Background & Context
The COVID-19 pandemic accelerated the entire work from home (WFH) situation at a global level. The working world needed to adapt and do so at a rapid pace. India was no exception, and the IT/ITES sector was the first to jump on the WFH bandwagon. The scenario of working from home was not new to these companies and extending this to the entire workforce happened very quickly, despite several legal and compliance constraints that they had to work with.
Lawmakers also rose to the occasion and quickly cleared these hurdles.
- The Telecom ministry eased the compliance requirements for work from home
- The Commerce ministry eased the work from home requirement for Special Economic Zones (SEZs)
- Labour and Home Ministries of both the Center and the State used the Disaster Management Act, 2005 to mandate that IT companies must allow their employees to work from home
The peak of the pandemic has long passed and it has now been more than 2 years since the time of the first lockdown in March 2019. The pandemic situation has now eased and a majority of the adult population in India are twice vaccinated. Normalcy is returning to offices and most organizations are slowly asking their employees to return to work as well. Now through a new notification, the Commerce Ministry seeks to allow employees of companies set up in SEZs to work from home for a year at a time. The government accepted this as a natural transition and adapted accordingly.
The Work from Home (WFH) Notification
On 14th July 2022, the Central Government notified the Special Economic Zones (Third Amendment) Rules, 2022, which amended the Special Economic Zones (SEZ) Rules, 2006 (ref. Commerce Ministry’s official press release). These Rules have added Rule 43A to the Special Economic Zones Rules, 2006, which allows a unit set up in a SEZ to have its employees, including contractual employees, work from home. The rule however limits the number of employees who can WFH to 50% of the total workforce at any given time. The said notification has also put forth a set of guidelines and rules for the SEZ units to follow.
WFH Application Process
The key highlights of the new guidelines and rules are as follows:
- Every IT/ITES company in an SEZ can apply for permission to have its employees (contractual and own) to work from home
- The application can cover up to 50% of its total workforce
- Such an application must be made to the jurisdiction Development Commissioner
- The Application must be made 15 days in advance for future proposal of work from home and those already working from home, the application must be made within 90 days of the 14th of July 2022.
Application contents for WFH
In addition, the application must contain the following details:
- Terms and conditions of work from home
- Date from which the work from home will be utilised
- Details of the employees to be covered by such permission of work from home.
Assets leaving the SEZ to facilitate WFH
A critical aspect of employees working from home are the necessary and required assets to perform their duties. Most companies facilitate and enable the setup of a work environment for WFH employees. Companies typically provide such employees with assets needed to fulfil the employment obligations like laptop, monitors, desk, chair, communication equipment and other miscellaneous assets. To do so, the company must ensure it does the following in respect of assets that leave the SEZ:
- The Company shall account for the goods removed temporarily
- The Company shall issue a Certificate, authorising the employee by name and giving full specification, namely serial number, model number and make of the equipment, intended to be taken outside the processing area temporarily and the copy of the Certificate shall be endorsed to the Specified Officer and acknowledgment received by the Company
- The Company shall maintain a record of such Certificate of authorisation issued for temporary removal of equipment.
While the notification has been successful in providing considerable relief for the companies that are operating out of an SEZ, it does still leave many questions unanswered. For example:
- If an employee were to work on a hybrid model, will permission be needed for each day of work from home? Will asset entry and re-entry in such cases be a constant phenomenon?
- Can the company obtain generic permission by headcount as opposed to by name of the employee?
- Will permission be granted as a matter of right, or will it be at the discretion of the Development Commissioner? If so, what are the parameters to reject permission?
- Will the company be able to apply multiple times and if so, does each permission have a validity of one year?
- What is the penalty for non-compliance especially with regards to the 50% cap?
Overall, this is a step in the right direction and as is the case with most notifications, further clarity will emerge as the provisions are put into action. We are certain there shall be teething issues and we will need to see how the application and permission process evolves. IT/ITES companies located in SEZs will need to make haste and comply with the requirements that have been set forth as most of them have been allowing work from home or a hybrid model for the entire staff.
As a first step, all companies located in an SEZ with employees working from home have 90 days to apply for permission regarding those already working from home and need to comply immediately with the 50% requirement of work from office.