Employer View

How changes in Indian labour laws and reforms will impact business

According to the 2018 Doing Business Report released by the World Bank, India is ranked 100th among 190 countries in the ease of doing business. This is a notable improvement from the 2017 ranking of 130th and indicates positive tidings for the Government of India under the leadership of Prime Minister Narendra Modi.

Among many other favourable factors for the business environment in India, changes in the country’s labour-related laws and legislation have had a positive impact on business enterprises in India.

Maternity Benefit Amendment Act of 2017

The Maternity Benefit Amendment Act, which was notified last year, revised the maternity leaves for women employees from the current 12 weeks to 26 weeks (or 182 days). This maternity benefit can be availed for up to 8 weeks before the expected delivery date, up from the previous limit of 6 weeks.

Only working women with none (or 1) living child are eligible for this maternity benefit. Maternity leaves for pregnant women with 2 (or more) living children will continue to be restricted to 12 weeks with up to 6 weeks of maternity leaves to be availed before the expected delivery date.

Along with this maternity law that brings a change for biological mothers, mothers of adopted children (below 3 months) and commissioning women who bear a child through surrogacy can also avail of maternity benefits now in India. These mothers can enjoy a paid maternity leave of 12 weeks from the date when they take charge of the infant.

Additionally, the 2017 Maternity Benefit Amendment act mandates the following benefits:

  • Business enterprises with 50 (or more) employees must have access to a nearby baby crèche. Working mothers can visit the crèche up to 4 times each day, which should include her rest period.
  • All working mothers can avail of “Work from home” facility provided her work allows this arrangement. “Work from home” facility must be beyond the stipulated maternity leave duration.
  • Every employer must inform female employees of these maternity benefits at the time of her appointment through written and electronic communication.

Following are the business and economic impact of the 2017 Maternity Benefit Amendment Act:

  • Improvement in the labour participation rate of Indian women from the current low of 27%.
  • Improvement in child care facilities for working women in India
  • Expected addition of 6 million working women to the Indian workforce by the year 2025, resulting in an addition of 16% in the GDP.
  • Reduction in working women dropping off the workforce after pregnancy break.

Prevention of Sexual Harassment of Women at Workplace Act, 2013

To prevent sexual harassment of working women, the Indian government had already passed the Prevention of Sexual Harassment of Women at Workplace act in 2013. For effective implementation of this act, India’s Women and Child Development ministry have launched an online platform in 2017 for female employees of the central government to file online complaints about sexual harassment at their workplace.

This online complaint system, named SHe-box (or Sexual Harassment electronic box) is hosted on the official website of the Ministry for Women and Child Development (WCD). Complaints can be submitted directly on the SHe-box, which are then sent to the internal complaints committee of the ministry. The WCD ministry plans to make this platform highly interactive and also expand it to women employees in the private sector.

Among the major social impacts of this law, the amendment would be that most companies will be forced to address concerns related to sexual harassment in their workplace. It will also encourage working women to report such harassment happening to them, instead of keeping quiet or leaving the employment.

Rights of Persons with Disabilities (RPWD) Act, 2016

The Rights of Persons with Disabilities (or RPWD) Act came into effect on the 30th of December 2016. It replaces the Persons with Disability (PWD) Act that was passed in the year 1995.

Some of the salient features of this act are:

  • Increase in the reservation of vacancies for persons with benchmark disability in government-run establishments from 3% to 4%.
  • Right to free education for every disabled child between the age groups of 6-18 years
  • District-level committees and special courts to be instituted in state districts to address any concerns or violations against persons with disabilities (PWD).
  • Increase in the number of disability categories to 21 from the previous 7 categories under the PWD act
  • Unlike the PWD act of 1995, the 2016 RPWD act also imposes regulations of private establishments to comply with the following:
    • Formulation of an Equal Opportunity Policy for private companies with 20 (or more) employees
    • Appointment of a liaison officer for the recruitment of PWDs
    • Mandatory maintenance of employment records including the total number of employed PWDs, along with their name, date of joining, and nature of work.
    • Ensure compliance with standards of accessibility in the physical working environment, transport facilities, and technology devices used by PWDs.

Listed below are the likely impacts of the 2016 RPWD Act:

  • Benefit at least 26 million people currently in India
  • Help in integrating India’s disabled community into mainstream society.
  • Improve the education and employment prospects for PWDs in India.
  • Create employment policies in private companies that are inclusive of the rights of disabled employees.

Changes to existing employee benefits

 Along with the passing of new legislatures related to labour laws in India, the following changes were also implemented for existing legislative acts:

  • The Employees’ State Insurance Act of 1948 ensures health insurance to all employees and that which includes the cover of the cost of any ailment, maternity, and medical treatments. To boost health insurance for employees, the tax exemption limit for health insurance premium was raised from the previous 15,000/- per annum to 21,000/- per annum.
  • The Payment of the Gratuity Act of 1972 entitled payment of gratuity money for any employee with continuous employment with the same company for a period of at least 5 years. Gratuity was calculated according to the equivalent wage paid for 15 days for every year of service. This was capped at a maximum limit of 10,00,000/-, which has now been amended to 20,00,000/-. Henceforth, due to this amendment, the tax will be levied only on any gratuity payment above the 20,00,000/- limit.

Proposed Changes in the Labor laws

To simplify labour laws in India, the Indian government has proposed the Code on Wages Bill 2017, which (if approved) will replace the following existing labour laws:

  • The Minimum Wages Act of 1948
  • The Payment of Wages Act of 1936
  • The Payment of Bonus Act of 1965
  • The Equal Remuneration Act of 1976

The Code of Wages Bill 2017 has the following salient features:

  • Ensuring the timely payment of minimum wages to all employees irrespective of the industry sector where they are working. Currently, the Minimum Wages Act and Payment of Wages Act are not extended to all workers, hence it benefits only a limited number of workers.
  • A statutory National Minimum Wage will be set by the Central government for different states and geographical regions. The respective state government cannot set the minimum wage below the amount specified as the National minimum wage for that state.
  • Wage payments will be done through either cheques or digital modes of payment, thus promoting digitization of the same and provide wage security to every worker.
  • Under the bill, central and state government will determine the number of working hours for employees in the business establishment. Any work done beyond these prescribed hours must be compensated with a double wage. Additionally, every employer must provide a resting day on a weekly basis for every employee.
  • Employers can only make deductions from employee wages for specific purposes, including:
    • Fine payment
    • Advance repayment
    • Fine for remaining absent from duty
    • Any charges for employee accommodation provided by the company
  • Any violation of the Code of Wages bill by employers will attract penalties based on the severity of the offence. The maximum penalty that can be imposed is 3-months imprisonment and 1,00,000/- fine.

Vikas Wadhawan, CFO PropTiger.com, Housing.com & Makaan.com


Change management is inevitable for Organisation growth

Today HR is a Business Enabler partnering with business on people initiatives.  HR strategy provides analytics and insight into people matters and helps in people planning and translating commercial challenges to people initiatives.  Especially a mid-sized organization might face the challenge of survival if they can’t optimize on their costs. As much as 30% of savings can originate from HR, through HR process assessment, re-engineering, process rollout, automation and continuous improvement considering compliance.  HR must balance the changing economic and business scenario and also the recent changes in labour which are aimed at facilitating ease of doing business

Employee deployment and skilling policy: Project profits are reducing day by day in many sectors, so an organization has to think of innovative ways of reduction in delivery cost for delivery of any project.  Consequently, HR policies should focus on how existing manpower can be multi-skilled efficiently. HR has to initiate productive conversation with the leaders to operate with the existing teams as per optimum utilization.  Instead of hiring new employees, existing employee can be upgraded to improve their productivity. 

Reforms in Labour Laws:  The Government does understand unless we reduce the number of labour laws, much of the FDIs would go to other countries.  Reforms on this front have already been initiated;   however, same changes have not been carried forward into organizational HR Policies.  There is lack of awareness even in some old laws like Apprentice Act, which makes it mandatory to hire 10% of employees under this act.  Unlike on roll employees, they don’t emanate under labour laws.  So approx. direct saving of 30% cost of compliance on CTC and also be able to get a refund from Govt on the % of salary has been paid to apprentice.  Similarly under NEEM Society/Trust/Company registered in Section 25 of Companies Act can hire trainees without any cost of compliance.  Contrastingly, taking advantage of recent amendment finance minister introduced Section 80JJAA to the IT Act wherein deduction of 30% is proposed to be given on additional wages paid to the additional workers employed. HR has to make the new framework, new policies to translate the benefit under all these new Acts.

Adapting to the new age Employee: HR has to address immediate aspiration and interest of the highly connected and tech-savvy new generation. In India, we are still struggling to cope up with mobile personal communication, late coming and absenteeism at duty etc.  This is high time we should create a policy with the true concept of fun at work, meeting target with least supervision. Employee-centric organization HR has become instrumental to reach to employees at least annually to take feedback on improvement and employee pain areas which give valuable input for change requirement of any policy.

Since beginning HR is dominated by hard copies of documents only and soft copies were not encouraged.  Online ERP system has forced HR to rewrite the way we operate in organization considering easy accessibility and saving, approvals on click of a button. HR must become early adopters of the paperless ecosystem and lead the organization in this initiative.

Shubhankar Malakar, Head HR and Admin, Telecom Network Solution Pvt. Ltd.