Employer Health & Social Security Compliance in India (2026)
No single law forces an Indian employer to buy group health insurance — but plenty of health and social-security duties do bite. Once you cross 10 employees, ESIC, gratuity, maternity leave and a POSH Internal Committee apply; EPF starts at 20. The Code on Social Security, 2020 has consolidated all of it into one framework since 21-Nov-2025, and group health premiums carry 18% GST on top.
General guidance, not legal advice
The short answer
Is group health insurance legally mandatory? No — but ESIC is.
There is no general statute compelling every employer to provide group health insurance. The one genuine statutory health obligation is ESIC, which delivers state-run medical cover to employees earning up to ₹21,000 a month in establishments with 10 or more staff. Above that wage line — and for smaller firms — health cover is a voluntary decision. What is mandatory across the board is the wider social-security stack: EPF, gratuity, maternity benefit, POSH and employees’ compensation. See is group health insurance mandatory in India for the full legal position.
Your employer obligations at a glance
Eight duties shape health and social-security compliance for an Indian employer. Most are triggered by headcount, each has its own threshold, and together they form the legal floor your voluntary benefits sit on top of. Rates and ceilings are set by statute and revised periodically — always confirm the current figures before you run payroll.
Indicative figures for general guidance only, not legal or tax advice. State-level rules and the labour-code transition mean thresholds vary — verify the position for your establishment.
The one-line version
ESIC is the only statutory health duty. Everything above the ₹21,000 wage line is your call.
The Code on Social Security, 2020 — the new umbrella
On 21-Nov-2025, India brought its four labour codes into force nationally. For benefits and HR, the one that matters most is the Code on Social Security, 2020, which consolidates nine earlier laws — including the EPF Act, the ESI Act, the Payment of Gratuity Act, the Maternity Benefit Act and the Employees’ Compensation Act — into a single framework. It also extends social security to gig and platform workers for the first time.
The change with the sharpest payroll impact is the new definition of “wages.” Basic pay must now be at least 50% of total remuneration; where allowances exceed that, the excess is added back to the wage base. Because PF, ESI and gratuity are all calculated on that base, many employers who ran allowance-heavy CTC structures will see statutory costs rise unless they restructure.
One more headline: fixed-term employees now earn pro-rata gratuity after one year of service, rather than the usual five. Detailed central and state rules are still being notified, so treat this as a live area and confirm specifics with a labour-law advisor before restructuring pay.
ESIC — the one statutory health duty
The Employees’ State Insurance scheme, run by the ESIC, is the single place a health obligation genuinely applies. It covers establishments with 10 or more employees — counting permanent, part-time, contract and probationary staff — and reaches every employee earning a monthly wage up to ₹21,000 (₹25,000 for an employee with disability). Registration is due within 15 days of crossing the threshold, and cover continues even if headcount later dips.
Contributions run at 3.25% of wages from the employer and 0.75% from the employee. In return, covered employees and their dependents draw medical care, sickness and maternity benefits directly from ESIC. The critical planning point is what ESIC does not reach: anyone above the wage ceiling has no statutory health cover through you at all — exactly the gap a voluntary group health insurance plan is built to close. See how the two compare in ESI vs group health insurance.
EPF, gratuity & maternity — the savings and leave duties
EPF applies once you employ 20 or more people and is mandatory for staff earning up to ₹15,000 in basic plus dearness allowance. The employee contributes 12% and the employer matches it, with 8.33% of the employer’s share funding the EPS pension. Gratuity is owed by establishments with 10 or more employees to anyone completing five years of continuous service — now one year for fixed-term staff — at (15 ÷ 26) × last-drawn monthly wage × years of service, tax-exempt up to ₹20,00,000.
The Maternity Benefit provisions require 26 weeks of paid leave for the first two children and a medical bonus where no free pre- and post-natal care is provided. These are leave-and-payment duties on the employer, not a requirement to buy a policy. For a deeper walk-through of the payroll stack, read the PF, ESI, PT & gratuity compliance guide.
POSH & employees’ compensation — the safety duties
POSH — Internal Committee
The Prevention of Sexual Harassment (POSH) Act, 2013 applies to every workplace, but at 10 or more employees you must constitute an Internal Committee — chaired by a senior woman, with at least half its members women and one external member from an NGO or the legal field. You must publish a policy, run awareness sessions, and file an annual report. Failure to comply can cost up to ₹50,000 for a first offence, and repeat breaches risk licence cancellation. Firms below 10 rely on the district Local Committee.
Employees’ (Workmen’s) Compensation
Now Chapter VII of the Code on Social Security, the former Workmen’s Compensation Act imposes a no-fault liability: you owe compensation for an employee’s injury, occupational disease or death arising out of and in the course of employment — even for an accident while commuting — without the employee having to prove negligence. Most employers discharge this exposure through a workmen’s-compensation insurance policy so a single serious accident does not become an uninsured, open-ended liability.
GST on group health premium — the 18% you must budget for
Group health insurance premiums carry 18% GST. This matters because individual health cover was made GST-exempt from 22-Sep-2025 at the 56th GST Council meeting — but group and corporate plans were left at the full rate. For most employers, the input tax credit is blocked under Section 17(5)(b) of the CGST Act, so the 18% is a genuine cost rather than something you recover (credit is available only where cover is mandated by another law).
Plan your budget on the GST-inclusive figure, not the quoted base premium:
Base premium / employee
18% GST
Total cost / employee
Size the real cost for your headcount and cover level with the group health premium calculator.
Get the floor right, then build benefits on top
Every obligation on this page is triggered by headcount and runs on a monthly cadence — register on time, deduct and deposit each month, and file the returns. Treat it as routine and it stays quiet in the background; miss a step and it surfaces at the worst possible moment.
The statutory floor is deliberately narrow, though. It leaves everyone above the ESIC wage line without state health cover — which is exactly where a voluntary group plan earns its place.
Why most employers add cover beyond the floor
Meeting your statutory duties is non-negotiable, but the floor is deliberately narrow — and it leaves your most critical people exposed. That is why voluntary group health cover has become standard, not optional.
The statutory floor is narrow
ESIC only reaches employees at or below ₹21,000 a month, so your mid- and senior-level staff have no state health cover at all. Everyone above that line depends entirely on what you choose to provide.
It is now a hiring baseline
Across Indian SMEs and startups, group health cover has moved from perk to expectation. Candidates compare it offer-to-offer, and its absence reads as a red flag rather than a neutral omission.
The tax treatment is favourable
Premiums an employer pays to insure its team are generally an allowable business expense, reducing taxable profit, while employees can separately claim Section 80D on cover they fund themselves.
Healthy teams cost less to run
Faster access to doctors, cashless hospitalisation and preventive care cut absence and lost output. Voluntary cover often earns its keep on productivity and retention before a single large claim is filed.
Weighing the CFO case? Read the ROI of employee benefits or compare cover options side by side.
Your 2026 compliance checklist
Compliance is a routine, not a one-off. Work down these six actions to keep an establishment on the right side of the Code on Social Security, ESIC, EPF, POSH and the injury-liability rules.
- 1
Re-baseline your wage structure
The Code on Social Security’s wage definition requires basic pay to be at least 50% of total wages. Restructure CTC before it silently inflates your PF, ESI and gratuity liabilities.
- 2
Register for ESIC and EPF on time
ESIC registration is due within 15 days of crossing 10 employees; EPF applies at 20. Enrol every eligible worker, generate UANs and ESIC numbers, and link Aadhaar and bank details.
- 3
Deposit and file every month
Remit ESI, EPF and any Professional Tax by the monthly due date and file the returns — even in a nil month. Late deposits attract interest and damages.
- 4
Constitute your POSH Internal Committee
At 10 or more employees, form an Internal Committee with a woman presiding officer and an external member, publish the policy, and file the annual report with the district officer.
- 5
Cover injury and death liability
Employees’ Compensation is a no-fault liability on you. Hold a workmen’s-compensation policy or reserve for it so an on-duty accident does not become an uninsured claim.
- 6
Budget premiums with GST on top
Group health premiums carry 18% GST that most employers cannot offset. Quote and approve budgets on the GST-inclusive figure, not the base premium.
Thresholds, rates and the labour-code rules are set by statute and revised periodically. Confirm the current position with a labour-law advisor or the ESIC, EPFO and GST portals before acting.
What this means for your business
Meet the statutory duties where they apply — ESIC, EPF, gratuity, maternity, POSH and injury cover are non-negotiable. Then treat everything above the ₹21,000 wage line as a design decision. The practical question is not “must I?” but “what does a competitive, affordable benefit look like for my team?”
Onsurity is built for exactly that decision. Cover runs on a monthly subscription you can cancel anytime, so spend flexes as you add or remove staff. The benefit that drives value is bundled in — cashless treatment at 10,000+ network hospitals, day-1 cover options, and OPD and wellness at no extra premium — run from the TeamSure dashboard. And because premiums are generally a deductible business expense, the after-tax cost is lower than the sticker price suggests — see Section 80D for how the tax side works.
Frequently asked questions
Is group health insurance legally mandatory for employers in India?
No. No central law requires a private employer to buy group health insurance. The only standing statutory health obligation is ESIC, which covers employees earning up to ₹21,000 a month in establishments with 10 or more staff. For everyone above that wage line, and for firms below the trigger, group cover is a voluntary business decision — though most competitive employers now offer it.
What changed for employers when the labour codes took effect on 21-Nov-2025?
The Code on Social Security, 2020 came into force nationally, consolidating nine laws — including EPF, ESI, gratuity, maternity and employees’ compensation — into one framework. The headline shift is the new wage definition: basic pay must be at least 50% of total wages, which raises PF, ESI and gratuity liabilities for many teams. Fixed-term employees also earn pro-rata gratuity after one year, not five.
When do ESIC and EPF registration become compulsory?
ESIC applies once you employ 10 or more people, counting permanent, part-time, contract and probationary staff, and covers those earning up to ₹21,000 a month; you must register within 15 days. EPF applies at 20 or more employees and is mandatory up to ₹15,000 in basic plus dearness allowance. Both continue even if headcount later dips below the trigger.
Do we pay GST on our group health insurance premium?
Yes. Group health premiums attract 18% GST. Unlike individual health cover — made GST-exempt from 22-Sep-2025 — group plans still carry the full rate. For most employers the input tax credit is blocked under Section 17(5)(b) of the CGST Act, so the 18% is a real cost. Always budget and approve the GST-inclusive figure, not just the base premium.
What are our POSH obligations as an employer?
The POSH Act applies to every workplace. Once you have 10 or more employees you must constitute an Internal Committee — with a senior woman presiding officer and an external member — adopt a prevention policy, run awareness sessions and file an annual report. Failing to set up the committee or comply can cost up to ₹50,000 for a first offence, with harsher consequences on repeat.
Cover the team the statutory floor leaves out
Get a group health quote and see the per-employee cost — GST included — of extending real hospitalisation and wellness cover to everyone above the ESIC line, on a monthly subscription rather than an annual lump sum.
Get a group health quote