Understanding Employee Benefits Compliance in India: What HR Needs to Know
Understanding employment laws and benefits in India has always been a bit complicated. Different laws and regulations apply depending on the industry and state.
For example, certain benefits and rules only applied to registered businesses known as the “organized sector.” Employees in this sector enjoyed fixed employment terms, benefits like insurance and provident fund, and regular salary increases.
We have over 29 labor laws, including the Employees’ State Insurance Act of 1948, the Employees’ Provident Fund and Miscellaneous Provisions Act of 1952, and the Payment of Gratuity Act of 1972.
Standardizing the labor codes
Streamlining labor codes became a priority in India in 2019 when the Ministry of Labour and Employment introduced four bills aimed at consolidating various laws. They include:
The Code of Wages, which merges four acts:
The Code of Wages ensures that all workers, regardless of sector, receive essential benefits and adhere to standardized regulations.
Industrial Relation Code:
which combined and updated the following acts:
The Industrial Relation Code stipulates rules for unions:
finding employment after termination, settling disputes, and governance of strikes and lock-outs.
Occupational Safety, Health and Working Code , which integrated:
Code on Social Security , including:
Employee benefits in the Code on Social Security
India does not have a nationwide retirement age. It’s up to states to establish their own criteria.
Pension and retirement plans : The majority of Indians who have access to formal social security in the form of old-age income protection are members of the Employees’ Provident Fund Organization. If they’re earning less than INR 15,000 per month, they must contribute to the fund at 12% of their salary, with an additional 12% contributed by the employer. Employees can also contribute to the Voluntary Provident Fund (VPF) in addition to the EPF.
Medical insurance : Private sector employees are entitled to medical benefits for sickness, death, disablement and maternity. They receive both medical care as well as cash benefits when they are unable to work. Group medical insurance may also be extended to spouses, children and parents.
Gratuity act : Companies with at least 10 employees are required to pay an additional 15 days’ worth of wages for each year of service at the company above five years, so long as the employee isn’t terminated due to misconduct. This is provided as a lump sum payout, and it must be paid out to the family members if the employee dies or has been injured on the job.
Other mandatory benefits
In addition to the workers’ benefits stipulated in the Code on Social Security, there are other benefits an employer may be required to provide, including:
Maternity leave : If a woman has worked full time for at least 80 days, she is entitled to paid maternity leave for 26 weeks, with a maximum of eight weeks preceding the expected due date.
Sick time : Employees can typically expect to receive 10 days of sick leave or casual leave.
Vacation time : Also referred to as annual leave, rules and regulations regarding vacation benefits are handled at the state level.
Holidays : In India, employees are entitled to three national holidays:
In addition to national holidays, employers are also required to provide five to nine festival holidays, depending on the state. Should an employee be required to work on a public holiday, they must receive double pay.
Why is an employee benefits policy important?
In India, offering employee benefits keeps employers in compliance with labor laws but also provides a hiring advantage when you offer beyond what is mandatory.
Supplemental benefits may include:
Understand each aspect better and support your employee to the best. These benefits will make the happy and stay for a longer time in the organisation’s.
