In the past few years, the business world has witnessed a shift in the ways that companies operate. Thanks to remote work, several organizations are tapping into a pool of skilled and talented resources around the globe. India has become a significant destination country for international companies to hire freelancers and contractors due to their diverse expertise.
However, with great change comes great challenges. One of the biggest challenges companies face when employing freelancers and contractors is retaining them. Often they have the tendency to switch jobs for better pay and benefits. To resolve this issue, companies must identify the appropriate employee benefits and ensure they are provided with maximum benefits.
By opting for EOR services in India, you can provide these contracted resources with the appropriate benefits that will keep them motivated, improve their morale, and increase productivity. This blog will delve into the benefits you can offer your employees, the governmental norms you need to adhere to, and other key benefits that will help you retain your talented workforce.
How can EOR help offer employee benefits?
Offering complete benefits to contracted resources is only possible when they are full-fledged employees of a company. This is where Employer of Record (EOR) services come into play. EOR can help international companies offer employee benefits without establishing an entity in India.
With an EOR partner, you can convert your existing freelancers or contractors into full-time employees. Additionally, they can also help hire talented resources on your behalf. When hired through these methods, it becomes easier for companies to provide necessary employee benefits plans.
EOR can help navigate India’s employment regulations, categorized into two primary types of employee benefits: statutory and supplementary. Statutory benefits refer to employee benefits that are mandatory and required by the government. On the other hand, supplemental benefits are not legally required but are offered by employers to attract and retain skilled talent.
Statutory benefits offered in India
It’s important for employers with Indian employees to know about statutory benefits. Not only do these benefits provide financial security, but they also help improve work-life balance and increase employee job satisfaction. By staying up-to-date with local laws and regulations, you can ensure your company is legally compliant and avoid potential problems.
Below are the statutory benefits in India.
- Employees Provident Fund (EPF)
The EPF, similar to a 401(K), offers a reliable source of income for employees during their retirement years and provides protection for their savings in case of job loss or disability. Both the employee and employer are required to make monthly contributions to the EPF, as regulated by the Employees Provident Fund and Miscellaneous Provisions Act of 1952. Employees contribute 12% of their basic salary and dearness allowances, while employers contribute 3.67% to the EPF and 8.33% to the EPS (Employee Pension Scheme).
Under the Income Tax Act of 1961, employees are eligible to claim tax deductions on their monthly EPF payments up to a maximum limit of ₹1.5 lakhs per year. Additionally, the entire amount contributed to an EPF account by an employer is tax-free.
- Employees’ State Insurance Corporation (ESIC)
The Employees’ State Insurance (ESI) scheme is designed to assist employees with financial costs resulting from illness, childbirth, and unemployment. The contribution rate for employees is 0.75% of their wages, while employers must contribute 3.25% of their employees’ wages in each wage period, as per the Employees’ State Insurance Act of 1948.
By law, it is the employer’s responsibility to deduct the employees’ contributions from their wages and pay their own contributions to each employee. These payments must be made at the specified rates to the corporation within 15 days of the end of the calendar month when they are due.
In addition to the above benefits, the Employee State Insurance Corporation (ESIC) offers other benefits, such as maternity and disability benefits.
Employees who have worked for their employer for more than five years are entitled to receive gratuity payments, which are welfare payments. The gratuity payment amount is equivalent to 15 days of wages for every year of employment.
- Minimum Wages
Setting minimum wages is important to ensure that workers are paid fairly. In India, the Minimum Wages Act of 1948 sets the minimum wage for employees based on various factors such as the state, skill level, and industry. This is done to take into account the cost of living and the employer’s ability to pay.
- Maternity Benefits
Maternity leave is a statutory benefit that allows female employees to take time off from work to care for their newborn children. It is needed to protect working women’s rights to remain self-reliant and economically independent.
Women are entitled to receive payment during their maternity leave based on the average daily salary rate. The Maternity Benefit Amendment Act 2017 changed outdated maternity laws governing the required benefits for pregnant women and put India ahead of many developing countries.
Companies with a workforce of ten or more individuals must adhere to the requirements stated in the Amendment Act. Among the mandates is mandatory maternity payment benefits for women, irrespective of their income. Nursing mothers are entitled to maternity leave and work-from-home options. New mothers who have recently given birth can avail of 26 weeks of maternity leave, while adoptive and commissioning mothers (those who opt for surrogacy) can receive 12 weeks of maternity benefits.
- National holidays
According to national regulations, employees have the right to paid time off on three specific holidays: Republic Day on January 26, Independence Day on August 15, and Gandhi Jayanti on October 2. Additional festive holidays may also be given based on the state of employment.
Supplemental benefits offered in India
Employers can also offer supplemental benefits in addition to statutory benefits to attract and retain skilled employees for a longer period. These benefits can differ from employer to employer and their company’s policies.
- Accidental insurance
As an employer, it is important to ensure the safety of your employees by enrolling them in a group accident insurance plan. This will not only give your employees peace of mind but also provides you with a discounted rate based on the size of your company when you initiate the policy.
- Bank loan eligibility
When deciding if eligibility for a loan, lenders frequently take into account the borrower’s employer. Businesses that have a good reputation in the market, steady earnings, a significant number of full-time employees, and a long-standing presence in the industry are more likely to be favored by lenders. As a result, employees may be able to obtain a longer loan repayment period or more favorable loan terms.
If an employee is applying for a bank loan, it’s important to remember that the Indian government offers tax benefits on home loans under the Income Tax Act of 1961. This act covers both the repayment of the loan’s principal and interest payments. They are eligible to claim tax deductions under Section 80C and Section 24(b) of the Income Tax Act for the principal repayment and interest payments, respectively.
- An additional set of leaves
Aside from the mandatory forms of leave, employees are entitled to an assortment of other types of leave, including casual, sick, compensatory, bereavement, and unpaid, among others.
- Zero balance salary account
Offering a zero-balance salary account to employees can be a great way for employers to empower their workforce. This account has numerous benefits, including free checkbooks, passbooks, e-statements, debit cards, net banking, phone banking, online fund transfers, Demat account services, loan conveniences, credit card offers, and utility bill payments.
- Gym membership
To keep the workforce fit and healthy, companies can confidently offer their employees a fully funded or discounted gym, leisure center, or health club membership as a core, voluntary, or flexible option. However, this benefit becomes a taxable perquisite.
- Superannuation benefit
A superannuation benefit is a retirement benefit that employers offer to their employees. It is a pension program created by a company to provide its employees with financial support during their retirement years. The employer provides a superannuation benefit for employees by contributing to their group superannuation policy.
In India, there are two types of superannuation plans:
- Defined benefit plan: This type of plan guarantees a certain amount of pension to the employee after retirement. The amount of pension is determined by the employee’s salary and years of service.
- Defined contribution plan: This type of plan does not guarantee a certain amount of pension. The amount of pension depends on the amount of money that the employee contributes to the plan and the investment returns of the plan.
The tax benefits for superannuation in India are as follows:
- Employee’s contribution: The employee’s contribution to the superannuation fund is eligible for an income tax deduction under Section 80C. The overall limit is ₹1,50,000.
- Employer’s contribution: The employer’s contribution of up to ₹1.5 lacks in respect of an employee is exempt. However, if the contribution exceeds ₹1.5 lahks, the amount in excess will be taxable in the hands of the employee as a perquisite.
Can foreign companies offer ESOPs in India?
Yes, several international companies offer their Indian employees with Employee Stock Ownership Plan (ESOP); however, foreign holding companies need to have a subsidiary company in India. The foreign company should comply with local laws and regulations to receive necessary approvals and licenses from the government authorities. Developing a well-structured ESOP plan and seeking professional guidance is also essential.
Stock options may extend beyond just employees and include contractors and associates, provided that the stock options program allows their participation. Companies may opt to extend stock options to non-employee workers for multiple reasons.
- It can instill a sense of ownership and inclusion among the entire workforce.
- It can help in attracting and retaining skilled personnel.
- It can also facilitate the transfer of ownership to the upcoming generation of leaders.
As India’s economy progresses, foreign holding companies with Indian subsidiaries increasingly turn to ESOPs as a popular option. The government has implemented measures to encourage the use of ESOPs, which will undoubtedly become an essential tool for attracting and retaining top talent in the ever-growing Indian talent pool.
EOR: Ensuring maximum employee benefits in India
Offering competitive employee benefits is essential for employers to attract top-tier talent. However, to ensure that your contractors, freelancers, or employees get the full benefits, it is crucial to understand Indian employment laws and legalities. Choosing an experienced EOR (Employer of Record) service with updated knowledge of constantly changing Indian labor laws will help you stay relevant to the shifting regulations.
Remunance is a reliable EOR partner assisting in hiring employees and providing them with benefits. Our team has extensive expertise in providing HR support, health insurance, accounting, legal services, and managing compliance risks. We offer insightful guidance, prompt response, and complete transparency, ensuring our solution is tailored to your needs. We believe in delivering the results you seek.
Remunance complies with Indian labor laws and offers various employee benefits per industry standards. Below are a few characteristics of our employee benefits.
- Better health insurance and claim support.
- Compliance with all employee-related laws like PF, ESIC, Gratuity and more.
- Assisting employees with bank loans and other services.
- Assisting employees with tax planning.
- Provide IT equipment support if needed.
- Various employee engagement activities.
In addition to the above benefits, Remunance can also extend other benefits and provide customized solutions to your employees. We ensure that your employees are provided with the required support and services so that your operations are carried out seamlessly. Remunance offers a range of comprehensive solutions to cater to your supplementary needs while you concentrate on managing your business operations or remote teams in India.