TeamLease RegTech

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Mar 01, 2022
4 min read

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In simple words, compliance means abiding by the law of the land. But the act of compliance can have broader implications in creating an environment of good governance. In India, labour laws form a significant portion of the compliance universe. The various labour laws laid down at the union, state, and municipal levels have undergone a paradigm shift since the enactment of the four Labour Codes in 2020. Although the new Codes are yet to come into effect, they are a huge step forward in simplifying and rationalising the landscape of labour laws in India.

When it comes to labour compliance within the organisation, many employers have adopted a passive approach towards compliance management without understanding the severe implications of non-compliance on their businesses. These include fine, penalties, revocations, cancellations and even imprisonment. However, over the years, increased awareness and rapid digitisation have triggered more serious discussions on the compliance front.


Let’s take a look at the 5 common mistakes that HR leaders make towards labour compliance and how these can be kept in check within an organisation.


1. Poor tracking of changing compliance requirements and laws: The labour compliance framework is fast-changing. More often than not, HR leaders in organisations miss crucial regulatory changes. However, with the intervention of technology, a more seamless compliance process has now emerged whereby processes are getting automated and organisations are shifting from manual paper-based compliance to digital compliance. HR leaders can use the current digital platforms for tracking and managing compliances in an efficient manner.


2. Lack of periodical reviews and audits: Most HR leaders conduct compliance reviews and audits on an ad hoc or need basis. These should be replaced by a standard practice involving periodical reviews and audits of all applicable labour compliances. This will allow them to have better visibility and control over their compliance requirements and capabilities and ensure better response towards compliance challenges.


3. Inadequate budget planning: A large chunk of an organisation’s resources is directed towards functions such as licence renewals, regulatory approvals, audits, advisories and so on. HR leaders often fail to prioritise budget planning for these functions, resulting in penalties and added costs. Proactive budget management must be given due consideration.


4. Lack of dedicated team or function to manage end to end compliance: Subject-matter experts, either within the company or empanelled with them, are much more suited to understanding the various labour compliance challenges and addressing them in a comprehensive manner. The absence of a dedicated labour team or function can result in non-compliance, attracting heavy monetary and criminal penalties. Hence, dedicated expertise should be incorporated into the workstream of the HR department, wherever possible.


5. Absence of training and upskilling programs: In most HR departments, training and upskilling takes a back seat. The implementation of tailor-made training and upskilling programs can enable HR leaders to have more clarity over labour compliances. For instance, training on how to handle authorities during inspections can be helpful in allowing HR leaders to provide relevant information and documents for faster processing of applications.

With the new Labour Codes on the horizon, labour compliance is bound to become a crucial element of an organisation’s compliance function. Resultantly, organisations will expect HR leaders to be more informed, aware and in control of the labour compliance needs. Hence, it is imperative that HR leaders avoid these common mistakes and take proactive measures to streamline the organisation’s labour compliance management. 

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