The Maternity Benefit Act 1961 was amended in 2017 to enhance/increase the maternity leave to 26 weeks from 12 weeks, for a woman employee, for the first two children. This write-up follows previous ones where we discussed the obligations under the amendment that were solely applicable to an employer.
Since the amendment was aimed to ensure the health of women employees pursuant to giving birth, and to also ensure safety of the newborn child, it appeared to be a positive development for women employees in the private sector. But the implementation of amendment has been inadequate and ineffective.
The ministry of labour and employment seems to have received complaints that in the private sector, women are having their employment contracts terminated on flimsy grounds at the time of applying for maternity leave under the amended MB Act.
According to a World Bank report, female participation in the labour force dropped to 27 per cent in 2017 from 35 per cent in 1990. The perception is that employers don’t want to employ women because they would then be required to sponsor them for a 26-week paid maternity leave.
In an attempt to tackle this problem, on November 16, the ministry proposed the maternity leave incentive scheme whereby 7 weeks’ wages would be reimbursed to employers who employ women workers with a wage ceiling up to Rs 15,000 a month ($209 approx) and provide them maternity benefit of 26 weeks paid leave, subject to certain conditions. But the scheme, which is in the drafting stage, would serve as an incentive to private employers to hire women employees. The scheme appears to be the right initiative in line with global polices around the world. At present, countries like Australia and Canada follow models whereby the benefits of maternity are entirely financed by public funds. There are also countries like the UK and Singapore wherein there is a shared responsibility on the employer and the government to contribute to the wages disbursed on account of maternity leave. In countries like South Africa, three stakeholders – the employer, employee and the government, share this responsibility. With the implementation of the scheme wherein the government would share the cost with an employer, India will be at par with norms followed by some developed economies and will receive recognition as being a country that is motivating female employment while being responsive to the family needs of working women.
The scheme would also help battle gender-based discrimination, which leads to questions as to the credibility of women employees and possibly a hostile work environment for them.
From an employer’s perspective too, the scheme would help them hire more and retain their women employees. The responsibility of ensuring the health and safety of women employees would no longer be solely an employer’s responsibility.
The government and society, both of which are equally important stakeholders in the process of ensuring employment opportunities for women, would contribute and share the responsibility of ensuring that women have equal access to employment and other approved benefits.
Given that the scheme is applicable to employees with a wage ceiling of Rs 15,000 ($209), the overall cost upon the government for implementation of the scheme is likely to be approximately Rs 400 crore ($56 million approx).
While the ministry has issued a clarification that the source of funds would not be a labour welfare cess since the ministry collects no such cess, clarity regarding the source of funding would be achieved only after the requisite budgetary approvals are obtained and the ministry officially implements the scheme. But it appears the scheme will be taxpayer’s money being put to another good use by the government.
While the scheme seems to be a step in the positive direction, it suffers from certain gaps. For example, the scheme only aims to cover women employees whose monthly salary goes up to Rs 15,000 ($209). We are of the view that the wage threshold should be such that a majority of women employees could benefit from the scheme.
The success of the scheme is largely dependent on its effective implementation. Once the budgetary approvals are granted, it is for the ministry to introduce a comprehensive plan of action to bring about the reimbursement envisaged under the scheme.
A certain degree of administrative strategy and monitoring of the disbursed funds to ensure that employers use finances for the designated purpose would go a long way in ensuring the success of the scheme. To ensure that the funds are not misused, declaration and/or filing by an employer on a periodic basis may be introduced by the government or payment of funds may be linked to certain obligations of employers towards provident funds and employees’ state insurance.
Having said that, the scheme appears to be an important step in placing India on the global map as a country that encourages employment of women and ensures that their basic needs are addressed.
(The writers are partner (employment team), senior associate (general corporate practice) and associate (employment laws practice) at Cyril Amarchand Mangaldas)