The Real Cost of Employing Someone in India: EPF, ESI, PT & Gratuity
Salary is only part of the story. Here's what employer contributions and statutory benefits actually add to your India payroll — and how to budget for them.
When you agree a salary with a candidate in India, that number isn't your total cost. On top of gross pay sit employer statutory contributions and accruals — modest individually, but worth planning for. Here's what actually makes up the cost of employment.
Employer contributions on top of salary
- Provident Fund (EPF): typically 12% of basic wages from the employer, subject to the statutory wage ceiling.
- Employees' State Insurance (ESI): an employer share (around 3.25%) for employees earning up to the ESI wage threshold (₹21,000/month at the time of writing).
- Professional Tax (PT): a small state-level tax; the amount and whether it's employer- or employee-borne varies by state.
- Gratuity: accrues over time (roughly 4.81% of basic) and is payable to employees who complete five years of service.
- Statutory bonus: may apply to eligible employees below a wage threshold under the Payment of Bonus Act.
Because several of these are calculated on basic wages, how a salary is structured — the split between basic, allowances and reimbursements — directly affects both take-home pay and employer cost. A sensible structure keeps the employee's net healthy while staying fully compliant.
Benefits employees expect
Beyond statutory items, competitive India offers usually include group health insurance, paid leave, and often a meal or internet allowance. These aren't legally mandated in every case, but they matter for attracting and keeping good people.
A simple way to budget
As a rule of thumb, employer statutory costs add a single-digit to low-double-digit percentage on top of gross, with benefits on top of that. Rather than estimate, model it: our India cost calculator breaks a salary into gross, employer contributions and the all-in monthly cost so you can plan an offer with confidence.
Thresholds and rates change with each Budget — always confirm the current figures before finalising an offer, or let your EOR keep them current for you.
