Contribution rates, unchanged since 1 July 2019, are 0.75 percent of gross wages from the employee and 3.25 percent of gross wages from the employer, adding up to 4 percent of gross wages in total. Employees earning a daily average wage of ₹176 or less are exempt from the employee-side contribution, but the employer share continues.

Once contributions begin, they continue for the full contribution period even if the employee's wages cross the ₹21,000 threshold mid-period. India runs two contribution periods each year, April to September and October to March.

The scheme covers full medical treatment for the insured employee and their family through the ESI Corporation's network of hospitals and dispensaries. Cash benefits include sickness benefit at 70 percent of average daily wages for up to 91 days per year, extended sickness benefit for specified long-term conditions, maternity benefit, and disablement benefit. The Corporation also administers education benefits for the children of insured workers.

Under the Code on Social Security 2020, the Employees' State Insurance Act 1948 is subsumed into a single social security code. The Central Government retains the power to extend ESI coverage to establishments with fewer than 10 employees through notification, and the Code creates the framework to bring gig and platform workers into ESI-style schemes over time.

How does gratuity work in India?

Gratuity is a statutory lump-sum payment made by the employer to the employee on separation, in recognition of continuous service. It is governed by the Payment of Gratuity Act 1972 as now layered by Chapter V (Sections 53 to 58) of the Code on Social Security 2020, effective 21 November 2025. It applies to every factory, mine, oilfield, plantation, port, railway, shop, or establishment that has employed 10 or more workers on any day in the preceding 12 months. Once the threshold is crossed, the obligation continues even if the headcount later falls below 10.

The formula

Gratuity = (Last drawn wages × 15 × Completed years of service) ÷ 26

Wages here means basic pay plus dearness allowance and retaining allowance where applicable, in line with the uniform wage definition under the Code on Wages. The divisor 26 reflects working days in a month excluding weekly off. On completion of a year of service, a fractional year of six months or more is counted as a full year, per Section 53(2) of the Code.

The 50 percent rule under the Code on Wages, which requires basic pay plus dearness allowance to be at least 50 percent of total remuneration, materially raises the gratuity base for salary structures where basic pay historically sat below 50 percent of cost to company.

Who qualifies

• Permanent employees: eligible after five years of continuous service on retirement, resignation, superannuation, death, or disablement. The five-year requirement is waived where the separation is on account of death or disablement.
• Working journalists as defined in the Working Journalists and Other Newspaper Employees Act 1955: eligible after three years of continuous service, under the first proviso to Section 53(1) of the Code.
• Fixed-term employees: eligible after one year of continuous service on completion or termination of the contract, on a pro-rata basis. This is a significant change under Section 53, replacing the earlier five-year threshold for this category. The Ministry of Labour and Employment clarified in March 2026 that the year is counted from the start of the fixed-term contract.

What counts as one year of continuous service

Under Section 2A of the Payment of Gratuity Act, preserved under the Code, a year of continuous service is legally satisfied by 240 days of work in the preceding 12 months for a non-seasonal above-ground employee, or 190 days for an employee at an establishment on a five-day workweek. Under the earlier framework, courts including the Supreme Court in Madras Fertilisers Ltd. v. Controlling Authority applied this definition to the eligibility threshold. The Code has expressly adopted the 190- and 240-day benchmarks as the statutory definition of a completed year of service, removing the ambiguity that had persisted under the Payment of Gratuity Act alone.

Statutory cap and tax treatment

The statutory tax-exempt cap for gratuity in the private sector is ₹20,00,000, notified through S.O. 1420(E) dated 29 March 2018, which continues under the Code on Social Security. For central government employees the cap is ₹25,00,000. The ₹20 lakh limit is a lifetime aggregate across all employers, not a per-employer entitlement.

Employers may pay more than the statutory cap. Any excess loses its statutory character as gratuity, is treated as ex-gratia payment, and is fully taxable in the employee's hands. Tax exemption under Section 10(10)(iii) of the Income Tax Act (as preserved in the Income Tax Act 2025) applies only to the statutory portion.

Timing of payment and forfeiture

Gratuity must be paid within 30 days of the employee's last working day. Delay attracts simple interest at 10 percent per annum on the unpaid amount, payable to the employee.

The Code permits forfeiture of gratuity in two specific circumstances: where the employee's services have been terminated for riotous or disorderly conduct or any other act of violence, or where the services have been terminated for an act constituting an offence involving moral turpitude committed in the course of employment. Ordinary termination on grounds other than these does not trigger forfeiture.

Worked example

For an employee with a basic plus dearness allowance of ₹60,000 per month and 10 completed years of continuous service, the gratuity works out to ₹3,46,154 (60,000 × 15 × 10 ÷ 26). Applying a 30-day divisor instead of 26 understates the payout by more than 13 percent, and remains the most common payroll error on this benefit.

Employer provisioning

Actuarial provisioning for future gratuity liability is typically made at approximately 4.81 percent of basic plus dearness allowance per employee per completed year of service, reflecting the 15/26 ratio applied to a projected wage. Ind AS 19 requires a projected unit credit method for the accounting liability. Employers who have not updated the wage base for the 50 percent rule should recalculate their gratuity provision on the higher base.

What are the maternity and paternity benefits in India?

Maternity benefit

Maternity benefit in India is governed by Chapter VI of the Code on Social Security 2020, which subsumes the Maternity Benefit Act 1961. It applies to establishments with 10 or more employees.

A female employee who has completed 80 days of continuous service with the employer in the 12 months preceding the expected date of delivery is entitled to paid maternity leave. The entitlement is:

• 26 weeks of paid leave for the first and second child, of which up to 8 weeks may be taken before the expected date of delivery.
• 12 weeks of paid leave for the third and subsequent children.
• 12 weeks of paid leave for adoptive mothers, from the date the child is handed over. The Supreme Court, in Hamsaanandini Nanduri v. Union of India (17 March 2026), struck down the earlier restriction that the adopted child must be below three months of age.
• 12 weeks of paid leave for commissioning mothers under surrogacy arrangements, from the date the child is handed over.

Payment is at 100 percent of average daily wages for the full leave period. For female employees earning ₹21,000 per month or less and covered by the Employees' State Insurance scheme, the ESI Corporation pays the benefit; for all others, the employer pays directly.

Additional obligations apply. A mandatory crèche facility is required at establishments with 50 or more employees, either on the premises or within a prescribed distance. Under Section 66 of the Code, a woman returning to work after delivery is entitled to two nursing breaks a day, of 15 minutes each, until the child reaches 15 months of age. The Social Security (Central) Rules 2026 also permit an additional travel period of up to 15 minutes each way where the crèche is off-site. Dismissal of a woman during maternity leave is prohibited, and violation is a criminal offence under the Code.

Paternity leave

There is no central statutory paternity leave entitlement for private-sector employees in India. The Maternity Benefit Act, and its successor Chapter VI of the Code on Social Security, apply exclusively to female employees. The Code uses broader parental leave language in places, but this has not been operationalised as a private-sector entitlement.

The Supreme Court, in its March 2026 ruling in Hamsaanandini Nanduri, urged the Union Government to legislate a statutory paternity leave framework. A private member's bill introduced in December 2025 proposed 8 weeks of paid paternity leave plus 8 weeks of shared parental leave, and has not yet been debated. Central government employees are entitled to 15 days of paid paternity leave under the Central Civil Services (Leave) Rules.

In the private sector, approximately 14 percent of Indian companies have a formal paternity leave policy. Typical policy ranges are 5 to 15 days, with some large employers offering considerably more.

What is the statutory bonus in India and how is it calculated?

The statutory bonus is a mandatory annual payment made by employers to eligible employees under the Payment of Bonus Act 1965, now subsumed into the Code on Wages 2019. It applies to every factory and to every establishment that has employed 20 or more persons on any day during the accounting year.

Eligibility requires an employee to have worked for at least 30 working days in the accounting year and to be drawing wages up to the eligibility ceiling, which is ₹21,000 per month.

The minimum bonus is 8.33 percent of the wages earned by the employee during the accounting year, and the maximum bonus is 20 percent of those wages, allocable out of available surplus per the Act. For the purpose of calculation, the wage base is capped at ₹7,000 per month or the applicable minimum wage for the scheduled employment, whichever is higher.

In practical terms, an eligible employee is entitled to a minimum annual bonus of 8.33 percent of ₹7,000 × 12 (or 8.33 percent of 12 months of minimum wage where higher), which works out to approximately ₹6,997 at the ₹7,000 base. Employers with available surplus pay above the minimum, up to the 20 percent statutory ceiling.

The bonus is payable within 8 months of the close of the accounting year. Where an award or agreement provides for a bonus linked to production or productivity, that arrangement continues, provided the amount is not less than the statutory minimum.

Under the Code on Wages, the eligibility ceiling and the calculation ceiling can be revised by the appropriate government by notification. Employers should confirm the currently notified ceilings in their state before finalising the annual bonus calculation.

What paid leave are employees entitled to in India?

Indian paid leave splits into three categories that most establishments recognise: earned or annual leave, casual leave, and sick leave. National and festival holidays sit alongside these.

Earned (annual) leave

Under Section 32 of the Occupational Safety, Health and Working Conditions Code 2020, a worker who has worked for at least 180 days in a calendar year is entitled to annual leave with wages, generally accruing at one day for every 20 days worked. The qualifying threshold has been reduced from 240 days under earlier state law to 180 days under the OSH Code. For an adult who works a full year, this translates to approximately 15 to 18 days of earned leave.

The OSH Code also standardises the carry-forward limit at 30 days and permits encashment of accrued earned leave during the course of employment, not only on separation as under the earlier framework.

State Shops and Establishments Acts continue to apply for casual and sick leave, and where they provide more generous entitlements than the OSH Code, the more favourable provision applies.

Casual leave

Casual leave is provided under state Shops and Establishments Acts. Typical entitlements are 7 to 12 days per year, without carry-forward to the next year. It is intended for short unplanned absences.

Sick leave

Sick leave is provided under state Shops and Establishments Acts and, for ESI-covered employees, through the Employees' State Insurance sickness benefit. Typical private-sector policy provides 5 to 12 days of paid sick leave per year, often after a short qualifying period of service. The ESI sickness benefit pays 70 percent of average daily wages for up to 91 days per year for ESI-covered employees. Employers commonly require a medical certificate for absences longer than 2 to 3 days.

National and festival holidays

Indian employees are typically entitled to three national holidays (Republic Day, Independence Day, and Gandhi Jayanti) plus a number of festival holidays notified by the state government. The total is usually 8 to 12 paid holidays per year, varying by state and by the establishment's chosen list.

Other statutory leave

Maternity leave is covered above. Compensatory off is available for work on a rest day. Some states provide short bereavement or study leave. Menstrual leave is a state-level or company-level provision rather than a central mandate.

How are gig and platform workers covered under India's new labour codes?

The Code on Social Security 2020 defined a gig worker, a platform worker, and an aggregator in central law for the first time, and provided the framework to extend social security to them. The Code came into force on 21 November 2025, and the Social Security (Central) Rules were notified on 8 May 2026.

Chapter IX of the Code empowers the Central Government to frame welfare schemes covering life and disability cover, accident insurance, health and maternity benefits, old-age protection, and crèche facilities for gig and platform workers.

Funding comes from three sources: the Central Government, state governments, and the aggregators themselves. Under Section 114 of the Code, aggregators are required to contribute between 1 and 2 percent of their annual turnover to a Social Security Fund, capped at 5 percent of the total amount paid or payable by the aggregator to gig and platform workers in the year. The rate within the 1 to 2 percent band, and the notified start date of contributions, are set by Central Government notification.

The Seventh Schedule of the Code identifies the aggregator categories liable to contribute: ride-sharing, food and grocery delivery, logistics, e-marketplaces, professional services, healthcare, travel and hospitality, content and media, and similar platforms.

A gig or platform worker qualifies for scheme benefits after 90 days of engagement with a single aggregator or 120 days across multiple aggregators, in the previous financial year. Registration is on the e-Shram portal. The Social Security (Central) Rules 2026 place the registration and data-sharing burden on the aggregator, which must register on the government portal, upload existing gig workers within 45 days, and report onboarding and exits in real time.

Section 141 of the Code creates the central Social Security Fund into which aggregator contributions flow.

Two states have moved ahead of the central framework. Rajasthan enacted the Platform Based Gig Workers (Registration and Welfare) Act 2023. Karnataka enacted the Platform Based Gig Workers (Social Security and Welfare) Act 2025, which permits a welfare fee of 1 to 5 percent of each payout to a gig worker set per aggregator category, and has constituted a welfare board with union and platform representation. Employers operating in these states carry state-level obligations in addition to the central framework.

As of mid-2026, the aggregator contribution rate under the central Code has not yet been notified and central contributions have not begun. Employers running gig operations should track Central Government notifications and reserve the anticipated 1 to 2 percent contribution in financial planning.

What voluntary employee benefits do Indian employers typically offer?

Beyond the statutory floor, Indian employers offer voluntary benefits to attract, retain, and support their workforce. Take-up varies with company size, industry, and geography. Plum's State of Employee Benefits 2024, which analysed 4,500 group benefit plans and 18,000 claims filed between January 2023 and January 2024, provides the benchmark data for the Indian mid-market.

The most common voluntary benefits Indian employers provide are:

• Group health insurance for the employee and typically their spouse, children, and dependent parents
• Group term life insurance at a multiple of annual salary
• Group personal accident cover at a multiple of annual salary
• Wellness and preventive care programmes, including health camps, screenings, telemedicine, and mental health support
• Flex benefits allowances covering categories such as wellness, professional development, meal cards, and remote-work reimbursement
• Retirement top-ups through the National Pension System with employer contribution
• Employee stock options or restricted stock units
• Meal and food benefits through the meal-card mechanism
• Learning and development budgets for certifications and structured programmes
• Family and dependant care including crèche support, elder-care support, and family counselling
• Transport and commute allowances including company-provided transport in metros

The rest of this guide walks through each category, its typical cover and cost range, and how it is taxed.

The direction of travel in the Indian market since 2022 has been toward greater choice within a defined design. Instead of a single fixed benefits menu, more employers now offer a flex allowance the employee can spend across a curated set of categories. This gives the finance team a predictable ceiling and the employee a choice architecture that reflects their life stage.

What is group health insurance in India and what does it cover?

Group health insurance is a voluntary employer-sponsored health cover that indemnifies the employee and, in most policies, their family members, for hospitalisation and specified outpatient expenses. It is regulated by the Insurance Regulatory and Development Authority of India and placed with a general or health insurer through an IRDAI-licensed broker or directly with the insurer.

Who is covered

A standard Indian group health policy covers the employee, their spouse, and up to two or three children. Many policies extend cover to the employee's dependent parents or parents-in-law, typically as an optional module.

What it covers

The base cover reimburses the sum insured, subject to policy terms, for:

• In-patient hospitalisation, including room rent, ICU, surgical costs, and consumables
• Pre-hospitalisation expenses for a specified number of days before admission (commonly 30 to 60 days)
• Post-hospitalisation expenses for a specified number of days after discharge (commonly 60 to 90 days)
• Day-care procedures that do not require 24-hour hospitalisation
• Ambulance charges
• Maternity benefit, where included, with a sub-limit
• Newborn cover from birth until the next policy renewal, where included
• Pre-existing conditions and waiting periods, both of which are typically waived under group cover for continuously insured employees

Common add-ons include cover for outpatient and diagnostic expenses, dental and vision, mental health treatment, gender-affirming care, fertility support, and modern treatment modalities.

Sum insured ranges

Sum insured levels in the Indian market range from ₹1,00,000 at the low end for entry-level roles up to ₹50,00,000 for senior executives. The mid-market benchmark for a mid-career professional is a family floater in the range of ₹5,00,000 to ₹10,00,000, with employer-paid parental cover as an optional buy-up.

Cashless network

Cashless treatment at a network hospital is arranged through the insurer's third-party administrator. The hospital network available depends on the insurer that places the policy. Plum works across major Indian insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and the cashless network varies with the insurer chosen. No responsible broker or platform should quote a single fixed hospital network number without qualifying it by insurer.

Claims experience as the reference bar

The operational quality of a group health programme is best measured in claims experience. Two benchmarks are useful. Plum publishes a claims Net Promoter Score of 79 and a median pre-authorisation turnaround of 45 minutes. Any group health arrangement whose numbers sit materially below these is worth reviewing.

Minimum group size and cost

Group placement in India requires a minimum group size of 7 employees under IRDAI regulations. Below that number, the appropriate conversation is an individual or family floater policy, not a group programme.

Group health premiums in India vary widely with the age mix of the workforce, the sum insured, the family definition, and any add-ons. As a rough anchor, a mid-market Indian employer spends between ₹6,000 and ₹20,000 per employee per year on group health, with parental cover adding materially to the top of that range.

Tax treatment

The premium paid by an employer for a group health policy covering its employees is not treated as a taxable perquisite in the employee's hands under Section 17(2) of the Income Tax Act. The employer claims the premium as a business expense under Section 37(1). Group health insurance premiums continue to attract 18 percent Goods and Services Tax at the employer level, notwithstanding the GST exemption granted to individual health insurance on 22 September 2025.

What is group term life and group personal accident cover in India?

Group term life and group personal accident are two low-cost cover categories that a majority of formal-sector Indian employers include as part of the voluntary benefits package.

Group term life insurance

Group term life insurance pays a lump sum to the nominated beneficiary if the employee dies during the policy term. It has no maturity value. In India, over 80 percent of formal-sector employers offer a fully funded group term life policy, most commonly at a sum assured of 2 to 3 times annual salary, sometimes rising to 5 times for senior roles. Some employers add a critical illness rider that pays a lump sum on the first diagnosis of a specified condition.

Group term life is priced on the workforce's age and gender mix and is one of the least expensive benefits per rupee of cover. Typical annual employer cost sits in the range of ₹500 to ₹1,500 per employee for a 2x-to-3x annual salary sum assured, subject to actual demographics.

Group personal accident cover

Group personal accident insurance cover pays a lump sum on death or permanent disablement resulting from an accident. It usually pays a graded amount for temporary total disablement and loss of specific body parts. Sum assured is typically 3 to 5 times annual salary. Many policies add cover for weekly compensation during recovery, education support for surviving children, and modification of the home or vehicle for permanent disability.

Group personal accident is priced on the industry risk profile and is generally inexpensive, in the range of ₹200 to ₹800 per employee per year for a 3x-to-5x annual salary sum assured.

Tax treatment

Premiums paid by the employer for group term life and group personal accident are not treated as taxable perquisites in the employee's hands under Section 17(2) of the Income Tax Act. The payout on death or disablement is generally exempt from tax in the recipient's hands under Section 10(10D) or the applicable exemption for insurance proceeds.

What wellness and preventive care benefits do Indian employers provide?

Wellness and preventive care benefits have moved from a fringe offering to a core component of the Indian benefits package over the last five years. The shift is driven by demographic and clinical evidence that chronic disease is manifesting earlier in the Indian workforce than in comparable international peers.

The health data behind the shift

Plum's Employee Health Report 2025, drawing on health-camp findings across close to 2,000 employees at 8 companies, reports that 63 percent of screened employees have elevated or high blood pressure, 22 percent are clinically obese, 38 percent have high or elevated cholesterol, and 17 percent sleep less than 6 hours a night. It also finds that ischaemic heart disease presents in Indian employees at an average age of 31, type-2 diabetes at 32, and cerebrovascular events between 33 and 34, materially earlier than in comparable international cohorts.

Only 1 in 4 Indian companies offer complimentary health check-ups to employees, and only 3 in 10 employees take one when offered. Where a workplace health camp is run, 3 in 5 employees complete their first-ever check-up through that camp. The Employee Health Report 2025 also models a return of ₹296 per ₹100 invested in structured workplace wellness, based on a workforce of more than 1,30,000 Plum users across 5,000 companies.

Common wellness benefit categories

• Preventive health check-ups, either annual or biennial, at a hospital of the employee's choice or through workplace camps
• Doctor consultations and telemedicine, delivered as a standing allowance or through a partner platform
• Mental health support, including confidential counselling through an Employee Assistance Programme, in-app cognitive behavioural therapy, and psychiatrist consultations
• Chronic disease management programmes for hypertension, diabetes, and cholesterol, with structured coaching and periodic screening
• Fitness and physical activity support, ranging from gym memberships to on-site classes to app-based subscriptions
• Reproductive and maternity care, including preconception counselling, fertility support, prenatal check-ups, and postnatal care
• Nutrition and lifestyle coaching, typically through a partner platform
• On-site health camps with blood pressure, blood sugar, cholesterol, and body composition screening

The obligation under the new labour codes

The Occupational Safety, Health and Working Conditions Code 2020 introduces a mandatory free annual health check-up for every worker aged 40 and above, funded by the employer. This raises the floor for what qualifies as basic preventive care under Indian labour law.

Tax treatment

Employer expenditure on wellness and preventive care programmes is generally treated as a business expense. Individual reimbursement of a preventive health check-up qualifies for the deduction under Section 80D of the Income Tax Act within specified limits.

What are flex benefits and how do they work in Indian workplaces?

A flex benefit is a fixed monetary allowance an employer provides that the employee can spend across a curated menu of pre-approved categories. Instead of the employer choosing one benefit for everyone, the employer defines a ceiling and a menu, and the employee chooses how to allocate their allowance across it.

Why the design has caught on in India

Indian mid-market adoption of flex has accelerated sharply since 2022. The reasons are consistent across employer segments. The Chief Financial Officer gets a predictable ceiling that closes the open-ended-reimbursement risk. The Chief Human Resources Officer gets a design that respects the life-stage differences across the workforce. The employee gets choice within a defined structure, which most engagement research finds more valued than a bigger uniform benefit.

Common flex benefit categories

• Wellness and preventive care (gym memberships, mental health app subscriptions, fitness devices)
• Professional development (certifications, structured courses, books, professional body memberships)
• Remote work reimbursement (broadband, ergonomic furniture, co-working access)
• Family and dependant support (elder care, crèche top-up, tuition reimbursement)
• Meal cards (Sodexo, Zeta, Pluxee, and similar)
• Fuel and transport (fuel cards, cab reimbursement)
• Household support (utility bills, subscription services)

The menu is typically curated by the employer to match the tax-advantaged categories under the Income Tax Act, so that the employee receives the allowance on a tax-efficient basis where the rules permit.

How the mechanic works

The employer credits a monthly or annual flex allowance to the employee. The employee makes claims against the categories on the menu, either through a benefits platform integrated with payroll or through a card-based mechanism (in the case of meal cards and similar). The claim triggers a payroll adjustment or a direct payment to the vendor.

Tax treatment

The tax treatment depends on the category. Meal cards enjoy a per-meal exemption of ₹200 per meal from 1 April 2026 (raised from ₹50 per meal earlier), and the exemption is now available under both the old and the new tax regimes. Fuel reimbursement, telephone and internet reimbursement, and specific allowances such as children's education carry their own exemption limits. Categories that fall outside the exempt list are treated as part of taxable salary. Employers should confirm which portion of the flex allowance can be delivered on a tax-advantaged basis with reference to Section 17(2) and Rule 15 of the Income Tax Rules 2026, which came into effect on 1 April 2026.

What retirement and equity benefits are offered beyond the statutory floor?

Beyond the statutory retirement scaffolding of the Provident Fund, the Employees' Pension Scheme, and gratuity, Indian employers offer three main categories of voluntary retirement and equity benefits.

National Pension System employer contribution

The National Pension System is a voluntary defined-contribution retirement scheme regulated by the Pension Fund Regulatory and Development Authority. Employers can add an employer contribution to an employee's NPS Tier I account as part of the compensation structure.

Under Section 80CCD(2) of the Income Tax Act, an employer contribution to NPS up to 14 percent of basic plus dearness allowance is deductible as a business expense for the employer, and is treated as an exempt contribution in the employee's hands, in addition to and separate from the employee's own Section 80C limit. This has made NPS a widely used vehicle for tax-efficient retirement top-ups. Employer contributions to the Provident Fund, NPS, and superannuation combined are exempt in the employee's hands up to ₹7,50,000 per year under Section 17(2); contributions above the combined cap are treated as a taxable perquisite.

Uncapped Provident Fund (contribution on actual basic and DA rather than the ₹15,000 ceiling) is a related retention feature many employers offer, subject to the same combined cap.

Superannuation

Superannuation is an employer-sponsored pension trust registered with the Income Tax authorities. An employer contribution to a superannuation fund up to prescribed limits qualifies for the same exemption treatment, subject to the ₹7,50,000 combined cap.

Employee stock options and restricted stock units

Employee stock options (ESOPs) and restricted stock units (RSUs) are equity-linked compensation instruments common in Indian technology, financial services, and multinational employers. The employer grants an option to acquire shares at a specified price (ESOPs) or grants share units that vest over time (RSUs).

Taxation happens at two points. On exercise (for ESOPs) or on vesting (for RSUs), the difference between the fair market value on the exercise or vesting date and the exercise price is treated as a taxable perquisite under Section 17(2) of the Income Tax Act. On subsequent sale, the difference between the sale price and the value already taxed as a perquisite is treated as a capital gain, taxed at short-term or long-term rates depending on the holding period and the listing status of the underlying share.

Startups notified under Section 80-IAC of the Income Tax Act qualify for a deferred perquisite tax mechanism on ESOPs, under which the perquisite tax can be deferred until the earlier of five years from exercise, the sale of the shares, or the employee leaving the employer.

How are employee benefits taxed in India?

Employee benefits in India are taxed under the head 'Salaries' in the Income Tax Act, 2025 (which succeeded the Income Tax Act, 1961 with effect from AY 2026-27). Perquisites (non-cash benefits provided by the employer to the employee) are defined under Section 17 and valued for tax purposes under Rule 15 of the Income Tax Rules, 2026, which came into effect on 1 April 2026 and modernised the earlier valuation framework.

The tax outcome depends on the category of benefit and the tax regime the employee elects. Under the new tax regime, most allowances and exemptions are not available; under the old tax regime, a wider set of exemptions applies.

Benefits that are typically not taxable in the employee's hands

• Employer-paid group health insurance premium (not a perquisite under Section 17(2), regardless of tax regime)
• Employer-paid group term life and group personal accident premium
• Employer expenditure on preventive health check-ups within reasonable limits
• Meal benefit up to ₹200 per meal delivered through a meal card or similar mechanism, available under both the old and new tax regimes from 1 April 2026
• Reimbursement of telephone, mobile, and internet expenses used for official purposes
• Employer-provided laptop or communication equipment
• Reimbursement of medical treatment for the employee or family at specified hospitals
• Leave Travel Concession for domestic travel, exempt for two journeys in a block of four calendar years (current block is 2026-2029), available under the old tax regime

Benefits taxed within specified limits

• House Rent Allowance, exempt under Section 10(13A) up to the least of: actual HRA received, 50 percent of salary in a metro city (40 percent elsewhere), or actual rent paid less 10 percent of salary. Old regime only.
• Children's Education Allowance, exempt up to ₹100 per month per child for up to two children, plus a hostel expenditure allowance where applicable. Old regime only.
• Employer contributions to Provident Fund, National Pension System, and superannuation, exempt in combination up to ₹7,50,000 per year in the employee's hands. Excess is a taxable perquisite.
• Gratuity, exempt under Section 10(10) up to ₹20,00,000 in the private sector. Excess is fully taxable as salary.
• Interest-free or concessional loans from the employer, taxed as a perquisite where the aggregate exceeds ₹20,000 (rising to a higher threshold under Rule 15 of the Income Tax Rules 2026).

Benefits taxed at full value

• Company car for personal use, valued under Rule 15
• Rent-free or concessional accommodation, valued at prescribed percentages of salary depending on city population
• Club memberships and other in-kind benefits
• Employee stock options, on the difference between fair market value and exercise price at the time of exercise

Note on the Income Tax Act 2025

The Income Tax Act, 2025 replaced the Income Tax Act, 1961 with effect from 1 April 2026. Substantive provisions on perquisites and exemptions have been substantially retained, with several thresholds updated. Employers should confirm current thresholds against the Central Board of Direct Taxes' most recent notification before finalising payroll structure changes.

How much does an employee benefits package cost an Indian employer?

The fully loaded cost of an Indian employee benefits package sits between 20 and 30 percent of gross salary in a typical formal-sector organisation, once statutory contributions and a competitive voluntary programme are both counted.

The statutory floor

The statutory burden ranges from approximately 13 to 18 percent of gross salary for a workforce covered by the standard provisions. The main components:

• Employees' Provident Fund: approximately 13 percent of the wage base up to the ₹15,000 ceiling (12 percent contribution plus 0.5 percent EDLI plus approximately 0.5 percent administrative charges)
• Employees' State Insurance: 3.25 percent of gross wages for workers under the ₹21,000 wage ceiling
• Gratuity provision: approximately 4.81 percent of Basic + DA per completed year of service, provisioned annually against future liability
• Statutory bonus: minimum 8.33 percent of eligible wages (capped at ₹7,000 per month or minimum wage, whichever is higher) for eligible workers
• Professional tax: state-specific, typically up to ₹2,500 per year

The 50 percent rule under the Code on Wages, which mandates that Basic + DA is at least 50 percent of total remuneration, mechanically raises the base on which Provident Fund, gratuity, and bonus are calculated for salary structures that historically kept basic low.

Voluntary programme cost

A competitive voluntary benefits programme adds meaningfully to the loaded cost. Typical ranges for a mid-market Indian employer:

• Group health insurance (employee, spouse, two children, optional parents): ₹6,000 to ₹20,000 per employee per year, with parental cover adding significantly at the top of the range
• Group term life (2x-3x annual salary): ₹500 to ₹1,500 per employee per year
• Group personal accident (3x-5x annual salary): ₹200 to ₹800 per employee per year
• Wellness and preventive care programme: ₹2,000 to ₹8,000 per employee per year, depending on scope
• Meal card allowance at ₹1,600 to ₹4,400 per month (based on ₹200 per meal, 8 to 22 working days): ₹20,000 to ₹55,000 per employee per year
• Flex allowance across other categories: ₹20,000 to ₹50,000 per employee per year, depending on seniority

For senior and technical roles, employers routinely add ESOPs or RSUs, extended learning budgets, higher parental cover, and premium mental health support. The total voluntary programme cost per employee per year for tech and professional services hiring can sit between ₹1,50,000 and ₹5,00,000 for senior roles.

The one number that dwarfs the rest

The cost most benefits business cases underestimate is the cost of a bad claims experience translated into avoidable attrition. Plum's State of Employee Benefits 2024 estimates the cost of an average attrition at approximately 12.5 percent of the departing employee's cost to company. On a 500-person team with 20 percent annual attrition and a median CTC of ₹15 lakh, this works out to roughly ₹1.9 crore per year in avoidable attrition cost. A benefits programme that measurably reduces this line item pays for itself several times over.

₹1.9 crore per year. The avoidable attrition cost on a 500-person team at 20 percent annual turnover, using Plum's State of Employee Benefits 2024 finding that an average attrition costs approximately 12.5 percent of the departing employee's cost to company.

How are Indian employee benefits changing in 2026?

Four shifts are reshaping the Indian employee benefits landscape through 2026, drawing on labour code implementation, market data, and Plum's proprietary research.

1. Statutory coverage is widening under the labour codes

Social security coverage in India rose from approximately 19 percent of the workforce in 2015 to more than 64 percent by 2025, per the Ministry of Labour and Employment. The 2025 labour codes push this trajectory further by bringing gig and platform workers under a central social security framework for the first time, requiring mandatory appointment letters for every worker, and setting a statutory floor for wages, safety, and grievance redressal. The direction is toward formalisation of a workforce that has historically been largely informal.

2. Claims severity in young cohorts is climbing

The Plum Employee Health Report 2025 identifies a pattern that is now consistent across sectors: chronic conditions historically associated with older cohorts are manifesting in employees aged 25 to 40. Ischaemic heart disease presents at an average age of 31, type-2 diabetes at 32, and cerebrovascular events between 33 and 34 in Indian employee populations. This is materially earlier than in comparable international peers. The implication for benefits programmes is that chronic disease management and preventive screening are moving from a wellness extra to the base cover for a working-age workforce.

3. Flex is moving from a multinational feature to an Indian mid-market default

Plum's State of Employee Benefits 2024, which analysed 4,500 group benefit plans, tracked the shift of flex benefits from a large-multinational feature into the mid-market. Rising claims severity, dependent inflation, and the generational preference for choice have combined to make a flex allowance a competitive requirement rather than a differentiator, particularly for technology, financial services, and professional services hiring.

4. Claims experience is becoming the retention lever

The most consequential 2026 shift is that the perceived quality of the claims moment now correlates directly with retention. Plum publishes a claims Net Promoter Score of 79 and a median pre-authorisation turnaround of 45 minutes as the reference bar for what an operationally serious programme looks like. Employers whose claims experience sits materially below these numbers are seeing measurable attrition consequences, and CFOs are increasingly treating claims ratio and claims-experience metrics as retention indicators rather than pure cost indicators.

The Employee Health Report 2025 models a return of ₹296 per ₹100 invested in structured workplace wellness, based on more than 1,30,000 Plum users across 5,000 companies. The direction of travel is unambiguous: benefits are moving from a cost line to a retention line.

₹296 return per ₹100 invested. The modelled return on structured workplace wellness, based on more than 1,30,000 Plum users across 5,000 companies. Plum Employee Health Report 2025.

How should employers choose an employee benefits partner in India?

Building a benefits programme in India typically requires two capabilities: an IRDAI-licensed broker to place the group health and group life policies, and a technology platform to administer enrolment, claims, endorsements, and reporting. Four types of partner serve the Indian market:

• Global consulting brokers such as Marsh, Aon, Willis Towers Watson, Gallagher, and Mercer, best suited to multinationals with 5,000 or more Indian employees and complex global reporting requirements.
• Technology-enabled group insurance brokers, which hold IRDAI licences, place cover directly, and operate a proprietary platform. Best suited to India-headquartered companies from 50 to 5,000 employees and MNCs establishing an Indian entity. Plum operates in this segment.
• Human capital management platforms with embedded benefits modules, best suited to enterprises where the HRIS is the operating anchor. A licensed broker is required alongside.
• Marketplaces and perks aggregators, best suited as a supplement to a core benefits programme, not as the programme itself.

A rigorous procurement runs to 10 to 14 weeks and evaluates candidate partners across four lenses: risk and cost containment, employee experience, governance and compliance, and service standards. For a complete decision framework covering procurement phases, evaluation criteria, and a downloadable weighted scorecard and RFP question bank, see the separate guide: Employee benefits in India: a 2026 decision framework.

Frequently asked questions

What are the mandatory employee benefits in India?

Mandatory employee benefits in India include Employees' Provident Fund contribution at 12 percent of Basic + DA (up to a ₹15,000 wage ceiling), Employees' State Insurance for employees earning up to ₹21,000 per month, gratuity payable after five years of continuous service (one year for fixed-term employees under the 2025 labour codes), 26 weeks of maternity leave for the first two children, a statutory bonus, paid leave, and professional tax. Coverage for gig and platform workers has been extended under the Code on Social Security 2020.

When did India's new labour codes come into effect?

India's four labour codes came into effect on 21 November 2025. They are the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Occupational Safety, Health and Working Conditions Code 2020. They replaced 29 earlier central labour statutes. The Social Security (Central) Rules were notified on 8 May 2026, and state-level rules are being finalised through 2026.

What is the 50 percent wage rule under the new labour codes?

Under the Code on Wages, basic pay plus dearness allowance must be at least 50 percent of total remuneration. The Ministry of Labour and Employment confirmed in its March 2026 FAQ that the rule applies from 21 November 2025. For salary structures with a lower basic component, this raises the base on which Provident Fund, gratuity, and statutory bonus are calculated.

Is group health insurance mandatory in India?

Group health insurance is not a statutory requirement for private-sector employers in India, but it is a competitive expectation in the formal sector. Employees earning up to ₹21,000 per month are covered by the Employees' State Insurance scheme, which provides medical benefit through the ESIC network. Employers offering group health cover for employees above the ESI threshold, and for family members, do so voluntarily.

What is the minimum group size for group health insurance in India?

Group health placement in India requires a minimum group size of 7 employees under IRDAI regulations. Below that, an individual or family floater policy is the appropriate route rather than a group programme.

How much do employee benefits cost in India as a percentage of salary?

The fully loaded cost of employee benefits in India typically sits between 20 and 30 percent of gross salary for a formal-sector employer. Statutory contributions account for approximately 13 to 18 percent of gross salary, and a competitive voluntary programme adds a further 5 to 15 percent, depending on the scope of group health, wellness, flex benefits, and retirement top-ups offered.

Are paternity benefits mandatory in India?

There is no central statutory paternity leave for private-sector employees in India as of 2026. The Supreme Court, in Hamsaanandini Nanduri v. Union of India (17 March 2026), urged the Central Government to legislate a paternity leave framework, but no such framework is yet in force. Central government employees are entitled to 15 days of paternity leave under the Central Civil Services Rules. Approximately 14 percent of Indian private companies have a formal paternity leave policy, typically 5 to 15 days.

How are gig and platform workers covered under the new labour codes?

The Code on Social Security 2020 defined gig workers, platform workers, and aggregators for the first time in central law. Aggregators are required to contribute between 1 and 2 percent of annual turnover to a Social Security Fund, capped at 5 percent of what they pay their gig workers. Workers qualify for scheme benefits after 90 days of engagement with a single aggregator or 120 days across multiple aggregators. Registration is on the e-Shram portal. The contribution rate within the 1 to 2 percent band, and the notified start date of contributions, are set by Central Government notification.

Is the employer's group health insurance premium taxable for the employee?

No. The premium paid by an employer for a group health insurance policy covering its employees is not treated as a taxable perquisite in the employee's hands under Section 17(2) of the Income Tax Act. The employer claims the premium as a business expense under Section 37(1). This is one of the most tax-efficient benefits an Indian employer can offer.

What is the tax-free meal benefit limit in India in 2026?

From 1 April 2026, the tax-free meal benefit limit through employer-provided meal cards is ₹200 per meal, raised from ₹50 per meal earlier. The benefit is available under both the old and new tax regimes, making meal cards a broadly usable tax-efficient benefit.

What is the 50 percent wage rule under India's labour codes?

Under the Code on Wages 2019, effective 21 November 2025, basic pay plus dearness allowance must equal at least 50 percent of an employee's total remuneration. The Ministry of Labour and Employment confirmed in its March 2026 FAQ that the rule applies from the code's effective date. For salary structures with a lower basic component, this raises the base on which Provident Fund, gratuity, and statutory bonus are calculated.

When were India's labour codes implemented?

India's four labour codes came into effect on 21 November 2025: the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, and the Occupational Safety, Health and Working Conditions Code 2020. Together they replaced 29 earlier central labour statutes. The Social Security (Central) Rules were notified on 8 May 2026, and state-level rules are being finalised through 2026.

What is the gratuity formula in India?

Gratuity is calculated as (last drawn wages × 15 × completed years of service) ÷ 26. Wages here mean basic pay plus dearness allowance and any retaining allowance. The divisor 26 reflects working days in a month excluding weekly off. Fixed-term employees become eligible after one year of continuous service under Section 53 of the Code on Social Security 2020; permanent employees remain eligible after five years.

Is EPF mandatory for all employees in India?

Employees' Provident Fund contribution is mandatory in establishments employing 20 or more workers, for employees drawing basic pay plus dearness allowance up to ₹15,000 per month. Contribution above the wage ceiling is voluntary. Many employers extend Provident Fund contribution on actual basic and dearness allowance as a retention feature, subject to the combined tax-exempt cap of ₹7,50,000 on employer contributions to Provident Fund, National Pension System, and superannuation.

Sources and methodology

Regulatory citations in this guide reference the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020, the Occupational Safety, Health and Working Conditions Code 2020, the Income Tax Act 2025 (and the Income Tax Rules 2026), and the Insurance Regulatory and Development Authority of India Insurance Brokers Regulations. Ministry of Labour and Employment communications, including the Press Information Bureau announcement dated 21 November 2025 and the Ministry's March 2026 FAQ on the labour codes, have been cited where relevant.

Data points on the Indian employee benefits market draw on two Plum publications:

• State of Employee Benefits 2024: an analysis of 4,500 group employee benefit plans and 18,000 claims filed between January 2023 and January 2024, including benchmarks by company size and industry, and cost-mitigation levers. Cost and attrition analysis is attributed to Aditya Bagarka, Vice President of Insurance Partnerships; Akshay Golechha, Vice President of New Business; and Mukul Kanchan, Head of Finance, at Plum.
• Employee Health Report 2025: health-camp findings from close to 2,000 employees across 8 companies, with a modelled return of ₹296 per ₹100 invested in structured workplace wellness, based on more than 1,30,000 Plum users across 5,000 companies.

Operational service benchmarks referenced in this guide are published by Plum: claims Net Promoter Score of 79, median pre-authorisation turnaround of 45 minutes, and minimum group size of 7 employees for group health placement.

Financial thresholds cited in this guide (Provident Fund wage ceiling, Employees' State Insurance wage ceiling, gratuity cap, statutory bonus ceilings, and tax exemption limits) are subject to change by Government of India notification. Employers should confirm current thresholds against the applicable Central and State Government notifications before finalising payroll structures.