HR Toolkit · For founders & HR leaders
Employee Benefits Checklist for Indian SMEs
Six benefits are statutory in India once you cross the size thresholds — provident fund (EPF), Employees’ State Insurance (ESI), gratuity, maternity leave, EDLI life cover and, in many states, professional tax. Everything else — group health cover, accident and life insurance, OPD and wellness — is optional but expected. This checklist separates what you must provide from what wins you talent.
Last updated 07-Jul-2026 · General guidance, not legal advice
Statutory benefits — the non-negotiables
These are set by central labour law and bite once you cross the relevant headcount or wage threshold. Missing them is a compliance failure, not a design choice — so confirm each one before you think about perks. Thresholds and rates are revised periodically, so treat the figures below as a working guide and confirm the current position for your state.
Provident Fund (EPF)
The Employees’ Provident Funds Act, 1952 applies once you reach 20 employees. Employer and employee each contribute 12% of wages, with the statutory wage ceiling at ₹15,000 a month; of the employer’s share, 8.33% flows to the pension scheme (EPS), capped at ₹15,000 — a maximum of ₹1,250 a month. Register on the EPFO portal and file the monthly ECR.
Employees’ State Insurance (ESI)
The ESI Act, 1948 covers establishments with 10 or more employees (20 in some states) and every employee earning at or below ₹21,000 a month (₹25,000 for an employee with disability). The employer contributes 3.25% of wages and the employee 0.75%. Covered staff draw medical care, sickness and maternity benefits directly from ESIC.
Gratuity
The Payment of Gratuity Act, 1972 applies to establishments with 10 or more employees and is payable to anyone completing five years of continuous service. The formula is 15 days’ wages for each completed year, subject to the statutory ceiling of ₹20,00,000. It is an employer-funded liability that accrues from the first year, so provision for it early.
Maternity benefit
The Maternity Benefit Act, 1961 applies to establishments with 10 or more employees and grants 26 weeks of paid leave for the first two children (12 weeks for the third onward), plus a medical bonus where no free pre- and post-natal care is provided. This is a paid-leave obligation on the employer — separate from any health insurance policy.
EDLI life cover
The Employees’ Deposit Linked Insurance scheme rides on EPF registration — every EPF member is automatically covered for a lump-sum death benefit of up to ₹7,00,000 payable to the nominee, funded by an employer contribution of 0.5% of wages. There is nothing extra to buy, but confirm nominations are recorded so a claim can actually be paid.
Professional tax
Professional tax is levied by individual states — Karnataka, Maharashtra, West Bengal and others — not by the centre, so applicability and slabs vary by where your employees work. Where it applies, the employer deducts it from salary and deposits it, subject to the statutory annual cap of ₹2,500 per employee. Check the rule for each state you employ in.
Checklist: statutory compliance
Tick each item that applies to your establishment. If a box is unchecked, it is the first place to act.
Registered on the EPFO portal and filing the monthly ECR for every eligible employee (20+ headcount).
Registered with ESIC and contributing for every employee earning at or below ₹21,000 a month.
Provisioning for gratuity from year one and tracking five-year service milestones.
Paying 26 weeks’ maternity benefit and the medical bonus where due.
EDLI nominations recorded against each EPF member so the death benefit can be paid.
Professional tax deducted and deposited for every state you employ in, within the ₹2,500 annual cap.
Contribution rates and wage ceilings re-checked each year — they are revised periodically by statute.
See the full statutory compliance guide for thresholds, contribution rates and how each benefit fits together.
Optional benefits — what wins hiring
None of these is legally required, but candidates compare them offer-to-offer. The one that has shifted from perk to expectation is group health insurance — because ESI leaves everyone above the ₹21,000 wage ceiling with no employer-provided cover at all.
Group health insurance (GMC)
The single most-expected benefit that is not legally required. A group mediclaim floater covers hospitalisation for the employee and, usually, their family — closing the gap ESI leaves for everyone above the ₹21,000 wage ceiling. On a subscription model it can start from a few hundred rupees per employee a month.
Group personal accident (GPA)
A low-cost policy paying a lump sum on accidental death or disablement, often several times annual salary. Because premiums are modest relative to the payout, GPA is one of the highest perceived-value additions you can make alongside a health plan.
Group term life (GTL)
Pure-risk life cover paying the nominee a fixed sum on death from any cause. It reassures employees with dependents and rounds out a benefits package beyond the ₹7,00,000 EDLI floor.
OPD, wellness & mental health
Teleconsultations, discounted diagnostics, dental and vision, and mental-health support are used far more often than hospitalisation — so they shape day-to-day perception of the benefit. Bundling them lifts engagement without a large premium.
Parental & maternity add-ons
Extending the group health floater to cover employees’ parents, or adding a maternity benefit on the policy, addresses two of the most-requested gaps in Indian benefits — both optional, both strong retention levers.
Flexible & tax-efficient pay
Meal cards, NPS, LTA and a well-structured CTC let employees keep more take-home for the same cost to company. Model it with the CTC and salary-structure tools before you finalise offers.
Checklist: competitive benefits
Work down these to build a package that reads well in an offer and holds up at renewal.
Group health cover sized for your headcount, age mix and family needs.
Group personal accident and term-life added for low-cost, high-value protection.
OPD, wellness and mental-health benefits bundled for everyday usefulness.
Parental or maternity add-ons considered against your team’s life stage.
CTC structured tax-efficiently so benefits cost the business less than salary.
Every benefit communicated in the offer letter and at onboarding, not discovered later.
Model the cost with the group health premium calculator, then pressure-test the policy itself with the group health policy checklist.
How to prioritise on a tight budget
Meet every statutory obligation first — that part is non-negotiable and the penalties for missing it dwarf any saving. Then spend the optional budget where perceived value per rupee is highest: a group health floater for the whole team, a low-cost group personal accident policy, and everyday OPD and wellness that employees actually use between hospitalisations.
Onsurity is built for exactly this. Cover runs on a monthly subscription you can cancel anytime, so spend flexes as you hire, with cashless treatment at 10,000+ network hospitals, day-1 cover options, and OPD and wellness bundled in. Because premiums are generally a deductible business expense, the after-tax cost is lower than the sticker price — see Section 80D for how the tax side works.
Frequently asked questions
Which employee benefits are legally mandatory in India?
The core statutory benefits are provident fund (EPF, at 20+ employees), Employees’ State Insurance (ESI, at 10+ employees for staff earning up to ₹21,000 a month), gratuity (10+ employees, after five years’ service), maternity benefit (26 weeks), EDLI life cover linked to EPF, and state professional tax where it applies. Group health insurance is not on this list — it is optional.
Is group health insurance a statutory benefit?
No. There is no central law requiring private employers to provide group health insurance. The only statutory health obligation is ESI, which reaches employees earning at or below ₹21,000 a month in covered establishments. For everyone above that ceiling, group cover is a voluntary benefit — but it is the one candidates most expect, which is why most competitive SMEs offer it.
What is the EPF wage ceiling and contribution rate in 2026?
EPF applies to establishments with 20 or more employees. Employer and employee each contribute 12% of wages, with the statutory wage ceiling at ₹15,000 a month. Within the employer’s 12%, 8.33% goes to the pension scheme (EPS) capped at the ₹15,000 ceiling — a maximum of ₹1,250 a month — and the balance to EPF. Confirm the current ceiling, as a revision to ₹21,000 has been discussed.
When does gratuity become payable to an employee?
Under the Payment of Gratuity Act, 1972, gratuity is payable once an employee completes five years of continuous service with an establishment of 10 or more employees. The amount is 15 days’ wages for each completed year of service, subject to the statutory ceiling of ₹20,00,000. It also becomes payable earlier on death or disablement, where the five-year condition is waived.
How much do optional benefits like group health cover cost an SME?
It depends on headcount, age mix, sum insured and add-ons, but on a monthly-subscription model group health cover can start from a few hundred rupees per employee a month. Because premiums an employer pays to insure staff are generally an allowable business expense, the after-tax cost is lower than the sticker price. Use a premium calculator to model your exact spend.
Ready to add the benefit candidates expect?
Get a group health quote and see the per-employee cost, coverage and wellness mix for your exact headcount and budget — on a monthly subscription, not an annual lump sum.
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