Statutory Benefits in India Explained

Statutory benefits in India refer to the mandatory employee benefits that employers provide as stipulated by the law. These benefits play a crucial role in protecting and progressing Indian employees, especially during difficult life emergencies. Through statutory benefits, employers guarantee their employees to provide financial or other assistance when required.

Statutory benefits, such as insurance, pension benefits, mandatory leaves, gratuities and more, are included in employees' total compensation. However, the number or type of statutory benefits provided can vary from the region of the country you are working to the sector you are working for. The core concept of providing these benefits is to provide a minimum standard of financial security and overall well-being for employees across the country.

Understanding the importance of statutory benefits in India is important for their efficient implementation. Therefore, here are a few reasons why statutory benefits are vital:.

-Promotes Employee Well-Being: Providing employees with their basic rights and benefits helps them stay satisfied with their work, which ultimately improves their morale and work productivity.

-Reduction in Employee Turnover: High employee turnover is the biggest sign of dissatisfaction among employees with their organisation. Employers can reduce this phenomenon by providing employees with various types of statutory benefits.

-Provides Job Satisfaction: Providing employees with statutory benefits like insurance, maternity pay, provident fund, etc., not only satisfies them but also protects them against any unforeseen emergency or accident.

-Fulfil Legal Obligations: Employers must follow labour laws in India by providing statutory benefits to employees. By complying with these laws, employers can avoid any legal penalties.

-Also Read: Employee Benefits Program: Types, Importance and Need

There are various types of statutory benefits in India that both employees and employers must be aware of. Here are the benefits.

-Provident Fund

Employee’s provident fund is one of the most crucial statutory benefits in India. That is why, there is a separate act that oversees all its functioning; that is, the Employee Provident Fund and Miscellaneous Provisions Act 1952. As per the provision, the employer who has 20 or more employees in their organisation with a salary of a minimum of ₹5,000 per month has to contribute towards the employee provident fund.

For the employee provident fund, both the employee and employer contribute a certain percentage of the monthly salary. The percentage can be decided according to industry standards and company policies.

The provident fund increases over time, and the employee receives the payment along with interest on retirement. Generally, employees need to wait until they are 55 to withdraw the full fund amount.

-State Insurance

The next statutory benefit provided in India is state insurance. Under the Employee’s State Insurance Act 1948, companies with 10 or more employers need to provide state insurance coverage to their employees. The health insurance provided covers medical expenses like employment injury, maternity and sickness.

Moreover, state insurance also provides coverage for the employee's dependent family members in terms of medical, unemployment cash benefits, disability benefits, and maternity benefits.

It must be noted that similar to the employee provident fund, the employer and employee both need to make contributions towards state insurance. The employer's contribution is around 4.75%, and the employee’s contribution is equivalent to 1.75% of the salary payable. However, if the employee makes less than ₹137 per day, then they are exempted from any contribution.

Also Read: Benefits of Group Health Insurance Policy for Employees

-Gratuity Payment

Gratuity is one of the statutory benefits in India. It is a welfare payment made to employees for their services. Gratuity is paid to the employees who have worked for their employees for over 5 years. The payment is equivalent to 15 days of wages for every year of employment. It should be noted that it does not apply to employees who are terminated for misconduct or negligence.

-Minimum Wages

Wages are the most crucial part of any job; they are the monetary benefit that every employee deserves for the service and skill provided to their employer. That is why the Minimum Wages Act. 1948 ensures that every employee is fairly compensated all across India. The minimum wages for employees differ depending on their region, skills and education qualifications.

-Statutory Maternity Benefits

Maternity benefits in India have improved significantly. Under the Maternity Benefit Amendment Act 2017, employers are liable to provide necessary maternity support to their expecting employees.

The act states that companies with 10 or more employees must provide all maternity benefits to women employees. These benefits include statutory maternity pay, paid maternity leaves, and work-from-home flexibility for nursing mothers.

Also Read: Maternity Leave Rules in India 2024

-Mandatory Leave Benefits

It is one of the types of statutory benefits that employees are eligible to receive, such as mandatory leave. It includes national holidays like Independence Day, Republic Day and Gandhi Jayanti.

Other than these, there are festive leaves that depend on the region and organisation. The Factories Act mandates 12 days of leave for employees who have worked 240 days in a year. Moreover, the number of paid leaves that can be carried forward to next year lies between 30 days and 60 days.

Till now, you must have understood what statutory benefits are and their types. Let us explain how they are different from non-standard benefits.

Also Read: Individual Health Insurance Vs Group Health Insurance

This article aims to inform both employees and employers about various statutory benefits in India. Benefits like minimum wages, maternity leaves and provident funds are some of the basic must-haves that every employer needs to provide. Moreover, the importance of statutory benefits has informed employees of the compulsory benefits they need to have in addition to their salary.

Group mediclaim policy is an essential part of any organisation. Having group health insurance is beneficial for employees as it provides them with medical coverage and financial assistance during emergencies.

Moreover, group health insurance is an important business insurance that helps employers fulfil their financial and legal obligations. Thus, having group health insurance is important for both employees and employers.

Employers can use TATA AIG Business Insurance India to provide trusted health insurance to their employees. With TATA AIG, businesses can get several benefits, such as comprehensive health insurance for employees and their families, coverage for pre-existing illnesses from day one of insurance, and, the best part, a customisation option for the group health insurance as per the company’s needs.

-Is EPF a statutory deduction?

Yes, EPF deduction is the statutory contribution that should be deducted from all eligible employees.

-Can an unmarried daughter claim her father's pension?

Yes, as per the guidelines, a daughter (except for one with physical or mental disabilities) might be eligible to receive a father’s pension until marriage, remarriage or till they start earning.

-Which company has the best employee benefits in India?

Several big corporations provide great employee benefits in India. All you need to do is check company policies and discuss your queries with the hiring team before joining the company.