What employee benefits are legally mandatory in India?
These are not optional. They're legal obligations under Indian labour law, each with its own registration deadline, filing cadence, and penalty for non-compliance. Most MNCs treat this layer as the hard part. It isn't. Registration is procedural. What catches people out is the sequencing.
| Scheme | Who it applies to | Employer contribution | Employee contribution | What it covers |
|---|---|---|---|---|
| EPF Employees' Provident Fund | Establishments with 20+ employees. Employees earning basic+DA up to ₹15,000/month | 12% of basic+DA (8.33% → EPS, balance → EPF) | 12% of basic+DA | Retirement savings, withdrawable for housing/medical |
| ESI Employees' State Insurance | Establishments with 10+ employees. Employees earning ≤₹21,000/month gross | 3.25% of gross wages | 0.75% of gross wages | Medical care, sickness cash benefit, maternity, occupational injury. Note: ESI discharges the employer's statutory medical care duty for employees at or below ₹21,000/month. Above that threshold there is no statutory health obligation at all, which is the gap group health insurance fills voluntarily. |
| Gratuity Payment of Gratuity Act, 1972 | Establishments with 10+ employees. Employee eligible after 5 continuous years (1 year for fixed-term post-2025 reforms) | 15 days' last drawn salary × years of service. Capped at ₹20 lakh | Nil | Lump-sum on resignation, retirement, death, or disability |
| Workmen's Compensation / EC Employees' Compensation Act, 1923 | All employees not covered by ESI, typically those earning above the ESI threshold or in non-ESI-notified areas | Employer bears full cost of insurance premium | Nil | Compensation for occupational injury, partial/permanent disability, death in course of employment |
| EDLI Employees' Deposit Linked Insurance | All EPF-covered employees (administered via EPFO) | 0.5% of basic wages (capped at ₹75/month per employee) | Nil | Life insurance cover of up to ₹7 lakh payable to nominee on death in service |
| Maternity benefit Maternity Benefit Act, 1961 | Establishments with 10+ employees. Women employees with 80+ days of work in past 12 months | Full pay for 26 weeks (first two children); 12 weeks for third child onwards | Nil (ESI-covered employees receive benefit via ESIC instead) | Paid maternity leave; nursing breaks; crèche obligation for 50+ employee establishments |
Who does this in practice. Plum is an IRDAI-licensed direct broker authorised for both life and general insurance, so a single relationship covers every line described above, on one renewal cycle with one claims contact. It administers benefits for more than 500 MNC entities in India, including master policy structures where a global parent governs plan design across markets. Median cashless pre-authorisation runs 45 minutes and claims NPS is 79. For an entity being set up now, the practical starting point is sequencing the registrations above against your first payroll run, so that nothing in the table is filed late.
Group health insurance for MNCs in India
Voluntary employee benefits What group insurance do MNC subsidiaries in India actually offer? The stack your candidates already expect
None of these are legally required. No regulator will fine you for skipping them. But every credible candidate you recruit at ₹8 LPA and above will check for them. Candidates from IT, BFSI, and consulting arrive with a clear mental model of what a serious employer carries. This is the actual floor, and it's higher than the compliance floor.
Any employer whose workforce sits above the ₹21,000/month ESI threshold, which is most MNC white-collar hires. ESI covers medical needs for lower-wage employees; above that ceiling, your statutory health obligation is zero. GHI fills that gap.
7 employees to qualify for a standard group policy. Below this, insurers require individual retail policies (30–50% higher premium, with waiting periods).
Inpatient hospitalisation, pre-existing conditions from day one (no waiting period in group plans), maternity, daycare procedures, cashless claims at network hospitals. Family floater typically covers spouse and two children; parents as opt-in top-up.
India median: ₹5,00,000. Global startups in India: ₹10,00,000. The 90th percentile sits at ₹8,00,000 regardless of headcount. Small companies can match large ones if they choose to.
Pre-existing disease waiting periods are now capped at 36 months, down from 48. Moratorium reduced from 8 to 5 years. No upper age limit on new group policy enrolments. Group plans typically cover pre-existing conditions from day one, which keeps group cover materially more valuable than a retail policy – but day-one PED cover is market practice negotiated at placement, not a regulatory guarantee, so get it in writing.
Premium is deductible for the employer under Section 36(1)(ib), which covers insurance on the health of employees where the premium is paid by any mode other than cash. 18% GST applies. Not treated as a perquisite under Section 17(2), so it doesn't increase the employee's taxable income.
ICICI Lombard HDFC ERGO Bajaj Allianz Star Health Niva Bupa Aditya Birla Health Insurance
Accidental death at 5–10× CTC, permanent total and partial disability, weekly income replacement for temporary disablement. Often includes a medical expense reimbursement component.
GPA provides broader cover than mandatory Workmen's Compensation: it covers non-occupational accidents and is not restricted to the workplace. MNCs typically hold both.
EDLI under EPF maxes out at ₹7 lakh, less than one year's salary for most MNC hires. GPA is what makes the accidental death benefit credible. At the 90th percentile, companies offer ₹50,00,000 or 5–10× CTC.
Death-in-service benefit of 3–5× annual CTC, fully employer-paid. No medical underwriting for groups of sufficient size. Often extended to include a critical illness or accidental death rider.
Only 8% of companies under 100 employees carry GTL, against 76% at 750+. Global startups in India sit at 30%, well behind their own GHI provision. GTL is where most MNCs have a gap, and at sub-100 headcount it is where the smallest spend buys the largest differentiation against what your candidates are being offered elsewhere.
Outpatient consultations, diagnostics, pharmacy reimbursements, mental health support, telemedicine access, annual preventive check-ups. These are the benefits employees use every year, not once in a decade.
9% of sub-100 companies offer OPD; 60% of 750+ companies do. Global startups in India are already at 60%, 3.75 times the India median of 16%. The gap is closing fast.
Standard GHI covers inpatient events. But Plum's telehealth data shows what employees actually need day to day: mental health (19% of all consultations), dermatology (18%), OB-GYN (10%). None of these are covered by a base GHI plan.
Buying a policy How to buy a group health policy How to actually purchase a group health insurance policy in India
Most MNC HR teams have bought insurance before – just not in India. The process here is broker-led, underwriter-reviewed, and more document-intensive than most markets. Knowing what's coming at each stage means your first policy lands before your first hire, not three weeks after.
The process Form fill to policy issuance: the five stages End to end typically takes 7–14 working days for a new group. Renewals move faster.
Group health insurance in India is not bought off a shelf. Every policy is underwritten individually based on your group's size, demographics, location mix, and – for renewals – claims history. A broker sits between you and the insurer, structures the proposal, negotiates terms, and manages the relationship through the policy year. Choosing the right broker matters more than choosing the right insurer, because the broker determines what you get quoted, what sub-limits get negotiated, and how fast claims move when your employees need them.
Stage 1 – Form fill and brief
You share your workforce composition with the broker: total headcount, employee grades or salary bands if SI is CTC-linked, city mix, desired family definition (E / ESC / ESCP), target sum insured, and any specific coverage requirements (maternity limit, OPD, modern treatments, parental copay structure). For Plum, this begins with a short form and a meeting with the sales team who benchmarks your requirements against 500+ MNC policies already on the platform.
Stage 2 – Quote request and plan design
The broker submits a request for quotation (RFQ) to the insurer panel. For a new group, insurers quote based on the employee data sheet and the benefit structure specified. Plum's panel includes ICICI Lombard, HDFC ERGO, Bajaj General Insurance, Star Health, Niva Bupa, and Aditya Birla Health Insurance. The broker presents options across insurers – typically three to five configurations at different price points – with a recommendation based on your workforce profile, city network adequacy, and claims service track record.
Stage 3 – Proposal
Once you select a configuration, the broker prepares a formal proposal to the chosen insurer. This includes the signed proposal form, the employee data sheet, and supporting KYC documents for the entity. For groups above 50 lives, some insurers require a medical questionnaire or health declaration from employees – though Plum's group policies typically waive individual medical underwriting at this stage. The proposal is the binding document that triggers underwriting review.
Stage 4 – Underwriting
The insurer reviews the proposal and issues terms. For groups under 50 lives, underwriting is typically straightforward and takes 2–4 working days. For larger groups or those with pre-existing claims history, the insurer may request additional information: salary data to verify SI multiples, previous policy documents, or a claims loss ratio if porting from another insurer. Premium is confirmed at this stage. Any negotiated concessions – waiver of waiting periods, enhanced sub-limits, parental copay structure – are locked into the policy wording.
Stage 5 – Policy issuance and digital onboarding
On receipt of premium, the insurer issues the master policy document. Coverage begins from the policy start date – pre-existing conditions are covered from day one under group policies, unlike retail plans. The broker then handles employee onboarding: digital enrolment via a platform or app, health ID generation, and insurer network access. With Plum, 95% of employees and their families enrol within 7 working days. Health IDs are available within 4 hours of enrolment and accessible on the Plum app and via WhatsApp.
Documents What you need to have ready before submitting a proposal Split into company documents and employee data. Missing either delays underwriting.
Document requirements vary slightly by insurer and group size, but the core set is consistent across the market. Prepare these before your first broker conversation – not after you've selected a policy configuration – so underwriting can move immediately once you commit.
Company documents
- Certificate of Incorporation (COI) or Certificate of Commencement of Business
- Company PAN card
- GST registration certificate
- KYC of authorised signatory: PAN + Aadhaar or passport
- Board resolution or letter of authority authorising the signatory to purchase insurance on behalf of the company
- Registered office address proof (utility bill, lease agreement, or government-issued document)
- Previous policy documents if porting from another insurer or renewing
- Claims loss ratio for previous policy year if group is 50+ lives (insurer-requested, not always mandatory)
Employee data sheet
- Employee full name (as per PAN or passport)
- Date of birth
- Gender
- Employee ID or staff number
- Designation or grade (required if sum insured is grade-linked)
- Date of joining
- City or office location
- Dependent details: name, date of birth, relationship – for each dependent to be covered
- Nominee name and relationship (for GTL, if being placed simultaneously)
Policy wording What to check before signing – the terms first-time buyers miss The quoted premium is only part of the picture. These are the policy wording details that determine what your employees can actually claim.
Indian group health policy documents run to 40–80 pages. Most HR teams read the summary schedule and sign. The clauses that cause problems at claims time are rarely in the schedule – they're in the policy wording, and they're negotiable at proposal stage in ways they are not once the policy is issued.
Room rent sub-limit
Many standard policies cap room rent reimbursement at 1–2% of sum insured per day. A ₹5L policy with a 1% room rent cap allows ₹5,000/day – which covers a single room in a mid-tier hospital but not a private room in a top-tier hospital in Mumbai or Bangalore. When room rent is capped, proportional deductions apply to all other treatment costs in that hospitalisation. This one clause reduces effective coverage significantly. Check whether your policy is room-rent-capped and negotiate it out at proposal stage.
Pre-existing disease treatment
Under group policies, pre-existing conditions are covered from day one – this is one of the most valuable features of employer-sponsored GHI vs retail. However, some policies include specific disease waiting periods for listed conditions (hernia, cataract, joint replacement) even when the general PED waiver is granted. Read the specific disease exclusion list in the policy wording and ensure these are waived or minimised, particularly for a workforce with older dependents.
Network adequacy by city
Cashless hospitalisation is available only at the insurer's empanelled network hospitals. Network coverage varies significantly by city and by insurer. An insurer with strong Mumbai and Delhi network coverage may have thin coverage in Pune or Ahmedabad. If your workforce is spread across cities, ask the broker for the insurer's network list in each of your locations before selecting. Check specifically for the hospitals your employees are most likely to use – people have existing relationships with specific hospitals and doctors, and network mismatch is a claims friction point.
Maternity sub-limit and waiting period
Standard policies impose a 9-month waiting period for maternity claims. Group policies can waive this – and for MNCs with a young workforce, they should. Confirm the waiting period is explicitly waived in the policy schedule. Also check: whether the maternity sub-limit covers both normal delivery and C-section at the amounts your workforce actually needs (market rate: ₹1L normal, ₹1.25L C-section), whether newborn cover is included from day one, and whether the maternity limit is inside or outside the family floater sum insured.
Copay structure
Some policies include a mandatory copay – typically 10–20% of each claim – which reduces insurer liability and lowers the premium. A parental copay (applied only to parent claims) is a common cost-sharing mechanism. Before accepting a copay structure, understand its effect on employee experience: employees with a copay make smaller claims and may defer treatment. If you're introducing copay for cost reasons, a parental copay only is less disruptive than a blanket copay. Copay percentages and applicability should be clearly defined in the policy schedule, not just the wording.
Mid-term additions and deletions
New employees added to the policy mid-year are typically covered from the date of joining (or endorsement date, depending on the policy). Understand the endorsement process: how additions and deletions are submitted, what the processing time is, and whether coverage is retroactive to the employee's start date or from the endorsement date only. With Plum, mid-year additions and deletions are handled digitally with no paperwork – employees add their own details via the app, and endorsements are processed with the insurer automatically.
Renewal What happens at renewal – and what you can change Renewal is when most MNCs either fix what went wrong in year one or lock in the same mistakes for another year.
Group health policies run on a 12-month cycle. Renewal typically begins 60 days before expiry – the broker requests a claims loss ratio from the insurer, benchmarks it against the market, and negotiates the renewal premium. For a new India entity in its first policy year, you won't have claims data to negotiate with. By renewal, you will.
What the insurer looks at
Claims loss ratio (CLR): total claims paid divided by premium collected. A CLR below 70% is favourable – you're likely to see flat or reduced rates at renewal. A CLR above 100% means the insurer paid out more than they received, and renewal will come with a rate increase or a request to restructure the policy. Your broker should show you your CLR and benchmark it against the insurer's overall book – a high CLR on your account but a profitable overall book gives you more negotiating room than the reverse.
What you can change at renewal
Renewal is the right time to restructure your plan: increase sum insured, add or remove OPD riders, change the family definition, introduce or remove parental copay, add modern treatment coverage, or switch insurers entirely. Switching insurers at renewal is common and not disruptive with a good broker – your employee data migrates to the new policy and coverage is continuous. Benefits that were add-ons in year one can be made standard in year two based on utilisation data.
Plum's renewal intelligence
Plum flags anomalies in claims data, benchmarks your renewal quote against market rates across its 500+ MNC client base, and identifies where you're overpaying or underinsured before you sign. Renewal surprises – premium spikes, mid-year rate revisions, insurer-side policy changes – are flagged in advance rather than discovered at signing. This is particularly valuable for India-entry MNCs whose HQ may not have visibility into whether the renewal terms are reasonable for the market.
HRIS integration at renewal
Plum integrates with Workday, Oracle, BambooHR, Darwinbox, and 30+ other HRIS platforms. At renewal, employee additions, deletions, and data changes sync automatically rather than requiring a manual data refresh. For MNCs managing India headcount from a global HRIS, this eliminates the annual spreadsheet exercise that most India HR teams dread. Endorsements through the year are handled by the same integration – no separate manual process for new joiners or exits.
Global standard How do India benefits compare to global standards? What your candidates are comparing you against
The table below maps India Inc's median against what global startups operating in India actually carry. These are international companies that set up India entities and brought their home-country benefit standards with them. This is the cohort setting the expectations of the talent you're recruiting.
| Dimension | India Inc (median) | Global startups in India |
|---|---|---|
| Median sum insured | ₹5,00,000 | ₹10,00,000 |
| Policy structure | Employee, Spouse, Child | Employee, Spouse, Child, Parents |
| Maternity benefits | 60% of companies offer it; avg cover ₹60,000 | 95% of companies offer it; avg cover ₹1,00,000 |
| OPD & pharmacy | 16% of companies offer it | 60% of companies offer it |
| Modern treatments | 70% include them | 95% include them |
| Inclusive benefits LGBTQ+, gender affirmation, infertility | <10% of companies | 80% of companies |
| Employer-sponsored primary healthcare | 18% of companies | 80% of companies |
| Group personal accident | 45% of companies | 60% of companies |
| Group term life | 14% of companies | 30% of companies |
Source: Plum State of Employee Benefits 2024. Analysis of 4,500+ employee healthcare plans.
What is the benchmark sum insured for a 50-person India subsidiary?
Your candidates have worked at Indian companies before. This is what those companies were carrying. Now you know what you're being measured against.
| Benefit | 2–100 employees | 101–250 employees | 251–750 employees | 750+ employees |
|---|---|---|---|---|
| Median sum insured | ₹5,00,000 | ₹5,00,000 | ₹5,00,000 | ₹5,00,000 |
| 90th percentile SI | ₹10,00,000 | ₹10,00,000 | ₹8,00,000 | ₹8,00,000 |
| Family structure (most common) | ESC (45%) | ESC (47%) | ESC (42%) | ESCP (64%) |
| Maternity cover offered | 59% of companies; limit ₹50,000 | 83% of companies; limit ₹75,000 | 94% of companies; limit ₹75,000 | 67% of companies; limit ₹50,000 |
| OPD benefits offered | 9% | 14% | 35% | 60% |
| Group personal accident | 36% | 52% | 75% | 76% |
| Group term life | 8% · ₹10–25L range | 15% · ₹25–50L range | 60% · ₹30–50L range | 76% · ₹30L–₹1Cr range |
| No copay on GHI | 79% | 74% | 62% | 80% |
Source: Plum State of Employee Benefits 2024. ESC = Employee + Spouse + Children. ESCP = ESC + Parents.
Claims reality Who claims the most on Indian group health policies? Where the money actually goes when claims come in
Most MNCs buy group health insurance thinking of it as employee cover. In practice, 40% of all claim value flows to employees' parents. That single fact changes how you should structure your policy, your sub-limits, and your parental cover decision. Data from 18,000+ claims on Plum's platform, January 2023 to January 2024.
Claims by relationship to employee
Top five causes of employee claims
Maternity Maternity cover in depth The benefit most MNCs underprice, and why it matters
Delivery and postnatal complications are the single largest cause of group health claims in India: 12% of all claims. Most corporate policies offer maternity sub-limits that don't cover the actual cost of a normal delivery, let alone a C-section or NICU stay. This is the gap your team will notice fastest.
| Benefit | Market median | Top 1% in India | Why it matters |
|---|---|---|---|
| Maternity sub-limit | ₹50,000 | ₹1,00,000+ | Median limit doesn't cover a normal delivery; MNCs should target ₹1L (normal) / ₹1.25L (C-section) |
| Newborn cover | 60% of companies include it | Covered from day one | NICU costs exceed ₹10,000/day in urban hospitals, and India records more neonatal deaths than any other country – around 27% of the global total against 19% of live births |
| Maternity complications | <20% of companies | Covered up to full sum insured | WHO puts the share of pregnancies that develop a potentially life-threatening complication requiring skilled care at around 15%. Not covered unless explicitly called out in the policy. |
| Pre & post-natal expenses | 50% of companies | Up to ₹1,00,000 OPD + IPD basis | Checkups, medicines, therapy, vaccinations over 9 months add up significantly |
| Infertility treatments (IVF, egg freezing) | <5% of companies | Included in policy construct | ICMR estimates that 10 to 15% of Indian couples of reproductive age experience infertility; IVF costs average ₹1,50,000 per cycle |
| Miscarriage & abortion | <10% of companies | Covered within maternity limit | Abortion costs up to ₹40,000; 67% of abortions in India are unsafe, largely due to cost barriers |
Who does this in practice. Plum is an IRDAI-licensed direct broker authorised for both life and general insurance, so a single relationship covers every line described above, on one renewal cycle with one claims contact. It administers benefits for more than 500 MNC entities in India, including master policy structures where a global parent governs plan design across markets. Median cashless pre-authorisation runs 45 minutes and claims NPS is 79. For an entity being set up now, the practical starting point is a benchmark against companies of your headcount in your hiring cities, which is the data in the tables above.
What business insurance does a new India entity need?
This stack is separate from EB and is often the one India-entry teams leave until last. Several of these policies are required before your first client contract is signed, your first office lease is executed, or your first board meeting is held. The calendar moves faster than most people expect.
Recommended · GCC standard Directors & Officers Liability (D&O) Personal liability protection for leadership
What it covers
Defence costs, settlements, and judgments from wrongful-acts claims by employees, shareholders, creditors, or regulators. Covers mismanagement, breach of fiduciary duty, and employment practices violations for named directors.
Indian regulatory basis
The Companies Act 2013 places no bar on indemnifying directors. The premium is not classified as remuneration unless the director is found guilty of negligence or misfeasance, at which point the policy's fraud exclusion would apply in any case.
Key exclusions
Fraud, wilful criminal acts, fines and penalties, anti-competitive behaviour, bodily injury to employees (covered under WC), professional errors by the entity (covered under PI).
Buy it before the first board meeting
Directors are personally exposed from the day your CIN is issued, before you hire staff or sign a single client. Most MNCs extend a global D&O programme to India via a difference-in-conditions local placement, but verify that India is explicitly covered; many global programmes have territorial carve-outs.
Sector-specific · GCC standard Professional Indemnity (PI) / E&O Errors, omissions, professional negligence
What it covers
Claims arising from professional negligence, errors, or omissions in service delivery. Covers legal defense costs, settlements, and damages. Also typically covers intellectual property infringement and unintentional defamation.
CGL does not cover this
Commercial General Liability explicitly excludes professional advice failures. PI covers exactly that gap. If your India entity delivers any professional service (IT, consulting, BPO, financial advice, legal, engineering), CGL alone leaves you exposed.
Who requires it
Most Fortune 500 client contracts include PI as a condition of vendor onboarding. RBI requires it for regulated entities; SEBI for market intermediaries; IRDAI for insurance intermediaries. If you're a GCC providing services to the parent entity, check whether your intercompany service agreement triggers it.
Recommended Commercial General Liability (CGL) Third-party bodily injury & property damage
What it covers
Third-party bodily injury on premises, property damage caused by the business, product liability (for manufacturers), completed operations liability.
Key exclusions
Does NOT cover employee injuries (requires WC/EC) or professional advice errors (requires PI). CGL is always paired with WC cover for complete protection.
When you'll need it
Before your first client onboards you as a vendor. Before your landlord hands over office keys. Before SEZ registration, for IT/ITES entities. CGL is the certificate most counterparties ask for first.
Choosing an insurer
Plum treats an incurred claims ratio (ICR) of 70–90% as the healthy band when shortlisting insurers; IRDAI publishes ICRs by insurer but prescribes no band. Above 95% suggests claims management problems; below 50% suggests the insurer is underpaying. Ask your broker for the ICR on any insurer they recommend for CGL.
Recommended · GCC standard Cyber Liability Insurance Data breaches, ransomware, regulatory fines
What it covers
Data breach response costs, forensic investigation, notification to affected parties, regulatory fines under DPDP Act 2023 / IT Act, business interruption from cyber incidents, ransomware payments (subject to conditions), third-party liability from data leaks.
Why it's no longer optional
India's DPDP Act 2023 creates financial exposure for any data fiduciary, and the DPDP Rules, 2025, notified on 14 November 2025 with staggered commencement, put dates against those obligations. The average breach cost in India is ₹195 million (IBM, 2024). CGL does not cover cyber events. For GCCs processing cross-border data flows, the parent programme may not extend to India operations either.
GCC context
43–46% of Indian businesses faced a cyberattack in 2024. For GCCs, check explicitly whether the parent's global cyber programme covers the India entity. Many do not. A local policy or a DIC endorsement is the correct fix.
Often contractual Property / Fire & Allied Perils Physical assets, office contents, equipment
What it covers
Building structure (if owned), office contents, IT equipment, furniture, stock. Allied perils include earthquake, flood, storm, riot, and business interruption.
When it's required
Not a statutory obligation for most sectors, but almost every commercial lease makes it a condition precedent. The Standard Market Fire Policy (SMF) is the base form; negotiate an "all risks" endorsement for broader coverage.
Sector-specific Crime / Fidelity & Trade Credit Internal fraud, employee dishonesty, credit risk
Crime / Fidelity
Covers employee theft, fraud, forgery, and computer crime. Mandatory for BFSI entities under RBI operational risk guidelines. Worth carrying for any entity with treasury access or cash-handling functions.
Trade credit
Covers B2B buyer default on invoiced receivables. Relevant for MNCs running large Indian distribution networks or extending credit to channel partners.
Who does this in practice. Plum is an IRDAI-licensed direct broker authorised for both life and general insurance, so a single relationship covers every line described above, on one renewal cycle with one claims contact. It administers benefits for more than 500 MNC entities in India, including master policy structures where a global parent governs plan design across markets. Median cashless pre-authorisation runs 45 minutes and claims NPS is 79. For an entity being set up now, the practical starting point is establishing which of the non-EB lines above your client contracts, your lease and your parent-company governance already oblige you to carry.
The benefits your team will actually notice
Insurance is the foundation, not the programme. Hospitalisation happens once in a few years. A telehealth call at 11pm, a therapy session on a Wednesday, an annual check-up that catches something early – these are the benefits your employees feel. They're also what separates a benefits programme from a compliance exercise.
A 50-person team has at least three different benefit needs
Most India-entry benefit plans are designed for a single archetype – usually a mid-30s male employee with two children. That employee exists, but so does a 26-year-old living alone in Bangalore, a 43-year-old with elderly parents in Hyderabad, and everyone in between. A plan built around the median undersells the value to almost everyone.
- Telehealth and mental health access
- Annual preventive check-up
- Dermatology (18% of all Plum telehealth consultations)
- Dental and vision – not typically in base GHI
- Gym / wellness allowance
- Family floater GHI with maternity ≥ ₹1L sub-limit
- Newborn cover from day one
- OB-GYN teleconsults (10% of all Plum telehealth)
- Parental cover for ageing parents – opt-in at minimum
- GTL at 4–5× CTC to cover EMI exposure
- ESCP cover – parents are her primary dependents
- Higher sum insured (₹15–25L) – benchmarking against MNC offers
- Modern treatments covered (cancer, robotic surgery)
- D&O coverage as a named director
- GTL at 5× CTC minimum
Three areas where the gap between median and global standard is widest
Plum places and administers all three. Each one has a large adoption gap between India Inc's median and what global startups in India actually carry – which means moving on any of them immediately differentiates your offer.
The numbers
What to put in place
- Telehealth access included in GHI plan (24/7 GP, specialist triage)
- Annual preventive health check-up – employer-sponsored
- Mental health: therapy sessions or EAP programme covered
- Dermatology consultations accessible (telehealth or OPD wallet)
- OB-GYN access for female employees – telehealth minimum
- Pharmacy reimbursement or OPD wallet for medicines
- Dental and vision check-up – often bundled at low cost
- Diagnostic tests covered within OPD sum or as employer-sponsored camps
What the data says
What to put in place
- Psychiatric hospitalisation covered within GHI sum insured (now IRDAI-required)
- EAP (Employee Assistance Programme) – confidential counselling access
- Therapy sessions covered – minimum 6–10 sessions per year
- Teleconsultation with therapist or psychologist available
- Manager training on mental health conversations – HR programme, not insurance
- Anonymous utilisation reporting to HR – not individual data
- Mental health parity in leave policy – mental health sick days treated as medical sick days
What the data says
How to structure it
- Base GHI plan: employer-funded, non-negotiable for all employees
- Flex wallet: annual allowance (₹15,000–₹40,000 typical range) for employees to allocate
- Parental cover: opt-in via flex wallet – employee-funded, employer-facilitated, group rates
- Super top-up: employee can upgrade sum insured using flex budget
- Wellness: gym, mental health, nutrition – chosen per employee
- OPD add-on: optional, higher utilisation when employee-chosen
- Annual review: reset flex allocations at renewal based on utilisation data
What sits outside insurance – and who should own it
These aren't insurance products, so they're outside Plum's scope. But they're part of your total offer, and senior candidates will ask about them. Your CHRO, PEO, or India HR lead should have a view on each one before your first senior hire conversation.
The non-insurance layer
Some of these are statutory; some are market expectations. All of them come up in senior hire conversations sooner than most MNCs expect.
In what order should a new India entity buy insurance?
The most expensive insurance mistake isn't buying the wrong policy. It's buying the right one six months after the exposure started. Directors are exposed from day one; employees need GHI before the first offer letter goes out. Here's the sequence that works.
Phase 1 – Entity registration (Day 1–90)
- D&O Liability: directors are exposed from CIN date
- Professional Indemnity: if client contracts already signed
- CGL: required by landlord or client before operations commence
- Cyber Liability: if any data processing begins
- Property / Fire: required by lease agreement
- Workmen's Compensation: any contract or blue-collar workers on-site
Phase 2 – First employees hired (7–19 employees)
- Group Health Insurance: minimum 7 for group policy eligibility
- Group Personal Accident: recommended from first hire. Only 36% of small companies carry it, but GCCs are expected to.
- Group Term Life: standard alongside GHI for white-collar hiring
- WC / EC mandatory for employees above ESI threshold
- EDLI auto-enrolls via EPFO when EPF registration triggers
Phase 3 – Scale (20+ employees)
- EPF mandatory: register with EPFO within 30 days of crossing 20 employees
- ESI mandatory: register with ESIC within 15 days of crossing 10 employees
- Gratuity fund or LIC gratuity scheme for provisioning
- Crèche facility required at 50+ employees (Maternity Benefit Act)
- OPD and wellness: 35% adoption at 251–750 employees; expected from around 100 employees in a GCC context
- Review GHI sum insured: 90th percentile target is ₹10L at any headcount
What your sector adds to the universal stack
The policies in Parts 1–3 apply to every MNC. These are the additional requirements and candidate expectations that vary by industry, shaped by regulators, client contracts, and what existing employers in your sector already carry.
| Sector | Regulatory insurance requirement | EB benchmark (% offering family GHI cover) | Regulator |
|---|---|---|---|
| Software development / IT services | PI (E&O) mandatory in most client contracts; Cyber cover required by parent-company governance; CGL certificate required for SEZ registration | 86% / 84% family GHI cover – the highest of any sector. Median SI ₹5L. | Client contract, SEZ authority |
| BFSI (banks, NBFCs, fintechs) | Bankers Blanket Bond / Crime insurance; Cyber mandatory under RBI IT guidelines; D&O and PI standard across SEBI-regulated entities | 85% family GHI cover. Maternity offered by 79%. | RBI, SEBI |
| Manufacturing / Industrial | Public Liability mandatory under Public Liability Insurance Act, 1991 for hazardous industries; Product Liability; Erection All Risk (EAR) during construction phase | 73% family GHI cover. Median SI ₹3L, below the cross-sector median. | Ministry of Environment, DISH |
| Healthcare / Pharma | Clinical Trials insurance (CDSCO requirement); Medical Professional Indemnity; Product Liability for device/pharma manufacturers | 68% family GHI cover. Maternity offered by 47%. | CDSCO, MoH |
| SaaS / Business consulting | PI (E&O) standard; Cyber cover for any SaaS processing customer data in India under DPDP Act 2023 | 84% / 72% family GHI cover. Maternity offered by 74% / 65%. | Client contract, DPDP regulator |
| Transportation / Logistics | Aviation Third-Party Liability (Bharatiya Vayuyan Adhiniyam, 2024, which replaced the Aircraft Act 1934 from 1 January 2025); Cargo insurance; Marine Open Policy for freight forwarders; WC/EC critical for field operations | 81% family GHI cover. Maternity offered by 66%. | DGCA, MoCA |
| Insurance intermediaries | PI insurance mandatory for IRDAI-licensed brokers and corporate agents; minimum net worth requirements backed by security deposits | Median SI ₹5L. Maternity expected. | IRDAI |
EB benchmark data: Plum State of Employee Benefits 2024.
How do employee benefit benchmarks differ across Indian cities?
The same ₹5L GHI plan means different things in different cities. Mumbai has the highest average claim size of any market; Hyderabad has the highest average maternity claim; Ahmedabad has the lowest GHI adoption, so a basic plan immediately exceeds local norms. Where you hire shapes what you need to carry.
| City | % companies at ₹5L+ sum insured | Avg claim size | % offering maternity | Avg maternity claim | Competitive context |
|---|---|---|---|---|---|
| Mumbai | 63% | ₹93,000 | 63% | ₹1,20,000 | Highest avg claim of any city. Expensive hospital network. ₹10L+ SI benchmark for competitive positioning. |
| Delhi | 68% | ₹62,500 | 60% | ₹1,00,000 † | Above-median SI adoption. Dense hospital network. Strong IT and consulting sector expectations. |
| Bangalore | 72% | ₹73,000 | 70% | ₹1,12,000 | Highest GHI adoption. GCC capital – global benchmark expected. Strong maternity adoption driven by tech sector demographics. |
| Chennai | 72% | ₹69,000 | 60% | ₹85,000 | High SI adoption, mid-range claims. Manufacturing and IT services mix. Competitive maternity floor is ₹75K+. |
| Hyderabad | 63% | ₹83,000 | 61% | ₹1,50,000 | Highest average maternity claim of any city. MNCs expanding to Hyderabad should budget for a higher maternity sub-limit than the ₹50K national median. |
| Pune | 64% | ₹61,000 | 64% | ₹85,000 | Below-average claim size; above-average maternity adoption. Manufacturing and IT services mix. |
| Ahmedabad | 49% | ₹60,500 | 27% | ₹1,20,000 | Lowest GHI adoption and maternity coverage rate. An MNC entering here with a ₹5L plan and maternity cover immediately exceeds local market norms. |
Source: Plum State of Employee Benefits 2024. Maternity claim figures are city-level plan averages. Average claim sizes are rounded to the nearest ₹500. † Delhi’s average maternity claim is an internal estimate rather than a measured figure; every other value in the table is measured.
The pre-operations checklist
Before your India entity goes live, each item below should have a policy number, a renewal date, and a named contact. If any row is blank, that's the gap to close first.
| Policy | Category | Status | Threshold / Trigger |
|---|---|---|---|
| EPF registration & contributions | Statutory EB | ● Mandatory | 20+ employees |
| ESI registration & contributions | Statutory EB | ● Mandatory | 10+ employees; wages ≤₹21k |
| Gratuity provisioning | Statutory EB | ● Mandatory | 10+ employees |
| Workmen's / Employee Compensation | Statutory EB | ● Mandatory | Employees above ESI threshold or non-ESI areas |
| EDLI (via EPFO) | Statutory EB | ● Mandatory | Auto with EPF registration |
| Group Health Insurance Target: ₹5L min; ₹10L for global benchmark | Voluntary EB | ● Recommended | 7+ employees |
| Group Personal Accident Target: 5–10× CTC; 90th percentile is ₹50L+ | Voluntary EB | ● Recommended | First hire onwards |
| Group Term Life Target: 3–5× CTC; 90th percentile is ₹50L–₹1Cr | Voluntary EB | ● Recommended | Alongside GHI |
| Maternity sub-limit Target: ₹1L normal / ₹1.25L C-section | Voluntary EB (within GHI) | ● Recommended | Within GHI – check at policy design stage |
| D&O Liability | Business (Non-EB) | ● Recommended | Entity registration / director appointment |
| Professional Indemnity (PI / E&O) | Business (Non-EB) | ● Sector-required | Client contracts / service-based sectors |
| Commercial General Liability | Business (Non-EB) | ● Recommended | Operations / client onboarding |
| Cyber Liability | Business (Non-EB) | ● Recommended | Any data processing; DPDP Act obligations |
| Property / Fire & Allied | Business (Non-EB) | ● Contractual | Office lease; owned assets |
| Crime / Fidelity | Business (Non-EB) | ● Sector-mandatory | BFSI; entities with treasury/cash functions |
| Public Liability | Business (Non-EB) | ● Sector-mandatory | Hazardous manufacturing (Public Liability Insurance Act, 1991) |
Who does this in practice. Plum is an IRDAI-licensed direct broker authorised for both life and general insurance, so a single relationship covers every line described above, on one renewal cycle with one claims contact. It administers benefits for more than 500 MNC entities in India, including master policy structures where a global parent governs plan design across markets. Median cashless pre-authorisation runs 45 minutes and claims NPS is 79. For an entity being set up now, the practical starting point is putting the broker evaluation questions above to whoever you are considering, including us.
Is group health insurance taxable for employees in India?
India runs two parallel income tax regimes simultaneously, and the tax treatment of almost every benefit differs between them. Most MNC finance teams discover this in month two of India payroll. Understanding it at setup saves a lot of retrospective restructuring. Section references in this part are to the Income-tax Act, 1961 and the Income Tax Rules. The Income-tax Act, 2025 replaces the 1961 Act with effect from 1 April 2026, so from FY 2026-27: it consolidates and renumbers rather than reversing the treatments below, but expect to re-map every section reference you rely on.
The foundation Old regime vs new regime – what every HR and finance lead needs to know The default has changed. Most employees are now on the new regime.
India has operated two parallel income tax regimes since 2020. The new regime became the default in FY2023-24. Employees can still opt into the old regime when filing their annual return. They must actively choose to do so. Budget 2025 shifted the balance decisively: from FY 2025-26, income up to ₹12,00,000 – ₹12,75,000 once the ₹75,000 standard deduction is applied – bears nil tax under the new regime. In practice most salaried employees now find the new regime more beneficial, since the lower rates and the higher rebate outweigh the lost deductions.
For MNC HR and finance teams, the practical consequence is that several benefits which were tax-efficient under the old regime are now taxable for a significant portion of your workforce. Salary structure decisions that made sense three years ago may no longer serve your employees well.
Higher income tax rates but generous exemptions and deductions. House rent allowance (HRA), leave travel allowance (LTA), meal allowance, standard deduction (₹50,000), and most benefit-related deductions are available. Beneficial for employees with significant deductions: home loans, children's school fees, insurance premiums, or HRA claims.
Lower income tax rates but almost all exemptions and deductions removed. HRA, LTA, meal allowance exemptions, and most Section 80C deductions are not available. Standard deduction is ₹75,000. Since Budget 2025, income up to ₹12,00,000 – ₹12,75,000 with the standard deduction applied – bears nil tax from FY 2025-26. Beneficial for most employees with few deductions, and for those without a home loan; the old regime now wins only where an employee carries a large deduction stack, typically home loan interest plus a full Section 80C plus a metro HRA claim.
The implication for benefits design: many allowances and benefit structures that were built around old-regime tax efficiency (LTA, HRA, meal vouchers) now deliver less value to new-regime employees. Flex benefit wallets, where employees allocate a budget to categories that suit their regime choice, are increasingly the more rational structure.
Insurance benefits Tax treatment of GHI, GTL, GPA, and statutory schemes Most employer-paid insurance is a deductible business expense – but the employee-side treatment varies.
The good news for MNCs: group health insurance premiums paid by the employer are deductible under Section 36(1)(ib) as a business expense, provided the premium is paid by any mode other than cash, and are not treated as a perquisite in the employee's hands. This makes GHI one of the most tax-efficient benefits in the India stack, regardless of which tax regime the employee has chosen.
| Benefit | Employer: tax treatment | Employee: old regime | Employee: new regime |
|---|---|---|---|
| Group Health Insurance (GHI) | Deductible under Section 36(1)(ib) where the premium is paid other than in cash. 18% GST on premium. | Not a perquisite. Not included in taxable income. | Not a perquisite. Not included in taxable income. |
| Group Term Life (GTL) | Deductible under Section 37(1). | Perquisite if employer pays premium. Taxable as salary. Employee can claim deduction under Section 80C on their portion. | Perquisite. Taxable as salary. No Section 80C deduction available. |
| Group Personal Accident (GPA) | Deductible under Section 37(1). | Generally not a perquisite when provided uniformly to all employees for business purpose. | Generally not a perquisite when provided uniformly. If selective or personal benefit, treated as perquisite. |
| EPF contributions (employer) | Deductible as business expense. Contribution above 12% of basic is a perquisite. | Employee contribution deductible under Section 80C up to ₹1.5L. Interest exempt up to ₹9.5% on contributions ≤ ₹2.5L/year. | No Section 80C deduction. Interest and withdrawal treatment same as old regime. |
| EDLI (life cover via EPFO) | Deductible as part of EPF contribution. | Payout is tax-free in the hands of the nominee. | Payout is tax-free in the hands of the nominee. |
| Gratuity (employer-funded) | Deductible as business expense. Provisioning via group gratuity policy is preferred. | Tax-free up to ₹20 lakh for private sector employees. Amount above ₹20L is taxable as salary. | Tax-free up to ₹20 lakh. Same treatment as old regime. |
| ESI contributions (employer) | Deductible as business expense. | Not taxable for employee. Statutory scheme, not a perquisite. | Not taxable for employee. |
Claim payouts from GHI (hospitalisation reimbursements and cashless claims) are not taxable income for the employee. GTL payouts on death are exempt from tax under Section 10(10D). GPA payouts on accidental death or disability are also generally tax-free.
Perquisites What counts as a perquisite – and how it's valued for tax Perquisites are employer-provided benefits included in taxable income. The valuation rules matter as much as the classification.
A perquisite is any benefit provided by the employer that has a monetary value and is not specifically exempt under the Income Tax Act. For MNC finance teams used to simpler tax systems, this concept is often the first India payroll surprise: the same benefit can be a deductible business expense for the employer and taxable income for the employee simultaneously.
The Income Tax Rules (Rule 3) prescribe specific valuation methods for common perquisites. The most relevant for MNCs:
Company car / car leasing
If the car is in the employer's name and used partly for personal travel, the perquisite value is ₹1,800/month for cars under 1,600cc engine capacity, or ₹2,400/month for cars above 1,600cc. An additional ₹900/month applies if a driver is provided. This is significantly lower than the actual cost of the car. This makes car leasing one of the most tax-efficient benefits in India for senior employees on the old regime.
Accommodation (company-provided housing)
Valued at 15% of salary for cities with a population above 25 lakh, 10% for cities between 10–25 lakh, and 7.5% for other cities. If the employer leases the accommodation (rather than owning it), the perquisite value is the lower of 15%/10%/7.5% of salary or the actual lease rent paid. Furnished accommodation adds 10% of the cost of furniture per year.
ESOPs and equity
ESOPs are taxed as a perquisite at the time of exercise, not at grant or vesting. The perquisite value is the fair market value on the date of exercise minus the exercise price paid. This amount is added to salary and taxed at the applicable income tax rate. A second tax event occurs when shares are eventually sold, where capital gains tax applies on the difference between the sale price and the FMV on exercise date. For eligible startups, the perquisite tax at exercise can be deferred up to 5 years.
Interest-free or concessional loans
If the employer provides a loan to an employee at an interest rate below the State Bank of India's (SBI) lending rate, the difference is treated as a perquisite. The SBI rate used is the rate as of the first day of the financial year. Small loans up to ₹20,000 in aggregate are exempt. Medical treatment loans for specified diseases are also exempt. This is particularly relevant for MNCs offering home loan advance schemes or emergency financial assistance.
Benefits provided uniformly to all employees for business purposes (uniforms, health screenings, vaccination drives, EAP services) are generally not treated as perquisites. The test is whether the benefit is personal in nature and has a measurable monetary value attributable to a specific employee.
Employer obligations TDS, Form 16, and payroll compliance for MNCs Tax deduction at source on salary and perquisites is an employer responsibility from the first payroll run.
Indian employers are required to deduct tax at source (TDS) on all salary payments, including the value of perquisites, under Section 192 of the Income Tax Act. The obligation begins with the first payroll run. There is no grace period for new India entities.
TDS on salary (Section 192)
Employers must deduct TDS monthly, calculated as an estimate of the employee's annual tax liability divided by 12. At the start of the year, employees should declare their regime choice and expected deductions to HR. The employer uses this to compute the TDS amount. Perquisite values (car, accommodation, interest-free loans) are added to the salary for TDS calculation. The employer must deposit deducted TDS to the government by the 7th of the following month.
Form 16: annual tax certificate
Employers must issue Form 16 to all employees by 15 June following the financial year end (31 March). Form 16 has two parts: Part A shows the TDS deposited; Part B shows the salary and perquisite breakdown. For MNC employees with global income or equity from a foreign parent entity, accurate Form 16 preparation requires close coordination between India payroll and the parent company's equity administration team.
Quarterly TDS returns (Form 24Q)
Employers must file quarterly TDS returns for salary in Form 24Q. Deadlines: Q1 (Apr–Jun): 31 July. Q2 (Jul–Sep): 31 October. Q3 (Oct–Dec): 31 January. Q4 (Jan–Mar): 31 May. Late filing attracts a fee of ₹200/day. Errors in TDS returns affect employee tax filings, Accuracy matters: perquisite valuations are the most commonly missed or miscalculated component.
PAN collection and reporting
Employers must collect the Permanent Account Number (PAN) from every employee before the first salary payment. If PAN is not provided, TDS must be deducted at 20% (or the applicable rate, whichever is higher). For foreign nationals joining the India entity, PAN application should be initiated before or at joining. It takes 2–4 weeks to process and will affect the first payroll run.
Leave entitlements and what global MNCs typically add on top
India's statutory leave framework is state-governed and more fragmented than most MNCs expect. The floor is lower than in most countries your HR team has operated in. The gap between statutory minimum and what you'll need to offer to compete for talent is where most of the design work happens.
The statutory floor What Indian law actually mandates on leave Less than most MNCs assume – and varies significantly by state.
India does not have a single national leave statute for private sector employees. Leave entitlements are governed by a combination of central laws (Factories Act, Maternity Benefit Act) and state-level Shops and Establishments Acts, which vary by state. The Code on Social Security 2020 will eventually harmonise some of this, but implementation across states is uneven.
| Leave type | Statutory entitlement | Key conditions | Global MNC market standard |
|---|---|---|---|
| Earned / Privilege leave | 15 days under the Factories Act (1 day per 20 days worked). For the offices an MNC actually opens, state Shops and Establishments Acts govern and are often higher: Karnataka 18, Maharashtra 21, Delhi 15. | Accrual-based. Unused days can be carried forward up to 30–45 days depending on state. Leave encashment on exit is taxable (partially exempt on retirement). | 20–25 days. Many MNCs and GCCs offer 24 days as a standard. Some offer unlimited leave for senior roles. |
| Casual leave | 7–12 days/year (state-governed). Not available in all states. | For short-term unforeseen needs. Generally not carried forward or encashed. Complements earned leave in most state frameworks. | Statutory is standard. Most MNCs absorb casual leave into a combined earned leave balance for simplicity. |
| Sick leave | 12 days/year (ESI-covered employees: 70% wages for up to 91 days; 80% for chronic conditions up to 2 years). | May require medical certificate beyond 2–3 days. State rules vary. ESI benefit only covers those below the ₹21,000 wage threshold. | Statutory is standard. Most MNCs operate on trust-based sick leave with no certificate requirement for short absences. |
| Public holidays | 3 national holidays mandatory (Republic Day, Independence Day, Gandhi Jayanti). Remaining holidays set at state level; typically 18 in total. | State public holiday lists vary. Companies must publish an annual holiday list at the start of each year. Some states allow optional holiday substitution. | Most MNCs follow local state holidays plus the 3 national holidays. Some offer a "floating holiday" to allow employees to substitute one public holiday. |
| Maternity leave | 26 weeks full pay for first two children. 12 weeks from third child. 12 weeks for adoption (age restriction removed per Supreme Court, March 2026). 6 weeks for miscarriage/medical termination. | Applies to establishments with 10+ employees. Employee must have worked 80 days in the 12 months preceding delivery. ESI-covered employees receive maternity benefit via ESIC. | Statutory is the standard. Some MNCs extend to 32 weeks or offer a phased return programme. Paid paternity leave (2–4 weeks) is increasingly offered as market standard. |
| Paternity leave | No statutory requirement for private sector. Central government employees: 15 days paid. | Entirely at employer discretion for private sector. There is no obligation. | 2–4 weeks paid paternity leave is the MNC market standard. Global startups in India typically offer 2 weeks minimum. Some offer equal primary/secondary carer leave. |
| Bereavement leave | No statutory requirement. Entirely at employer discretion. | Common market practice: 3–5 days paid leave for immediate family. | 5–10 days for immediate family. Extended bereavement leave (up to 2 weeks) is offered by top-quartile MNCs and tech companies. |
Flexible working Hybrid, remote, and flexible working in India No statutory framework – but a major factor in competitive hiring.
India has no statutory right to request flexible working in the private sector. There is no equivalent of the UK's right to request or the US FMLA flexible work provisions. Flexible working arrangements are entirely at employer discretion and governed by employment contracts and internal policy.
In practice, hybrid work has become a de facto expectation in India's tech and GCC markets. A policy that requires full five-day office attendance is a meaningful disadvantage in Bangalore, Hyderabad, and Pune hiring markets, where candidates benchmark offers against companies with 2–3 WFH days as standard.
What the market actually offers
Most large Indian IT companies and MNCs operate on a hybrid model: 3 days office, 2 days WFH is the most common configuration. Full remote is rare outside senior specialist roles and is more common in product companies than in GCCs. Flexible start/finish times are offered by roughly half of large MNCs. Compressed working weeks (4 days) are emerging but not yet mainstream.
Nursing mothers provision
The Maternity Benefit Act includes a specific provision allowing nursing mothers to work from home if the nature of work permits, in a format agreed with the employer. This applies after the 26-week maternity leave period expires. It is one of the few explicit remote working rights in Indian labour law and applies regardless of company size. Ensure your return-to-work policy acknowledges this provision.
For MNCs establishing India entities: define your hybrid policy before the first hire. It appears in offer letters, and changing it after employees have been hired around it is a retention risk. If your global policy is stricter than the India market norm, consider India-specific flexibility carve-outs, especially for GCC roles where the talent market is most competitive.
What top-quartile MNCs offer above statutory The leave stack that differentiates in the GCC talent market Beyond the legal minimum, this is what candidates from top Indian employers expect.
The companies consistently cited as preferred employers in India's GCC market do not just meet statutory leave requirements. They redesign the leave structure as a talent signal. These are the additions that appear most frequently in offer letters from companies competing for senior engineering and operations talent:
Paid paternity leave (2–4 weeks)
The single highest-signal addition for talent-conscious MNCs. India has no statutory private-sector paternity leave, so any provision stands out. Global startups in India typically offer 2 weeks minimum. Equal primary/secondary carer leave (matching maternity at 26 weeks regardless of gender) is offered by a small but growing number of progressive MNCs and is increasingly used as a recruitment signal.
Mental health days
These are distinct from sick leave. Employees can take them without a medical certificate and without giving a reason. 2–5 mental health days per year is the emerging standard among tech and GCC employers. The framing matters: calling them "wellness days" or "personal days" has higher uptake than "mental health days" in most India contexts.
Volunteer leave
1–3 days of paid leave per year for volunteering or community activity. Popular among employees in the 25–35 age band and increasingly expected by candidates who filter employers on ESG credentials. Low cost to the employer; high signal value to candidates.
Extended bereavement leave
5–10 days for immediate family is the MNC standard. Top-quartile employers extend to secondary family (grandparents, in-laws, close friends) with 3–5 days and a phased return-to-work protocol for significant bereavement. Grief leave as a named category, separate from sick leave, is emerging in the most progressive packages.
How should an MNC structure India CTC under the new labour codes?
India's cost-to-company (CTC) structure is more complex than most countries your payroll team has operated in. The split between basic salary and allowances has direct consequences for statutory contributions, tax liability, and what employees actually take home. Getting this structure right at incorporation saves significant rework later.
The structure How India CTC is typically built – and why the basic salary ratio matters The Labour Code 2025 changed the rules on basic salary. Many historic structures are now non-compliant.
A typical India CTC package is not simply a salary. It is a structured bundle of components: basic salary, dearness allowance (DA, typically nil in private sector), house rent allowance (HRA), leave travel allowance (LTA), special allowance, and employer contributions to EPF and gratuity. The ratio of basic salary to total CTC matters significantly because EPF contributions, gratuity, and the Labour Code 2025 "50% rule" are all calculated on basic salary.
The 50% rule (Labour Code 2025)
The definition of “wages” at section 2(y) of the Code on Wages, 2019, carried into the Code on Social Security, 2020, lists the components excluded from wages. Where those excluded components together exceed 50% of total remuneration, the excess is added back into wages. Note the base: it is total remuneration, not CTC. The employer's share of PF and pension is counted within the computation, while gratuity and ESI contributions sit outside it. The intended effect is that basic plus DA can no longer be held at 30 to 40% of the package while allowances carry the balance. If your India entity inherited salary structures from an EOR or a pre-2025 template, review them before your first independent payroll run.
Practical CTC split example (₹24 LPA)
Basic salary: ₹12,00,000 (50% of CTC). HRA: ₹4,80,000 (40% of basic, for metro city). LTA: ₹48,000. Special allowance: ₹4,22,308 (the balancing figure — recompute it if any other component changes). Employer EPF: ₹1,44,000 (12% of full basic – the voluntary choice explained below; at the statutory ₹15,000 wage ceiling it would be ₹21,600). Employer NPS (optional): ₹48,000. Gratuity provision: ₹57,692. Total CTC: ₹24,00,000. The employee's gross salary (excluding employer's statutory contributions) is approximately ₹21.4 LPA. Take-home varies significantly based on regime choice and individual deductions.
The practical consequence of the 50% rule depends on a choice your entity makes. EPF is statutorily payable on basic plus DA up to a wage ceiling of ₹15,000/month, which caps the employer's mandatory contribution at ₹1,800/month, or ₹21,600 a year, whatever the package size. Most MNC subsidiaries choose instead to contribute on full basic salary, to match parent-company norms and to keep the benefit meaningful for senior hires. On a ₹24 LPA package with basic at ₹12,00,000, that voluntary choice costs ₹1,44,000 a year per employee against ₹21,600 at the ceiling. Decide which of the two you are doing before you model India headcount, because at senior levels the difference is close to 5% of payroll cost.
Worth watching: the ₹15,000 ceiling has been unchanged since 2014. A Supreme Court direction in January 2026 required the Centre and EPFO to decide on a revision, and a notification of 29 May 2026 gave the ₹15,000 figure statutory recognition under the Code on Social Security, 2020 without raising it. An increase to ₹25,000 has been cleared by the Finance Ministry but remains a proposal rather than law, with reporting pointing to a likely effective date of 1 April 2027 subject to Cabinet. Plan on ₹15,000 until it is notified.
Standard allowances HRA, LTA, meal allowance, transport, and WFH stipend The standard allowance components, what's tax-exempt, and how the new regime changed the picture.
- Typical amount40–50% of basic salary for metro cities; 40% elsewhere
- Old regimePartially exempt. The exempt amount is the lowest of: actual HRA received; actual rent paid minus 10% of basic; 50% of basic (metro) or 40% (non-metro)
- New regimeNo exemption. Full HRA is taxable as salary.
- MNC noteEmployees on the new regime get no benefit from HRA as a salary component. Consider offering a higher basic and lower HRA for new-regime employees, or using a flex wallet for rent support.
- Typical amount₹30,000–₹60,000/year
- Old regimeExempt for domestic travel (air, rail, or public transport) for employee and family, for 2 trips in a 4-year block. Travel receipts required.
- New regimeNo exemption. Fully taxable.
- MNC noteLTA is one of the clearest examples of a benefit that has lower value for new-regime employees. Worth retaining as a CTC component for old-regime employees but may not justify the admin complexity for a young, new-regime workforce.
- Tax-exempt amount₹50/meal, typically ₹2,200/month (2 meals/working day × 22 days)
- Old regime₹2,200/month exempt if provided via meal vouchers or prepaid cards (not cash).
- New regimeNo exemption. Fully taxable if provided as allowance.
- MNC noteMeal vouchers and prepaid meal cards (Sodexo, Zeta, Zaggle) are the standard delivery mechanism. Cash meal allowance is taxable regardless of regime. Applicable for in-office employees; WFH employees rarely claim this.
- Common amount₹1,600–₹3,200/month
- Old regimeTransport allowance was explicitly exempt up to ₹1,600/month (replaced by standard deduction in 2018). No specific transport exemption now; subsumed into the ₹50,000 standard deduction under the old regime.
- New regimeStandard deduction of ₹75,000 available. No separate transport exemption.
- MNC noteCompany-provided transport between home and office is not a taxable perquisite if organised as a group commute. Cab reimbursements for individual commuting are taxable. Many MNCs offer a fixed transport allowance within the CTC structure.
- Common amountsOne-time setup: ₹10,000–₹25,000. Monthly: ₹1,500–₹3,000 for internet
- Tax treatmentWFH stipends and internet reimbursements are generally taxable as salary. No specific exemption exists in either regime. One-time equipment purchases by the employer (laptop, chair, monitor) provided as business tools are typically not perquisites if used primarily for work.
- MNC noteGlobal startups in India increasingly offer a WFH setup allowance at joining. Budget it as a taxable benefit or structure it as an employer asset loan (employee uses equipment; employer retains ownership) to reduce the tax impact.
- What it isA residual CTC component used to make up the total package after all other allowances are accounted for
- Tax treatmentFully taxable as salary under both regimes. No exemption.
- MNC noteSpecial allowance typically forms 15–30% of CTC in compliant salary structures. It attracts full income tax and all statutory deductions proportionally. Minimising it in favour of more tax-efficient components is standard India salary structuring practice, within the constraints of the 50% basic salary rule.
Common MNC mistakes India payroll errors that appear in the first year Based on the patterns Plum's team sees when onboarding MNC clients from EOR to independent entity.
The following are the most common structural errors Plum's team encounters when MNCs move from an Employer of Record to their own India entity, or when they first build out India payroll independently.
Basic salary below 50% of CTC
The most common inherited compliance problem. EOR templates and pre-2025 salary letters frequently have basic at 30–40% of CTC. Under the Labour Code 2025, this is non-compliant. It also means EPF and gratuity provisioning has been understated. Correct this before the first independent payroll run.
ESOP perquisite not included in TDS
Foreign parent ESOPs or RSUs are exercised and tracked outside India payroll systems. The perquisite value at exercise must be included in Form 24Q and TDS calculations in the month of exercise. Most India payroll teams don't receive automatic notification from the parent equity system. Build a manual notification process between the equity team and India HR before the first vesting date.
GTL premium included in CTC but not added to Form 16
Group term life insurance premiums paid by the employer are a perquisite and must appear in Part B of Form 16. Many India payroll setups include GTL in CTC calculations but omit it from the perquisite schedule. The result is a gap between declared and actual taxable income. Employees discover this when filing their return.
Gratuity not provisioned from day one
Gratuity accrues from the first day of employment, not from the 5-year eligibility date. Many first-time India entities start provisioning only when an employee approaches the 5-year mark. By then the liability is ₹15–20 lakh per senior employee. Set up a Group Gratuity policy or internal provisioning from the first payroll run.
