New rules under Labour Laws to reduce compliance burden for companies

Amendment of Central Rules under certain Labour Laws 

In accordance with the Ease of Compliance Rules, an employer will be able to maintain combined registers under the following labour laws (collectively referred to as the Specified Labour Laws):

The employer will have to maintain five types of combined registers under the Specified Labour Laws, namely employee register; wage register; register of loan/recoveries; attendance register; and register of rest days/leave account of employees/leave with wages.

Accordingly, pursuant to the Ease of Compliance Rules, certain central rules enacted under the Specified Labour Laws have been amended to replace existing forms of registers with the combined registers notified under the Ease of Compliance Rules. 

The combined registers under the Ease of Compliance Rules may be maintained in electronic form. It is understood that Ministry is simultaneously developing a software for these five combined registers to enable maintaining such registers in digitised form. After development of the software, it is contemplated that the software will be uploaded on the Shram Suvidha Portal of the Ministry to enable establishments to download such software for free.

Effective implementation is the key to success

While these amendments will help in substantially reducing the number of registers that are required to be maintained by establishments regulated by the Specified Labour Laws, it may take some more time before the scheme of simplification contemplated in the Ease of Compliance Rules is adopted by state governments. 

Labour is a subject which falls in the ‘Concurrent List’ of the Constitution of India, where both the central and state governments are competent to legislate, and many states have enacted their own rules under the Specified Labour Laws. Other than those Specified Labour Laws which have no state specific rules enacted, for example the Equal Remuneration Act 1976, the amendments proposed by the Ease of Compliance Rules shall become applicable to an establishment only when the state in which the establishment is located adopts such proposed amendments. The appropriate state governments should be required to amend the rules enacted under the Specified Labour Laws in consonance the Ease of Compliance Rules.

It is important to note that several states, including Maharashtra, Gujarat, Telangana and Karnataka, have enacted voluntary ‘Self-Certification Schemes’ (Schemes) with a view to simplify and bring about transparency in labour law compliances. Under certain Schemes, upon registration, the specified establishments will have the option of filing combined returns under certain labour laws specified in the particular scheme. Some of the Schemes, such as the scheme enacted by the state of Telangana, also provide an option of filing combined registers under certain labour laws. While adopting the amendments proposed by the Ease of Compliance Rules, the state will have to ensure that there is no inconsistency between the extant scheme and the Ease of Compliance Rules.

The central government has made several efforts in trying to streamline and simplify the number of compliances required to be adhered to under the various labour laws. The notification of the Ease of Compliance Rules is definitely a step in the right direction to help establishments cut costs and efforts and ensure better compliance with labour laws. 

The key to the success of the Ease of Compliance Rules will, however, lie in the effective adoption of amendments by the state governments at the earliest. It is to be seen whether any further clarifications or any instructions to the state governments will be notified by the central government in this regard.

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Anshul Prakash is the associate partner at Khaitan & Co

Jyoti Kakatkar is the associate at Khaitan & Co