KNOWLEDGE PAPER BRIEF
With 13 states having pre-published the draft rules related to the four new labour codes, Indian workplaces are bracing for a major overhaul. Encompassing every major aspect of the employer-employee relationship, the new codes have placed a heavy premium on proactive action requiring companies to carry out regular and rigorous audits.
The bar for compliance with the laws has been raised such that even a minor infringement can result in stiff penalties and possible prosecution of the company and its top executives. Yet, data from extensive audits carried out across companies and sectors suggests a worrying trend of routine non-compliance. What’s more, these violations cut across sectors as well as pedigrees. Thus, on an issue like overtime, IT vendors are just as likely to be non-compliant with the provisions of the law as manpower vendors. Anecdotal evidence adds a further dimension to the cost of flouting the law even if it is inadvertent. As small routine violations go undetected in the absence of systematic audits by external experts, they build up to a sudden and ruinous denouement with substantial damages for the company in question. A perfect example of this is last year’s nightmare at the Taiwanese contract manufacturer Wistron Corp where simmering discontent among contracted workers eventually led to an assault on the plant necessitating its shut down for several weeks.
Compounding the resulting scarring from such incidents is the reputational damage that a company suffers as news of such events travels swiftly to shareholders, business partners and employees. In a world where an enterprise’s Environmental, Social, and Corporate Governance score is increasingly being used to evaluate its corporate conscientiousness, it is vital to prevent such episodes rather than struggle to handle their fallout.
In such a scenario, what steps can companies take to safeguard their interests while at the same time remaining true to the letter and spirit of the law? In our latest knowledge paper (A Call to Arms: Complying With Labour Laws In India), we map the emerging terrain and earmark possible actions companies can take to mitigate the consequences of non-compliance. We also suggest how firms can set up dynamic processes to continuously evaluate their preparedness and carry out necessary corrections in real-time such that they are always ahead on this crucial aspect of governance and management.