India: Employer Update 2016 and 2017

By Suzanne Horne and Hannah Harris © 2017 Paul Hastings Apr 17, 2017
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Key Developments for 2017

Ongoing agenda to update old employment laws

Mr. Narendra Modi's government has taken steps to enact India's Labour Code on Industrial Relations Bill 2015 ("IR Code"). The IR Code aims to consolidate three main enactments: the Trade Unions Act 1926, which deals with laws relating to trade unions; the Industrial Employment (Standing Orders) Act 1946, which requires an industrial establishment to formally define conditions of employment; and the Industrial Disputes Act 1947, which is often regarded as the bible of Indian employment laws. As and when the IR Code gets parliamentary consent, and is promulgated into law, Indian labour laws may finally be seen to be aligned to the liberal investment climate that the government is promoting.

Strengthening of maternity laws

The Maternity Amendment Bill 2016 was approved by the Upper House, however, it is yet to become law. Currently, the Maternity Benefit Act 1961 entitles eligible female employees to receive 12 weeks of maternity leave and benefit. However, under the new bill there would be increased maternity leave and benefits from 12 to 26 weeks other than for women who already have two children, a 12 week maternity leave period for adopting and surrogate mothers, greater flexibility to work from home, a mandatory requirement for companies having over 50 employees to have a crèche within a 1 km range of the office and no continuity of service requirement for women to receive these benefits.

Various additional legislative proposals

There are proposed amendments to the current Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("EPF Act"), the Employees Compensation Act 1923, better protections for those working in shops, minimum wage for contract labourers, proposed amendments to the Employee State Insurance Act and the Factories Act and strengthening laws in relation to the Sexual Harassment at The Workplace (Prevention, Prohibition and Redressal) Act and Rules, 2013.

Key Developments for 2016

Wider coverage and changes to method of payment to the Employee's Provident Fund scheme

An amendment to the Act has raised the threshold of applicability of the Act to all employees drawing up to 15,000 rupees per month. Previously the cap was set at 6,500 rupees. The central government has made it mandatory for all employers to make monthly provident fund contributions through Internet banking of the State Bank of India or any other nationalised bank authorised to collect the contributions. Companies are advised to check if they are compliant with this change in the law.

Limited carve-out to child labour laws

The Child Labour (Prohibition and Regulation) Act, 1986 has been amended. The employment of children under 14 years of age is prohibited in all occupations and processes. However, an exception has been made, namely where the child helps his family or family enterprises, which is other than any hazardous occupation, or works after school hours or during vacations; or where the child works as an artist in an audio-visual entertainment industry. Foreign companies working with sub-contractors should be mindful of this provision to ensure their vendors remain compliant with the law.

More employees eligible to larger statutory bonus

The Bonus Act Amendment Bill has increased the threshold of applicability for statutory bonuses. Employees earning 21,000 rupees or less must now be given a statutory bonus in line with applicable laws. The amendment also increases the amount of bonus that would be received by the eligible employees to 7,000 rupees per month or the minimum wage for the scheduled employment (whichever is higher).

Changes relevant to expats to or from India

The citizens of many countries, including Belgium, Germany, France, Switzerland, Netherlands, Luxembourg, Hungary, Sweden, Norway, Finland, Denmark, Czech Republic, South Korea, Austria, Canada, Australia and Japan will not be expected to make Social Security contributions in India as provided for in the specific treaty. Reciprocally, Indian citizens working in the signatory country will also not be required to make any Social Security contributions in the host country. If the home country of the foreign citizen working in India has not entered into an SSA with India, then such foreign citizens will be obliged to make Social Security contributions in accordance with the EPF Act.

With thanks to Shalini Agarwal of In Se Legal for her invaluable collaboration on this update.

Suzanne Horne and Hannah Harris are attorneys with Paul Hastings LLP in London. © 2017 Paul Hastings. All rights reserved. Reposted with permission of Lexology.

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