Home news Important Considerations While Drafting an Employee Benefits Policy in India

Important Considerations While Drafting an Employee Benefits Policy in India

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Over the last thirty years, India has overtaken and globalized its economy. The labor codes were the most favorable by-products of globalization in this country. These were fragmented among different industries and regions, and they have been further standardized and updated. Check out more about hiring with an employer of record India. 

The younger generation is expected to have protection and benefits common in the modern workplace because the average worker age falls in India. Businesses planning to expand in this country and appoint local artisans must have a proper employee benefits policy. Here are a few parameters that describe what to look for while drafting benefits policy in India.

Indian Employment Laws 

Understanding the employment perks and laws has not been an easy task. Several regulations, laws, and governmental programs specify labor requirements, and they were split between industries and states.

For example, many mandatory employment regulations and benefits are applied to the organized sector. It indicated the small percentage of regulated and licensed organizations, and they also had to pay a good and service tax. Employees operating within this sector have mandatory benefits, the security of regular and fixed employment terms, add-on benefits, contractual employment protections, and regular salary hikes. Employees were safeguarded by over 29 labor laws that include:

  • Payment of Gratuity Act of 1972
  • Employees’ State Insurance Act of 1948

 Standardizing the labor codes

The Ministry of Labor and Employment introduced four bills in the country in 2019, that would amalgamate the other laws. Also, they apply them to several other unorganized areas. The four different acts include:

  • The Equal Remuneration Act of 1976
  • The Minimum Wages Act of 1948
  • Payment of Wages Act of 1936
  • The Payment of Bonus Act of 1965

The Code of Wages broadens regulations and benefits to many artisans irrespective of the sector. It also specifies floor wages, payment of wages on time, and a minimum wage.

Industrial Relation Code has also combined a few things and updated several acts like:

  • Trade Unions Act of 1926
  • Industrial Disputes Act of 1947
  • Industrial Employment (Standing Orders) Act of 1946

This code specifies rules for finding employment after termination, governance of lock-outs and strikes, unions, and settling disputes.

Occupational Safety, Health, and Working Code also integrated

  • Factories Act of 1948
  • Contract Labor (Regulation and Abolition) Act of 1970

It concentrates on making safe workplaces across industries and occupations.

Code on Social Security, which subsumes several acts that touch upon employee benefits, including:

  • Employees’ Compensation Act of 1923
  • Employees’ Provident Funds and Miscellaneous Provisions Act of 1952
  • Employees’ State Insurance Act of 1948
  • Employment Exchanges (Compulsory Notification of Vacancies) Act of 1959
  • Payment of Gratuity Act of 1972
  • Maternity Benefit Act of 1961
  • Cine-Workers Welfare Fund Act of 1981

 The Code on Social Security for Employee Benefits

The country has not specified retirement age, so every state has specific parameters. The codes vary based on the contributions from companies, the specific program, etc. Well, different benefits enjoyed by the employer in India under the Code on Social Security are:

  • Retirement and pension plans: 

In India Employees’ Provident Funds Organization manages old-age income protection in the form of social security for the majority of people. Anyone earning below INR 15,000 per month must contribute 12% of the salary, and the employer will contribute another 12%.

  • Disability coverage: 

Artisans are protected from workplace-related injury or illness, are entitled to compensation:

  • Permanent disability: Employees get the largest sum of INR 120,000 or 60% of a monthly income.
  • Death: Employees’ families get the largest sum of INR 120,000 or 50% of a monthly income.
  • Medical insurance

Private sector workers get medical benefits for death, disablement, sickness, and maternity if specified in the contract. They get medical cash benefits and care while unable to work. In some cases, benefits are extended to family members. 

  • Gratuity Act
    In India companies with at least 10 employees are required to pay a gratuity to employees after five years of continuous service. The gratuity amount is an additional 15 days’ salary for each year of service for five years.

 Other Compulsory Benefits

Additionally, the other benefits included in the Code on Social Security are:

  • Maternity leave: Full-time workers who have worked for at least 80 days can get paid maternity leave for 26 weeks.
  • Sick time: They get ten days of sick leave.
  • Holidays: In India, employees are entitled to three national holidays such as
  1. Birthday of Mahatma Gandhi
  2. Independence Day
  3. Republic Day
  • Vacation time: Employees working in industries for a minimum of 240 days a year get one day of leave every 20 days.

Apart from that, they are offered five to nine festival holidays as per the state. An employee working on a public holiday earns additional pay depending upon the employer.

HR Expertise for Giving Employee Perks in India 

Understanding the labor laws for international employers with different languages, cultures, languages, and legal systems are challenging. A suitable way to hire as a part of the global expansion in India is to look for an employment partner with exceptional HR expertise. An employer of record in India can assist through the complete process. It ensures the benefits package of an employee is according to employment regulations.

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