Did you know that preventive care plans in India have risen nearly 40%, with demand for OPD, wellness, and personalised benefits growing rapidly? Employees now expect more than just pay, whether they’re in a startup, MSMEs, or a larger organisation.
Companies that overlook this shift risk higher attrition, lower engagement, and losing top talent to competitors offering better support. From health cover for families to mental-wellness initiatives and flexible work, benefits are now a key part of the employment value proposition.
In this blog, you’ll get a clear breakdown of employee benefits in India, along with practical examples. You’ll also learn how to design an effective programme, avoid common pitfalls, and ensure employees actually use what’s offered.
Employee Benefits: Beyond salary, employee benefits support health, financial security, work-life balance, and overall well-being.
Statutory vs Optional: Compliance is mandatory, but optional perks drive engagement, retention, and employer brand.
Design Thoughtfully: Understand workforce needs, set clear goals, balance statutory and optional benefits, and choose vendors carefully.
Communicate Clearly: Use plain-language summaries, visuals, and timely reminders to boost benefit usage.
Tools help: Platforms like Craze centralise records, automate compliance, sync with payroll, and provide self-service portals for employees, reducing errors and effort.
Employee benefits are non-wage forms of compensation provided by employers in addition to salaries. They include health insurance, retirement contributions, paid leave, wellness initiatives, and other perks that support employees’ overall well-being.
Benefits matter because they help organisations attract talent, retain skilled employees, and improve productivity. While salary covers the basic compensation, benefits shape the overall work experience and influence engagement and loyalty.
In short, while salary covers the “what” of compensation, benefits address the “how” and “why” employees feel supported and motivated to stay and perform.
Benefits come in different forms, each designed to support employees’ well-being, financial security, and work-life balance. Below are the main categories beyond salary that employers typically provide. Understanding these helps you decide what to prioritise and what additional perks could add value.
1. Health & Insurance
Beyond covering medical expenses, these benefits help reduce stress and absenteeism. They signal to employees that their health and family’s well-being are priorities, which can improve overall morale and productivity.
2. Retirement & Financial
Long-term financial benefits go beyond basic compensation to provide employees with a sense of stability. Offering retirement plans, gratuity, or equity options builds loyalty and encourages employees to plan for the future.
3. Time-Off & Leave
Paid leave and flexible time off are critical for maintaining focus and preventing burnout. Properly structured leave policies support work-life balance, help employees manage personal responsibilities, and contribute to sustained engagement.
4. Work & Lifestyle Perks
These benefits enhance the day-to-day work experience, driving satisfaction and retention. From learning budgets to wellness initiatives and recognition programmes, lifestyle perks show employees that their development and wellbeing are valued beyond standard compensation.
Here’s a quick reference of each benefit category with the types of inclusions typically offered:
Category | Typical Inclusions |
Health & Insurance | Health insurance (hospitalisation), family/dependent cover, OPD (out-patient department) benefits, dental & vision cover, group term life insurance, personal accident cover. |
Retirement & Financial | Provident Fund (EPF), pension plans, gratuity, National Pension System (NPS) or equivalents, ESOPs/RSUs (for some companies), financial allowances (e.g., travel, housing). |
Time-Off & Leave | Paid leave (annual/earned leave), sick leave, parental leave (maternity/paternity), public/national festivals & holidays, bereavement leave. |
Work & Lifestyle Perks | Hybrid or remote work, flexible hours, learning & skill-development budgets, meal/transport allowances, wellness programmes (including mental health, Employee Assistance Programmes), recognition schemes. |
Examples: A company might offer hospitalisation insurance for the family (Health & Insurance), match provident fund contributions (Retirement & Financial), provide 20 days paid leave plus festival holidays (Time-Off & Leave), and a yearly learning stipend plus remote work options (Work & Lifestyle Perks).
Understanding these categories helps clarify which benefits are legally required in India and which can be offered strategically to enhance retention, engagement, and employer brand.
Next, we’ll move on to Statutory vs. Optional Benefits to help you ensure compliance while designing an effective programme.
When planning employee benefits in India, it’s crucial to distinguish between mandatory (statutory) benefits and optional perks. Missing statutory requirements can create legal risks, while optional benefits allow you to enhance engagement, retention, and employer brand.
1. Statutory (must-have)
These are legally required for eligible companies and employees. Non-compliance can result in fines, legal issues, or reputational risk. Key examples include:
Provident Fund (EPF) and Employee Pension Scheme contributions
Employee State Insurance (ESI) for applicable wage thresholds
Gratuity for employees with continuous service (usually 5+ years)
Maternity Benefits (leave and pay) under the Maternity Benefit Act; crèche facilities for larger establishments
Leave entitlements & holidays as per Shops & Establishments / Factories/state rules
Bonus payments (Payment of Bonus Act), depending on wage bands
Labour Welfare Fund (state-specific), where mandated
2. Optional (nice-to-have)
These are voluntary benefits that help you differentiate your offer and boost satisfaction, productivity, and loyalty:
Top-up health insurance (higher coverage, dependents, pre-existing conditions)
Term life / personal accident cover beyond statutory minima
OPD & telehealth reimbursements
Wellness & Employee Assistance Programmes (counselling, mental health support)
Flexible benefits “wallets” (allowances/perks employees choose)
Learning & development or certification reimbursements
Parental leave/childcare support beyond statutory requirements
Recognition & rewards programmes
Remote/hybrid work support, WFH stipends
Here’s a quick statutory checklist to help you ensure compliance based on your number of employees:
Note: EPF contributions are not mandatory for companies with fewer than 20 employees.
Once statutory foundations are firm, you can layer optional benefits that align with your objectives. Let’s now move into the full spectrum of what employers in India are doing (statutory + optional) in practice.
Here’s a current, detailed list of both statutory (mandatory) and optional (high-impact) benefits as used in India. Each point tells you who it applies to (or state/eligibility) and key limits/variations.
1. Statutory Benefits (Mandatory for Compliance)
These are legally required benefits that every eligible employer must provide. Ensuring compliance protects your organisation from fines, legal issues, and reputational risk.
Provident Fund (EPF): Mandatory retirement savings for eligible organisations/employees; usually 12% of basic salary from the employer and employee each; wage caps may limit applicability; voluntary higher contributions exist.Last Drawn Salary × Years of Service × 15 days’ Wages per Year
Employee State Insurance (ESIC): Medical & social security cover (including sickness, maternity, etc.) for employees whose wages are under the threshold set by the ESI Act; fixed contribution rates from employer & employee.
Gratuity: A one-time payout given to employees who leave after 5+ years of continuous service; the amount is typically calculated as
Last Drawn Salary × Years of Service × 15 days’ Wages per Year |
Subject to legal caps, it is largely tax-exempt up to certain limits.
Maternity Benefit: Under the Maternity Benefit Act, female employees are eligible for paid maternity leave (26 weeks in many cases), with eligibility based on duration of service; a crèche facility is required in plants/establishments above a certain employee strength.
Statutory Leaves & Holidays: Vary by state under Shops & Establishments / Factories rules. Includes Paid Earned Leave, Sick Leave, Casual Leave, and festival / national holidays. Different states have different mandates.
Payment of Bonus: If your organisation falls under the Payment of Bonus Act, you must pay an annual bonus (based on profit) for those eligible, within min/max percentages.
Labour Welfare Fund (LWF): Contribution by employer (and sometimes employee) where state law mandates; slab limits, remittance schedules vary widely.
2. Optional Benefits (High-Impact Perks to Enhance Engagement)
These are additional perks employers can offer to improve employee satisfaction, retention, and productivity. Optional benefits help differentiate your company and strengthen your employer brand.
Group Health Insurance (GMC): Hospitalisation cover often with add-ons for dependents; higher sum insured tiers; options for maternity, pre-existing, etc.
Group Term Life / Personal Accident Insurance: Sum assured multiple of salary; ensure clear policy around disablement and nominee.
OPD & Telehealth: Outpatient reimbursements, virtual clinic access, annual caps, and defined provider networks.
Wellness & EAP: Mental health counselling, preventive health check-ups, fitness subscriptions. Confidential services help increase utilisation.
Flexible Benefits Wallet: Allowances or credits that employees can spend on items of their choice (internet, meals, travel, books, etc.), depending on grade or eligibility.
Learning & Development: Budget for course fees, certifications, role-based learning; could include subscription services (Coursera, Udemy, etc.).
Parental Top-ups & Childcare Support: Additional leave or stipend for childcare, beyond statutory maternity/paternity, may also include elder care.
Recognition & Rewards: Non-monetary awards, peer recognition programmes, performance bonuses.
Remote / Hybrid Support: Stipends for home office infrastructure, internet reimbursements.
Commute & Meal Support: Shuttle, meal cards, transport/fuel allowances depending on site/location.
Also Read: Employee Database Management System for HR Leaders: What It Is, How It Helps, and How to Choose
Now that you know what’s legally required and what can delight your team, let’s explore how to design an effective, impactful benefits programme.
Creating an effective benefits programme requires understanding employee needs and aligning them with business priorities. The following steps guide you through planning, implementing, and refining your benefits strategy.
Step 1: Understand Your Workforce
First, gather data: who are your employees (ages, family status, health needs, locations, levels), what benefits they currently value, and what’s being used/claimed. If you have existing insurance or leave data, that helps. Surveys & focus groups are useful.
Step 2: Set Clear Goals & Budget
Decide what you want to achieve with your benefits plan: Is it to reduce attrition? To attract talent? To reduce absenteeism? To improve the employer brand? Set a total budget (often expressed as a percentage of payroll or total cost of salary + benefits), considering what you can afford sustainably.
Step 3: Choose the Right Mix of Benefits
Balance is key: statutory benefits are non-negotiable. Then include medical risk cover (health insurance, etc.), financial security (retirement, life cover), and perks that boost morale and usage (learning, wellness). Avoid overloading with low-impact perks at high cost.
Step 4: Evaluate Vendors & Ensure Compliance
Select good insurers / TPAs / service providers. Make sure network hospitals are relevant, claim turnaround is fast, and coverage terms are clear. Also, ensure compliance with local labour laws, state-wise differences, tax treatment, audit trails, and data security.
Step 5: Roll Out & Communicate Clearly
Even the best benefit plan fails if people don’t understand it. Write documents in plain English, perhaps build short FAQs or visual summaries. Use examples (“If you earn X, this is how much medical cover you have”). Introduce benefits at onboarding; send reminders for renewals or usage periods.
Step 6: Track, Measure & Refine
Track utilisation (which benefits are used, which are ignored), satisfaction (surveys), turnover/retention metrics, and cost vs benefit. Review annually (or sooner if costs/workforce change). Adjust the programme, maybe shift the budget from underused perks into more valued ones.
Also Read: Taxable and Non-Taxable Salary Allowances in India: Definition & Types
Even the best-designed benefits plan won’t deliver value if employees don’t understand or engage with it. Next, let’s look at strategies to communicate benefits effectively and boost adoption.
Offering benefits is one thing; getting employees to use them is another. Poor uptake wastes money and hurts morale. Here’s how to ensure usage.
1. Plain-English Summaries
Avoid long, complex policy documents. Use one-pagers or visual cards showing what the benefit is, who it applies to, and how to use it. Include clear examples for clarity.
2. Moments That Matter
Tie communication to moments: on day one (onboarding), during life events (marriage, childbirth, health scares), at renewal time for insurance, and around festivals/holidays. Reminders when a benefit period is ending or a limit is close.
3. Manager Enablement
Line managers often are the first point of contact. Equip them with cheat sheets, knowledge of escalations, and clarity on eligibility. Encourage them to flag under-utilisation or queries.
Even well-intentioned benefits programmes can falter if certain pitfalls aren’t addressed. Let’s take a closer look.
When designing and running a benefits programme, here are the most common pitfalls SMEs and growing companies face when implementing benefits, and strategies to avoid them:
Over-complex plans: Too many perks without clear guidance confuse employees and lower usage. Keep the plan simple, prioritise high-impact benefits, and provide clear instructions.
Poor communication: Employees don’t know what exists or how to claim it. Use plain-language summaries, visuals, and regular reminders.
Ignoring state differences: Laws, taxes, and compliance vary; overlooking them risks non-compliance and inequity. Regularly review state regulations and adjust policies accordingly.
No feedback loop: Without employee input, you can’t identify underused or disliked benefits. Conduct surveys, focus groups, and monitor utilisation to iterate.
Vendor lock-in without SLAs: Partnerships without clear agreements can result in delays, poor service, or inadequate coverage. Negotiate clear SLAs, monitor performance, and maintain alternative options.
Managing employee benefits manually, via spreadsheets or separate HR systems, can be time-consuming, error-prone, and hard to scale. Craze ensures compliance, accuracy, and better employee engagement.
Key functionalities include:
Centralised Employee Records: Craze stores all employee information in one place, including eligibility rules, dependent details, and benefit history. This makes tracking entitlements and updates easier for HR teams and eliminates scattered documentation.
State-wise Compliance Automation: The system automatically applies statutory rules for PF, ESI, professional tax, and state-specific leave laws. This ensures organisations remain compliant across different locations without manual checks or frequent legal updates.
Payroll Management: Benefit deductions, allowances, and insurance premiums are synced with payroll automatically. This reduces double-entry errors and ensures accurate reporting for salary disbursement and statutory filings.
Employee Self-Service Portal: Employees can access their entitlements, submit claims, and explore optional perks directly through the portal. Self-service increases benefit usage and reduces HR queries, while providing transparency on coverage and limits.
Audit Trails & Reporting: Craze tracks flexi-benefits usage, claim approvals/rejections, and net taxable income. These insights help HR teams optimise the benefits mix, identify underused perks, and plan budgets efficiently.
By consolidating records, automating compliance, integrating payroll, and enabling employee self-service, Craze reduces administrative effort, ensures accurate benefit management, and improves employee satisfaction and engagement. For companies scaling operations or moving from manual processes, this can be a transformative step.
Request a demo today and see how Craze can streamline your benefits management while boosting employee engagement and operational efficiency.
Employee expectations in India have shifted, with candidates and existing employees now valuing benefits as much as salary. A well-structured programme that balances statutory requirements with optional perks drives compliance, reduces attrition, improves engagement, and strengthens your employer brand.
To manage these changing expectations effectively, Craze provides an all-in-one platform. It streamlines record management, ensures state-wise compliance, and automates payroll integration, reducing administrative burden and errors.
1. What are the main types of employee benefits?
A. Employee benefits typically fall into four categories: Health & Insurance, Retirement & Financial, Time-Off & Leave, and Work & Lifestyle Perks. Health & Insurance covers medical needs, Retirement & Financial ensures long-term security, Time-Off & Leave supports rest and personal time, and Work & Lifestyle Perks enhance day-to-day work experience. Organisations can mix statutory and optional benefits within these categories.
2. Which employee benefits are mandatory in India?
A. Statutory benefits required under Indian law include Provident Fund (EPF), Employee State Insurance (ESI) for eligible employees, Gratuity after 5+ years of service, Maternity Benefits under the Maternity Benefit Act, statutory leave and holidays, Payment of Bonus (if applicable), Labour Welfare Fund (state-specific), and Professional Tax where mandated. Compliance is essential to avoid legal penalties.
3. How much should a company budget for benefits?
A. Companies often allocate 10–25% of payroll costs for employee benefits, depending on workforce size, industry, and benefit mix. Statutory benefits form the baseline, while optional perks can be adjusted based on objectives like retention, attraction, or engagement. Smaller organisations may start at the lower range, while larger firms offering extensive optional benefits often budget closer to the higher end.
4. How do I choose health insurance for employees?
A. Choosing health insurance involves evaluating coverage, sum insured, dependent inclusion, network hospitals, claim turnaround, exclusions, and cost per employee. Assess workforce demographics (age, family status, chronic conditions) and align with company objectives. Optional features like OPD reimbursements, maternity cover, and telemedicine can enhance value. Partnering with insurers or TPAs with strong support networks ensures smooth claim processing.
5. What are flexible benefits, and how do they work?
A. Flexible benefits, or “cafeteria plans,” allow employees to choose perks that suit their personal needs, such as wellness allowances, meal cards, or learning budgets. Employers allocate a budget or points per employee, which can be redeemed for approved benefits. This approach increases satisfaction, engagement, and perceived value without inflating overall cost, as employees pick what they value most.
6. How do I measure the ROI of benefits?
A. ROI can be measured by tracking metrics like utilisation rates, employee satisfaction surveys, retention, absenteeism, productivity, and cost per employee. Compare these against the total benefits spend to assess efficiency. Analysing which benefits drive engagement and loyalty helps optimise the programme, ensuring high-impact perks are prioritised and low-utilisation offerings are reconsidered or redesigned.
