Compensation and benefits are 2 of the most contested areas of India’s employment law. Employees often receive supplemental benefits on top of their base salary. Without these, you could have trouble attracting new employees or retaining existing team members. Instead, turn to G-P for guidance. We’ll help you meet and exceed every India employment law to stay compliant and attract top talent.
India compensation laws
India’s minimum wage laws vary by state and sector. For example, the agriculture sector has a separate minimum wage set by state governments. Employers are required to give employees a pay slip (email or hard copy), paid via an employee’s bank account. Generally, an employer will pay employees on the 1st of every month. Under prevailing legislation, companies with fewer than 1,000 employees should pay wages every month before the 7th, while companies with more than 1,000 employees should pay every month before the 10th.
Salary inflation is common in India, and employees often receive a title and wage increase of around 10% to 15% each year. Although India’s compensation laws do not require this increase, employees who do not get one will typically look for other jobs, especially in the technology sector.
Guaranteed benefits in India
A variety of guaranteed benefits must be a part of your India benefits management strategy. Employees get paid time off including 3 paid national holidays, but these can vary by state, religion, and local custom. Pregnant employees also receive a guaranteed maternity leave of 26 weeks. The statutory minimum for paid vacation leave varies according to applicable legislation — we often see companies offering up 12 days of sick and/or casual leave.
India benefits management
When you decide to expand to India, you’ll need to make sure you budget enough for supplemental benefits. Employees are highly concerned about allowances, so including these in your India benefits management program is best:
- Medical allowance
- Leave travel allowance of concession (LTA/LTC)
- Telephone/mobile phone allowance
- Vehicle allowance
- House rent allowance (HRA)
Restrictions for benefits and compensation
India’s compensation laws also dictate certain restrictions, such as a typical workweek. The average workweek is 40 hours with a workday of 8 hours. Workers must get 10.5 hours of rest between workdays, and they shouldn’t work more than 48 hours per week or 9 hours a day.
India employee benefits plans
While some benefits play a role in ensuring company compliance, others are intended to support the wellbeing of your employees. A good benefits plan will boost morale and increase retention rates. You can also use your benefits as a way to compete with other companies in the industry.
Required benefits are non-negotiable, but your fringe benefits will set your company apart from the competition. Possible supplemental provisions can include:
- Company cars
- Transportation allowances
- Housing allowances
- Children education allowances
As an employer, you’re responsible for providing any employee provisions described in a country’s labor laws. In India, the requirements include:
- Social security contributions
- Gratuity payments
- Public holidays off
- Maternity leave
These required provisions come with various calculations and minimums. For example, pregnant employees must receive at least 26 weeks off for paid maternity leave. Make sure you understand these details before creating your benefits plan.
Designing India employee benefits plans
When you expand to a new country, it may feel challenging to design your benefits plan. While you have to account for your company’s resources, you also want to meet employees’ expectations and needs. The best way to find a balance between these factors is to conduct research. You can follow these basic steps to get started.
1. Determine company budget and goals.
The first step in designing a benefits plan is understanding what your company is capable of financially. Look into your business’s earnings and expenses and determine a benefits budget that works for you.
It’s also helpful to consider how your benefits plan can help you meet your goals. For instance, if you want to focus your efforts on recruiting, you may want to create a similar benefits plan to other companies in your industry. This approach will make your company more competitive in the job market.
2. Explore employee needs and expectations.
Your benefits packages can only be competitive if they represent needs and match standards in your industry. This research phase is dedicated to learning about employee needs and what other companies in your sector are offering.
Conducting surveys in your area can help you understand what employees need and expect from their employers. You can also research companies similar to yours to find commonalities in their benefits packages.
3. Make an informed benefits plan.
With the information you gathered, you can create your plan. Start by allocating funds for any required benefits. With the remainder of your budget, you can establish supplemental benefits based on your findings.
Average cost of benefits
The cost of benefits is different for every company. Many factors can influence the benefits a company chooses, including location, business size, and industry. You should determine a percentage of your earnings for benefits spending.
How to calculate benefits
Benefits calculations will vary based on the type of provisions you offer. For example, employers must provide gratuity payments for retiring and resigning employees who have served for 5 or more years. Gratuity is a lump-sum payment equal to 15 days of work for every year of service. Calculate an employee’s daily rate and multiply it by the appropriate number of days.
How are employee benefits taxed in India?
Allowances fall into 3 categories — taxable, nontaxable, and partially taxable. Generally, most benefits are taxable as they’re considered part of employee income. Nontaxable allowances only include special circumstances, such as allowances paid to judges of the high court.
Partially taxable benefits include:
- House rent allowances
- Leave travel allowances
These types of benefits are nontaxable up to a set amount. Past that amount, employees must include them in their income calculations.
Employee health benefits
While it’s not required, employers may offer a supplemental healthcare scheme for employees. These schemes are an addition to compulsory social security contributions.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.