What is the difference between statutory and voluntary benefits in India?

Statutory benefits are those an employer must provide by law, such as provident fund, gratuity, employees’ state insurance, and maternity benefit. Voluntary benefits are those an employer chooses to provide, such as group health insurance, group term life, and wellness programmes. Statutory benefits in India are now governed mainly by the Code on Social Security 2020, which took effect on 21 November 2025.

What counts as a statutory benefit in India?

Statutory benefits are the contributions and entitlements mandated by central labour law. Provident fund requires employer and employee to each contribute 12% of wages in establishments with 20 or more employees. Gratuity is payable after five years of continuous service, reduced to one year for fixed-term employees under the Code on Social Security 2020. Employees’ state insurance covers workers earning up to ₹21,000 a month, or ₹25,000 for persons with disability, providing medical care and cash benefits through ESIC. Maternity benefit gives 26 weeks of paid leave to eligible women. The Code on Social Security 2020 also extends coverage to gig and platform workers and introduces compulsory gratuity insurance, which the older Payment of Gratuity Act 1972 did not require.

What counts as a voluntary benefit in India?

Voluntary benefits are anything an employer adds beyond the statutory floor. The most common is group health insurance, a master policy covering employees and dependents for hospitalisation. Group term life insurance pays a fixed sum assured to a nominee on death during service. Group personal accident cover pays for accidental death and disability. Employers also offer outpatient cover, telehealth, mental-health support, dental and vision riders, and parental benefits. These are funded at the employer’s discretion and are used to attract and retain staff rather than to meet a legal obligation.

How does the tax treatment differ between statutory and voluntary benefits?

Statutory and voluntary benefits follow different tax paths. Employer provident fund and gratuity contributions are deductible business expenses and not taxed as employee perquisites within prescribed limits. For voluntary group health insurance, the employer premium is deductible under Section 37(1) of the Income Tax Act and is not a taxable perquisite for the employee under Section 17(2). Group health premiums paid by companies still attract 18% GST, while individual health insurance became GST-exempt on 22 September 2025. Input tax credit on employee health insurance remains blocked under Section 17(5)(b) of the CGST Act, except where the cover is legally obligatory.

Which benefits should a growing company prioritise?

A growing company should first meet its statutory obligations, then add group health insurance as the highest-value voluntary benefit. Provident fund, gratuity, and ESI compliance are non-negotiable once the thresholds are crossed. Group health insurance is the benefit employees value most and is the standard expectation in formal employment. Group term life and accident cover are inexpensive additions that broaden financial protection for relatively low premium.

How Plum approaches this

Plum sets up group health and group term life cover for companies with a minimum of 7 employees, against the common assumption that a group needs only 2 or 3 members. The claims experience is measured: Plum holds a claims NPS of 79 and a median pre-authorisation turnaround of 45 minutes, well inside the one-hour cashless pre-authorisation window set by the IRDAI Master Circular of May 2024. Cashless access depends on the insurer underwriting the policy, so the hospital network varies; Plum places cover with insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and matches the network to where a company’s employees actually live and work.

Frequently asked questions

Is group health insurance statutory or voluntary in India?
Group health insurance is voluntary. Statutory medical cover for lower-wage workers runs through ESIC under the Code on Social Security 2020.

Are statutory benefits the same for every company?
No. They apply once eligibility thresholds, such as employee count or wage limits, are met. Below those thresholds, some statutory schemes do not apply.

Did the Code on Social Security 2020 change statutory benefits?
Yes. From 21 November 2025 it consolidated nine older laws, extended cover to gig workers, reduced the gratuity qualifying period for fixed-term staff to one year, and introduced compulsory gratuity insurance.