India has numerous labour laws that aim to protect the interests of employees and to increase employment opportunities in the country. These legislations are related to wages, employment, social security, etc.
Thanks to labour laws, a sharp decline was noticed in the number of hours lost during strikes and lockdowns. According to the Annual Report of the Ministry of Labour and Employer, 2019 saw a 63% decline in loss of man-hours due to internal disputes between employers and employees.
Every company in India is expected to follow the laws to avoid legal troubles such as fines, penalties, imprisonment, and even business shut down.
The presence of labour laws have improved productivity in companies and managed to safeguard the interests of employees.
However, labour laws are such that keep changing according to the change in labour and business models.
Hence, companies have a tough time complying with constantly evolving labour laws.
Here are some common challenges that they face in the process.
Common Challenges Faced By Companies While With Labour Law Compliance
An exhaustive list of laws
India has an exhaustive list of labour laws. These are classified into seven broad categories – industrial relations, remuneration, social security, nature, and condition of service and employment, gender equality and women empowerment, child and bonded labour, and employment and training of employees. A company may have to comply with anywhere from 100 to 1000 acts and compliances. Additionally, they have to comply with more regulations if the business model changes or if they merge or get acquired, or if they add more employees or markets to their portfolio. Companies are required to follow these laws to avoid any punitive action against them.
Different laws for different states
There are over 200 state laws and 50 central laws in the country. Companies are expected to mandatorily follow the laws laid down by the states apart from the ones laid down by the central government. The issue with the state laws is that it varies for different states. Take the professional tax, for instance. The state government levies a professional tax on all employees working in that particular state. The tax slabs are different for different states. Some states and union territories do not charge professional taxes. Such differences in labour laws make compliance difficult for companies that have a presence in multiple states. The lack of compliance expertise makes matters worse, leading to inefficiency in managing compliance.
Frequent changes in laws
As we mentioned earlier, the labour laws change frequently depending upon the changes in business models and society. For instance, last year, the Lok Sabha added gig workers to the proposed code on social security. There are over 2,500 regulatory changes made in a year. These changes could vary from a change in deadlines to change in forms. The frequent changes make tracking difficult for companies. Sometimes the compliance teams miss out on critical information, which leads to repercussions at a later stage.
Lack of communication within the company and key stakeholders
Communication is the key to a successful implementation of labour laws. The labour laws change so frequently that key stakeholders such as the board of directors and the employees of the company are unaware of the latest information. Some companies also lack awareness or expertise in particular compliance requirements. It gets even more challenging when companies have a presence in multiple locations within and outside the country. The chances of compliance risk increase multi-fold due to lack of awareness and expertise. In some companies, the leaders of various departments handle their respective functional activities, making compliance management fragmented and ineffective as they may not remember to complete the tasks on time.
Disconnect in communication between government and company
The dynamic labour laws make it difficult for companies to keep pace with changes. To add to the woes, there is a disconnect between the government and companies. Companies do not receive automatic notifications from the government about regulatory changes. Most often, the changes are not conveyed to the compliance officers on time, due to which they are unable to assess the changes and implement them within the company. Many company stakeholders are not equipped to manage communications with the government officials in case of any questions or disputes
Conclusion
Although Indian companies are taking giant strides towards digital transformation, compliance management has largely been a manual process. Companies have been using legacy methods such as Excel sheets and paper documents to complete compliance tasks. This exposes the company to compliance errors, which can cost money and even reputation, if not rectified on time. That’s where technology comes to aid. Our compliance solution platform called Ctrl F is a one-stop solution that enables companies to manage their compliance effectively. It offers the following benefits to companies:
