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Starting a business is a multifaceted endeavour and extends beyond just having a brilliant concept and top-notch products or services.Formulating a cohesive team is paramount to the success of a business as the team functions as an engine that drives smooth operations and attends to the daily tasks that keep the business thriving. Central to this cohesive unit is the vital role played by the Human Resource (“HR”) policies formulated and the adherence to the HR compliances.
While all the functions of the HR lie at an equal footing, compliances hold greater significance as they do not solely ensure a business’ adherence to a mandate, rather it also ensures employee satisfaction to an extent. As the industry constantly evolves, the compliance requirements also change to ensure that the policies and practices of organisations align with the industry practices and legal framework. This comprehensive guide serves the readers with a thorough understanding of the key HR compliances, protocols, and best HR practices, essential to foster a healthy and balanced workplace environment.
Onboarding Compliances
Onboarding compliances are the primary compliances involved in the process of hiring of employees. The foundation of an onboarding process often involves executing a well formulated employment agreement which outlines the terms and conditions of the employment, compensation, benefits, confidentiality terms, termination clauses and any other pertinent information. These employment agreements protect the interests of not only the employer but also provides clarity to the employee with respect to their duties and rights.
As mentioned above, legal compliance is vital in onboarding and employers must ensure compliance with various central legislations during the onboarding process. This includes adhering to relevant laws and regulations such as the Transgender Persons (Protection of Rights) Act, 2019 and the Rights of Persons with Disabilities Act, 2016. Organizations should ensure that the hiring processes are non-discriminatory, inclusive and provide equal opportunities to all potential candidates irrespective of their gender identity, disability status, race, religion, ethnicity, sexual orientation, or other characteristics. Employers must ensure that the processes do not discriminate against any specific person in any matter relating to employment including but not limited to recruitment, promotion, and other matters. In addition, applicable laws mandate establishments to formulate policies for persons with disabilities and measures to make the workplace accessible to the differently abled employees. To ensure simplification, organisations may integrate the mandates of both the statues in their equal opportunity policy.
Furthermore, employee background checks and verification, although not mandatory, are widely conducted by employers across industries to mitigate any risks associated with roles involving sensitive information and those of public importance. Background checks may involve obtaining government identification documents including but not limited to Aadhaar, Permanent Account Number (PAN), driving license or other generally accepted identity proofs, which are required to conduct a thorough verification as per requirements of the role and/or the organisation. However, the HR must comply with the applicable information technology laws and data protection laws when handling or storing personal data to safeguard the privacy of all the potential candidates and employees.
Ongoing Compliances
Like the operations of a business, the HR compliances are ongoing compliances that continue as the organisation operates and expands. Non-compliance with laws and regulations may lead to hefty penalties on organisations, can damage goodwill and in certain cases increase employee turnover rate. To avoid such adverse implications, organisations must ensure air-tight adherence to HR and labour compliances.
Pivotal to such adherence are compliances to state-specific laws and regulations. The Shops and Establishments Act of each state where the organisation is located, provides for various provisions pertaining to leaves of employees, their working hours, deductions from wages, display of certain information in the establishment, etc. Every state in India has formulated its own set of regulations and has additionally outlined procedures for various matters. To safeguard the interests of both employers and employees, policies should be formulated in compliance with these applicable regulations and ensure alignment with statutory requirements.
Although the respective states have formulated their set of laws with respect to leaves, working hours, probation, termination and notice period, it is imperative for the employers to comply with the legal thresholds outlined by each jurisdiction. However, organisations have the discretion to offer additional benefits extending beyond the minimum requirements stipulated by each state specific law. Furthermore, it is imperative to note that in certain states, employers have the flexibility to formulate their own policies with respect to these matters particularly for employees in managerial or supervisory roles, in which case standard laws may not be applicable.
One of the key statutes to be adhered to while undertaking HR compliances is the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH”), which is paramount for creation of a safe and comfortable workplace as it encapsulates provisions for protection against sexual harassment of women at workplace, prevention, and redressal of complaints of sexual harassment and connected matters. HR compliances under POSH include implementation of policies and procedures, imparting training to employees at all levels of the organisation, initiating appropriate action in instances of sexual harassment at workplace and filing of returns. Employers must conduct regular awareness programs to educate their employees, stakeholders, external members, contractors and related people about their rights and obligations under POSH.
In addition to compliances under POSH, organisations are also required to comply with the various other statutes including, but not limited to, the Maternity Benefit Act, 1962, the Employee Provident Fund & Misc. Provisions Act, 1952 and the Payment of Gratuity Act, 1972. While some ongoing compliances may be applicable on organisations from the commencement of operations, there are compliances that an organisation may be liable to undertake after crossing certain threshold limits as prescribed under the central and state-specific laws.
Termination Compliances
Termination of employment, whether voluntary or involuntary, is a sensitive and legally intricate process that requires the HR to comply with various laws and regulations to ensure that termination is legal and ethical without adversely affecting the organisation or the employee. Failing to adhere to the compliances during the termination process may lead to legal repercussions. Therefore, clear provisions with respect to termination must be included in the employment contracts of the employees, as per applicable laws to ensure a fair and lawful termination process.
The duration of the notice period and the amount of compensation that the employee may be entitled to may vary depending on factors such as the nature and duration of the employment and provisions of the employment agreement. Moreover, in the event of a misconduct, applicable state legislations necessitate an opportunity to be heard for the employee to present their side before any termination action is taken. Therefore, it is imperative for employers to comply with and be aware of the state specific regulations reflecting such requirements. Further, employers must comply with statutory requirements with respect to the full and final settlement of the terminated employees, which may include settlement of due salary, payment of gratuity (if applicable) and any other benefits accrued as per the employment agreement, organisational policies, or industry norms.
HR compliances during the termination of employment in India requires careful attention to detail, adherence to legal requirements, and respect for employee rights. By following due process, communicating effectively, and prioritizing fairness and compliance, HR professionals can mitigate risks and uphold the integrity of the organization’s employment practices.
Labour Codes
The Indian Government has introduced 4 (four) labor codes which are Occupational Safety, Health and Working Conditions Code, Code on Wages, Industrial Relations Code and Code on Social Security with the aim to amend the existing labor legislations. However, the above-mentioned labor codes have received parliamentary approval but are yet to come into force in India.
With the implementation of the new labor codes, organizations in India are awaiting significant changes in their compliance obligations. These labor codes provide a unified framework, introduce a streamlined compliance process, and represent a pivotal shift in the labor regulatory landscape. The new labor codes simplify wage payment systems and mandate timely and fair remuneration, streamlining the compliance processes. Additionally, amendments introduced under these codes facilitate compliances pertaining to workplace welfare, dispute resolution, and social security coverage for all workers.
It is imperative for organizations to stay abreast of the latest developments and proactively adapt their compliance practices. By aligning the HR policies and practices with the new labor codes, establishments can ensure adherence to the prevailing laws and ensure a compliant work environment.
Conclusion
HR compliances ensure that the organization complies with various laws, regulations, safety-standards, and policies that govern the duties and rights of the employers and employees both, thereby assisting the organization in effectively managing the workforce. Although many organizations consider it as a cumbersome task and find ways to evade their liabilities, it is crucial to note that HR compliances not only mitigate legal risks but foster a culture of trust, fairness, and accountability and lay the foundation for long-term success, sustainable growth and value creation for employees and stakeholders.
From onboarding to ongoing management and termination, organizations must understand that navigating HR compliances in India requires a comprehensive understanding of the legal framework and adherence to the statutory requirements. By embracing compliance as a guiding principle, organizations can navigate the complexities of the modern business landscape with confidence, ensuring that they not only comply with the law but also pave a way for effective and efficient management.
Authors: Shreyika Walia (Associate) and Khyati Bhatia (Senior Associate) of Ahlawat & Associates
