India: COVID-19 Pandemic – What Employers May Expect To Sustain And Grow

1. INTRODUCTION

As the world continues to make efforts to recover from the impact of COVID-19, business in India are also preparing to commence operations, soon after relaxation from the lock down is provided or the same is removed and operations (for services / goods other than non-essential) could commence. The Government of India ("GoI"), Ministry of Finance has announced certain relief measures relating to statutory and regulatory matters under direct tax as well as indirect taxes, etc. Similarly, Ministry of Corporate Affairs ("MCA") has introduced certain relaxations including directions regarding discharge of obligation under Corporate Social Responsibility ("CSR"), as applicable.

The MCA, on April 10, 2020 issued a set of FAQs¹ to clarify various aspects with respect to meeting CSR obligations of companies. One of the said FAQs clarifies that if any ex-gratia payment is made to temporary / casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.

The Ministry of Labour and Employment, with an intent to give relief to workers in unorganized construction sector, on March 24, 2020, advised all the States and Union Territories (UTs) to transfer funds in the account of construction workers through direct bank transfer mode, from the cess fund collected by the Labour Welfare Boards under the Building and Other Construction Workers Welfare Cess Act, 1996. The Ministry also clarified that about INR 52,000 crore is available as cess fund and about 3.5 crore construction workers are registered with these Construction welfare Boards.²

An employer, covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("EPF Act"), is required to pay 12% of contribution on the wages of an eligible employee and deduct a matching amount (12%) from the wages of an employee and pay to the provident fund account of such employees. The Central Government, in order to share the financial burden of provident fund, announced³ with regard to wage earners, earning below INR 15,000 per month, in establishments/factories having less than 100 workers, that the government, for a period of three (3) months, would pay 24 % of monthly wages of such employee to the provident fund accounts (of such employees) in (eligible) establishments/factories with 90% or more of such employees earning monthly wage of less than INR 15,000 per month⁴. The GoI considered this step as a measure to prevent termination of employment of such employees and extending indirect financial support to the eligible EPF covered establishments/factories.

Given that the businesses have been disrupted as a result of COVID-19, and there are several forecasts about this pandemic having a serious impact on global economy including India, the businesses are uncertain about the possibility of returning to normalcy in near future.

Since the first impact of adverse business situations could also involve workforce, it is imperative that GoI and State government (s) could consider extending certain benefits, within the realms of their power, from the perspective of labour and employment laws (referred to as industrial laws) in India.

2. SOME POINTS FOR CONSIDERATION

2.1. Waive or Reduction of contribution under the EPF Act

Since contribution under the EPF Act adds another cost for an employer, the GoI may want to extend the benefit as discussed hereinabove to the other establishments / factories having more than 100 workers. However, in case the same is not possible for GoI and/or since the benefit is limited to only three (3) months, the GoI may consider waiving the requirement of payment of employer and employees contribution for a period of six (6) months or more, from the end of lock-down period. Additionally, the GoI may want to waive the requirement of payment of administrative charges by the employer for this period.

Such a waiver may be extended in regard to all the categories of employees whether statutorily or voluntary covered under the EPF Act, within the limits provided in the statute.

This would mean that not only an employer would be able to deploy the amounts (saved) in sustaining the business and augmenting its growth but the employees would also be able to have more money in hand.

In the event, an absolute waiver would also not be possible, then the GoI may want to consider reducing the burden on an employer by half, in other words 6% contribution by an employer (and a matching deduction towards employees contribution), towards discharge of employers obligations under the EPF Act.

2.2. Contribution under The Employees State Insurance Act, 1948 ("ESI Act")

Under the ESI Act, all covered employers are under an obligation to pay contribution, of 4% of the wages of an eligible employee, to the ESI Corporation, to extend the medical /insurance benefits provided to such employees.

The GoI may want to want to waive the requirement of payment of contribution, by an employer, for a period of six (6) months or more, from the end of lock-down period.

In the event, an absolute waiver would not be possible, then the GoI may want to consider reducing the burden on an employer by half, in other words about 2% contribution.

2.3. Allowing people to work overtime for either no extra wages or at ordinary rate of wages

The Factories Act, 1948 provides that where a worker is required to work in a factory for more than prescribed working hours, the said worker is entitled to be paid wages at the rate of twice his ordinary rate of wages. The State-specific Shops and Commercial Establishments Acts also provide for overtime wages being paid at twice the rate of the ordinary rate of wages, for work beyond the standard hours of work.

The GoI and/or State Governments may want to allow/exempt the employers from the overtime provisions to allow employees to work overtime for either no extra wages or at ordinary rate of wages. Such measures will not only reduce the financial burden on employers but also allow them to use the extra time to cover up for the time lost.

2.4. Allowing working of women during night shifts

With an aim to sustain business and augmenting its growth, establishments/factories may want to run multiple shifts subject to working hour provisions as prescribed under the respective State specific Shops and Commercial Establishments Acts and/or Factories Act, 1948, as applicable.

With respect to working of women during night shifts, except for the states which have already allowed so, other State Governments/GoI may also want to allow women employees to work during night shifts by issuing specific notifications, subject to safety and welfare of the said women employees being ensured by the employer.

2.5. Furlough

The relevant Indian labour and employment laws do not have the concept of furlough, the GoI and/or State governments, in these unprecedented circumstances, may want to allow employers to send employees on unpaid leaves up to a certain period.

2.6. Deferment of Compensation

Since several State governments have decided to defer the part of compensation of government employees including senior employees, the GoI and State governments may want to offer a similar benefit to private employers even if for a limited period.

Any employee who ceases to be in employment, for any reason, during the period when deferment is in force, should be allowed to be paid the deferred amount, up to his period of resignation / termination, only after expiry of the deferment period.

2.7. Minimum Wages and Dearness Allowance

The GoI and State governments, as applicable, may want to avoid increasing the minimum wages, including deferring the implementation of increase introduced in the recent months, at least for a period of 12 (twelve) to 24 (twenty-four) months from the end of lock-down period.

The GoI and State governments, as applicable, may also want to freeze the increase in wages, for the above period, even in cases wherein collective bargaining agreements have been signed.

Additionally, the private establishments may be allowed to not increase the dearness allowance (DA) for a period of 12 (twelve) months, from the end of lock-down period.

2.8. Expeditious Grant of Approval

Industrial establishments (as defined under the Industrial Disputes Act, 1948), employing 100 or more workmen require approval, in certain circumstances, from the relevant government authorities. Therefore, GoI and/or State governments may want to allow employers, affected by COVID-19, to be granted approvals expeditiously, and in a time bound manner, if they could provide reasonable grounds in support of an approval sought.              

3. INDUSLAW VIEW

Given the fact that several private establishments have indicated that the current pandemic has adversely affected their businesses and it is possible that some of them may not survive or may not return to business as usual, it is imperative that the GoI and/or State governments may want to ensure that businesses survive and continue to retain employees and/or offer employment.

It is, therefore, important that the GoI and/or State governments may want to consider offering certain reliefs to private establishments on the lines as discussed hereinabove. Given that the principles of equity and balance are important in every scenario, it would be appropriate that the GoI and/or State governments may want to add certain parameters to ensure that any reliefs/ concessions granted are interpreted and implemented with the right spirit.

Since some or most suggested measures may need amendment to relevant labour and employment laws in India, therefore, it would be advisable that any reliefs proposed to be extended by the relevant government (s) are expeditiously considered and implemented, by way of amendment in applicable laws, even if relevant for a specified period.

Several industry associations have already started seeking financial incentives and/or financial reliefs, however, it may be appropriate that they should also reach out to the GoI and/or State governments seeking changes in labour and employment laws to ensure that the private employers could continue to offer employment opportunities in times to come.

Footnotes