6 Essential Employee Benefits

Wed 24 Apr 2019

Employee benefits helps in attracting and retaining talent. It shows that you believe in your company enough to invest in your employees , and proves that you’re stable, which can help you acquire top talent.

A good benefits policy is also important to minimise attrition. If your workforce is a constant revolving door, it is difficult to establish a team of experts and the overall effectiveness of the organisation takes a hit. With a good employee benefits offering it shows that you care for your employees and have their best interests in mind and gets you a team of professionals who will stay in the long run.

“Clients do not come first. Employees come first. If you take care of the employees, they’ll take care of the clients.” -Richard Branson

Ideally, an organisation level goal is to increase productivity and morale of the employees, which results in better performance, better retention, and better work culture. There are multiple aspects to creating such an environment, and one of the core aspects is employee benefits. Technically, while employee benefits only covers salary, insurance, PF and the like, it has a broader scope when looking at it from the lens of what a company can do for its employees.

With that in mind, here are the 6 most important employee benefits a company should provide

1. Group Insurance

Group insurance by definition is insurance that covers a defined group of people, usually employees of a company, but can also include the members of a society or professional association.

The most common group insurance is group health insurance, which covers hospitalisation and medical costs of the members in the policy. Group health covers offer benefits(such as no waiting periods, no underwriting constraints) that individual covers don’t, and are also more economical because of group discounts. Most policies cover the employees, their spouse, children and dependent parents.

The cover eases the burden of bearing ever-increasing healthcare costs and also allows employees to have some peace of mind in their personal lives. Over the years, group health insurance has become very prevalent across the country, and offering extra benefits(such as annual medical check-ups, or extra covers) can make the difference in making your organisation a better place to work.

Different types of group insurance

1.Group health insurance- covers hospitalization and day-care procedures. Typically covers employee, spouse and 2 children, with an option to cover one set of parents.

2.Group Personal accident- Covers disability and medical expenses incurred due to accident. Typically used for contract and field employees, but is relatively cheap and can be offered as an add-on to group covers

3.Group Term Life- While not as prevalent as the previous 2 group products, Group Term Life nevertheless is a cover worth taking, and is customisable. This is essentially pure term life insurance, a policy that pays out if someone covered in the policy dies(except as a result of suicide)

2. Leaves & Holidays

The employees of any government, non-government or private organization are entitled to certain types of leaves and holidays during the year to help them maintain a proper work-life balance.

Holidays are given to spend time with families, and give a break from a rigorous work schedule. Some holidays, such as independence day, republic day and Gandhi jayanthi are compulsory to observe in india. A majority of the other holidays are based on religious festivals or traditions(such as harvest etc). Companies can choose which holidays to observe for the most part, and the location of the office plays a major role in this. Holidays like Pongal, Rajyotsava day, etc are only observed in certain states. Holidays are broadly classified into the following types:

• National Holidays : These are the fixed holidays that we have in India on the 26th of January, 15th of August, and 2nd of October every year.

• Weekly Holidays : There are either one or two weekly holidays at the end of the week for all the employees depending upon the organizational policy.

• Festivals : Various religious and regional festivals also account for holidays in India.

The exact dates of some festivals depend on the lunar calendar and are subject to change on the sighting of the moon. Usually a company will have anywhere between 11-15 holidays in a calendar year. The leaves are generally decided at the end of January, when the government of India releases its holiday list for the year(the holidays that government companies will observe).


Leaves fall under multiple types, broadly speaking this is how the various types of paid leave are classified.

1.Earned Leave or Privilege Leave: The type of leave which employees earn as they work. Leaves accrue everyday and are usually either granted at the end of the month, or treated as a floating point balance. Privileged leave is sanctioned to the employees without any salary deductions. Privileged leaves can also be encashable upon exit

2.Casual Leave: Casual leaves are usually granted in bulk when the employee joins or at the beginning of the financial year(whichever is applicable). Different industries and organizations, have different rules for casual leaves, such as how many can be taken at a time, how they carry over to the next year, etc.

3.Sick Leave or Medical Leave: An employee can call in sick if he is not in a state to come to work. These are also allotted like casual leaves. Organisations can have differing rules on how many days sick leaves can be clubbed together, and might require proof of doctor visit.

4.Maternity Leave: Available for women employees who are pregnant. The duration of paid maternity leave is 12-26 weeks. There are statutory guidelines to be followed when it comes to maternity leave

3. Expense Reimbursement Policy

Expense reimbursement is a method for paying employees back when they spend their own money on business-related expenses. This is done for convenience(it takes time for approvals to be processed for business expenses, so time sensitive expenses are better paid by employee and then reimbursed)

Common reimbursable expenses include:

1.Mobile phone: Usually set at a fixed amount per month, companies allow employees to reimburse their mobile phone bills. Certain companies also tie up with telecom providers to offer a tailor made plan for their employees.

2.Fuel: This is done for employees who travel a lot for work. Reimbursing fuel allows employees to make more field trips and hence ensures greater productivity and proactiveness. This is different from conveyance allowance, which as per the latest budget is tax exempt(without requiring proof of bills; clubbed along with medical leaves)

3.Travel: Travel on work is generally borne by the company, without need for reimbursement. However in some cases, especially for sales personnel with geographically divided territories, etc, this is offered as a reimbursement benefit for inter-city travel, etc

4.Daily food allowance: Usually offered while an employee is travelling on work, away from his/her base city.

4.Provident Fund:

The Employees’ Provident Fund (EPF) is a savings scheme introduced by the government in 1952. It is administered and managed by the Central Board of Trustees that consists of representatives from the government, the employers and the employees. The Employees’ Provident Fund Organization (EPFO) assists this board in its activities.

This is a savings scheme where a percentage of the employee’s salary is transferred to the fund every month. The employer has to make an equal contribution(there are certain exemptions and rules) to the fund. The employee also gets a tax exemption on his/her contribution amount. This scheme is made to create some savings for employees, especially in certain specific industries or within a certain wage bracket.

In general, the contribution rate for the employee is fixed at 12% of basic pay + dearness allowance. However, the rate is fixed at 10% for the below-mentioned organizations:

1.Companies employing a maximum of 19 workers.

2.Organizations suffering annual loss much more as compared to their net value

3.Industries which have been declared as sick industries by the BIFR

4.Coir, gum, beedi, brick & jute industries.

5.Organizations operating under wage limit of ₹ 6,500.

5. Tax Declarations

Salaried employees in india can avail tax exemptions under various sections as per the income tax act. However since the company deducts Tax at Source(TDS), it’s important to be able to offer the ability for employees to declare exemptions so that they get reduced tax month-on-month rather than one lumpsum refund after filing returns.

Companies usually allow employees to fill out the various tax exemptions that they are claiming(this changes slightly every year, and is usually announced in the union budget). These range from investment schemes(post office FD, ELSS schemes etc.), to interest on loans(home loans or education loans) ot insurance policies(life or health). Senior citizens and women have a few more specific avenues to claim exemptions.

At a set time of the year, usually 3 months before the financial year closes, employees are required to provide hard proof of the various declarations they have made, so that the finance team or auditor can verify the tax exemptions. This is done so that in case there is an error, company can rectify the tax calculations in the coming payroll months. This also ensures the organisation maintains TDS compliance.

6. Gratuity

Also known as severance, gratuity is owed to long serving employees when they leave. Long-serving as per the definition of the act is defined as 5 years or more. Gratuity is calculated according to a formula specified in the gratuity act, and is calculated as a multiple of the monthly basic. The maximum gratuity payable is capped at INR 20 lakh as of this writing.

Those were the 6 most important benefits that employers should offer. Keep watching this space on more detailed articles on each of the benefits and how emplify allows organisations to offer and administer these benefits in a smooth, hassle-free and economical manner!