21  Employee benefits required by law

In India, several employee benefits are mandated by law to ensure the social security and welfare of the workforce. These are known as statutory benefits, and employers must provide them if they meet certain criteria, such as the number of employees or the industry they operate in.

Here are the key employee benefits required by law in India:

21.1 1. Employees’ Provident Fund (PF)

This is a mandatory retirement savings scheme. Both the employer and the employee contribute a portion of the employee’s salary to the fund, which earns interest over time.

  • Governing Law: The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
  • Applicability: Generally applies to establishments with 20 or more employees.
  • Key Feature: Provides a lump-sum amount to the employee upon retirement or after leaving a job. A part of the contribution also goes towards a pension scheme (EPS).

21.2 2. Employees’ State Insurance (ESI)

This is a comprehensive social security and health insurance scheme that provides medical, sickness, maternity, and disability benefits.

  • Governing Law: The Employees’ State Insurance Act, 1948.
  • Applicability: Applies to non-seasonal factories using power and employing 10 or more people, and other establishments as defined by the government. It is generally applicable to employees earning a monthly wage of up to ₹21,000.
  • Key Feature: Provides medical care for employees and their families, and financial assistance during periods of sickness or disability.

21.3 3. Payment of Gratuity

This is a lump-sum payment made to an employee as a token of gratitude for their long-term service to the company.

  • Governing Law: The Payment of Gratuity Act, 1972.
  • Applicability: Applies to establishments with 10 or more employees.
  • Key Feature: An employee is eligible for gratuity after completing at least five years of continuous service with the same employer. It is typically paid upon retirement, resignation, or termination.

21.4 4. Maternity Benefit

This benefit provides paid leave and other support for female employees during pregnancy and after childbirth.

  • Governing Law: The Maternity Benefit Act, 1961 (as amended).
  • Applicability: Applies to establishments with 10 or more employees.
  • Key Feature: Provides for 26 weeks of paid leave for the first two children, crèche facilities for establishments with 50 or more employees, and other related benefits.

21.5 5. Statutory Bonus

This is an annual bonus that must be paid to eligible employees based on the company’s profits.

  • Governing Law: The Payment of Bonus Act, 1965.
  • Applicability: Applies to establishments with 20 or more employees.
  • Key Feature: The bonus is calculated based on the employee’s salary and the profits of the establishment.

21.5.1 6. Employees’ Compensation

This benefit provides compensation to employees or their dependents in case of work-related injuries, occupational diseases, or death.

  • Governing Law: The Employees’ Compensation Act, 1923.
  • Applicability: Applies to workers in factories, mines, plantations, and other specified hazardous occupations, generally where the ESI scheme is not applicable.
  • Key Feature: The amount of compensation is determined based on the nature of the injury and the employee’s wages.

21.6 7. Statutory Leave

While a single national law doesn’t cover all leave types for all sectors, various acts mandate minimum paid leave.

  • Governing Laws: The Factories Act, 1948, and various State-specific Shops and Establishment Acts.
  • Key Feature: These laws prescribe minimum entitlements for paid leave, such as Earned Leave (or Privilege Leave), and often regulate Casual Leave and Sick Leave. The exact number of days and conditions vary significantly from state to state.