What are the statutory employee benefits in India?
Statutory employee benefits are the benefits Indian law requires every eligible employer to provide. The main ones are Provident Fund (PF), Employees' State Insurance (ESI), gratuity, maternity benefit, statutory bonus and paid leave. Since November 2025, most are governed by the Code on Social Security and the Code on Wages.
These benefits sit on top of salary and are not optional: they apply based on headcount and pay thresholds, not company policy. Everything beyond them, such as group health insurance, OPD cover, wellness programmes and flexible benefits, is voluntary but has become standard in competitive hiring.
For US and other foreign companies hiring in India, whether through their own entity, a global capability centre or an Employer of Record, the usual surprises are that health insurance isn't mandatory for most employees but is expected, and that gratuity is a long-term liability that must be provided for in the accounts.
In India
The core list: PF at 12% of basic + DA from both employer and employee (20+ employees); ESI medical and cash benefits for employees earning up to ₹21,000 a month (10+ employees); gratuity after five years of service, or one year for fixed-term employees; maternity benefit of 26 weeks' paid leave; and statutory bonus of 8.33–20% for eligible lower-wage employees.
In practice
A US software company opens a 150-person engineering centre in Bengaluru. It registers for PF, ESI (for a few eligible support staff), professional tax and the state Shops and Establishments Act, sets up a gratuity provision, adopts a POSH policy with an Internal Committee, and adds group health insurance and OPD cover to stay competitive.
Common questions
Which employee benefits are mandatory in India?
PF, ESI (for eligible employees), gratuity, maternity benefit, statutory bonus (for eligible employees) and paid leave as set by state law.
Is health insurance mandatory for employees in India?
Not for most employees. Those earning up to ₹21,000 a month are covered by ESI; for everyone else, group health insurance is voluntary but standard.
What employee benefits should US companies offer in India?
All statutory benefits, plus market-standard extras: group health insurance covering family, OPD cover, life and accident insurance, and wellness or mental-health support.
Is gratuity mandatory in India?
Yes, for establishments with 10 or more employees. It becomes payable after five years of continuous service (one year for fixed-term employees).