Ease of Doing Business in India & Labour reforms

How Labour Reforms contribute to Ease of Doing Business

Introduction:

Discussions and debates on the amendments to the Indian Legal system and sudden imposition of the Digitalisation in the life of normal people, clearly elucidate the intention of our Government to develop our Economy on par with other economies. The World Bank’s Ease of Doing Business is a stepping stone for us to realize our position when being compared with other developing economies. This has created a great impact on the rectification of major lacunas in the Legal system. Basically, it is a ranking system, established by the World Bank, which indicates how easy or difficult it is for an entrepreneur to establish a business when complying with relevant regulations. Every year the World Bank announces the survey report regarding the economies and their positions.

India and Ease of Doing Business (EODB):

Earlier India has always been considered as a place where doing business is complicated due to the multiplicity of applicable laws, compliance procedures, multiple levels of payments and exorbitant delays in approvals/registration and also the plethora of authorities and departments to deal with, which demotivates many entrepreneurs to invest in India.

Credit goes to Ease of Doing Business (EODB), because of which the Indian Government is insisting us to transform to Digital mode. After understanding the complexities in the Indian legal system, the Government has taken various initiatives to simplify and rationalize the existing regulations and switch us to information technology to make governance and compliance more efficient and effective.

Due to India’s overhauls on GST implementation, Insolvency and Bankruptcy Code, E-filing SPICE form for single incorporation and registration under Ministry of Company Affairs which automatically integrates with Tax department and most importantly the Codification of Labour laws, etc., have played a predominant role in promoting us to the 63rd best economy as per the EODB survey report 2020. In this context, the World Bank has specifically acknowledged India’s remarkable development in legal and compliance system.

Labour Reforms in EODB:

The bold and diligent effort of the Government can be witnessed by the introduction and implementation of many major and crucial Labour reforms during recent times. The development in the Labour sector not only regulates and ease the compliance but also promotes transparency and cost-effectiveness. The ease of compliance as notified by the Government promotes setting up more enterprises catalyzing the creation of more employment opportunities. The recent developments are given below as a ready reckoner:

1. Ministry of Labour & Employment has notified “Ease of Compliance to maintain Registers under various Labour Laws Rules, 2017” on 21st February 2017 which has in effect replaced the 56 Registers/Forms under 9 Central Labour Laws and Rules made thereunder into just 5 common Registers/Forms to facilitate ease of compliance, inspection and for providing easy accessibility to the public through electronic means, reduction in the cost of compliance and thereby increasing transparency

2. Registration process for EPFO and ESIC are now fully online on a real-time basis

3. Common Electronic Return cum Challan for EPFO and ESIC

4. Common Registration Service for 5 labour laws (ESI, EPF, BOCW, ISMWA and CLRA) on the e-biz Portal of DIPP

5. A Unified Web Portal ‘Shram Suvidha Portal’ has been launched to bring transparency and accountability in enforcement of labour laws and ease the complexity of compliance. It caters to four major Organisations under the Ministry of Labour, namely,

a. Office of Chief Labour Commissioner (Central),

b. Directorate General of Mines Safety,

c. Employees’ Provident Fund Organization

d. Employees’ State Insurance Corporation.

6. Single Online Common Annual Return under 9 Central Labour Acts has been made operational on Shram Suvidha Portal from 24.04.2015

The Codification of Labour laws

A major drawback for the entrepreneur in establishing the business in India is the complexities involved in labour legislation and, its compliances. With hundreds of central level and state level labour legislation, it is the need of the hour to consolidate, amalgamate, simplify, rationalize and codify these laws. In this regard, the Government has succeeded in combining laws relating to the same subject matter under one umbrella. This is the biggest step towards promoting EODB. Thus the Government as part of labour law reforms has undertaken a drive to rationalize 38 Labour Acts by framing 4 labour codes viz Code on Wages, Code on Social Security, Code on Industrial Relations and Code on occupational safety, health and working conditions.

Amongst several steps to overcome the lacunas, the codification of labour laws has minimised the multiple definitions and authorities, without compromising on the basic concepts of employee welfare and benefits. In a way, it would be easier for employers to adhere to the compliances within the prescribed timeline and also for the labour authorities to enforce the laws. The decision of changing the nomenclature of ‘inspector’ to inspector-cum-facilitator is one of the best friendly initiatives undertaken by the Government to promote the amicable relationships between the Employer and Inspector-cum-Facilitator.  Promoting digitalization through the introduction of web-based inspection scheme, calling of information electronically, the composition of offences etc. promotes a positive business environment.

On one hand, the Code emphasis on compliance mechanism and, on the other hand, it increases the cost of non-compliance and deterrent penalisation. Gone are the days, when employers could take it easy on non-compliances which hardly provided a deterrent with a paltry fine. At the same time, diligent employers who are willing to comply with the Code gets an opportunity to compound the offence. Thus the Code, embarked upon the simplest compliances and step forward in the direction of ease-of-business.

Of course, the enactment of a law is one thing and, its proper implementation is another thing. So, the major challenge faced by the Government is whether all these codifications of Labour law reforms shall reap positive effects from all related parties like an entrepreneur as well as Labour force. We shall await further Labour law reforms and its implementation.

 Conclusion:

Efforts and contributions from various level of people have made us jump to the 63rd position among 190 countries. This means last year India improved its business regulations in absolute terms, indicating that our country is continuing its steady shift towards global standards. But to reach higher ranking in the ease of doing business and thereby creating a feasible platform for the businesses, it is pertinent to concentrate on various grey areas too.

Finally, with all these optimistic reforms, we expect a higher ranking for India in the next World Bank survey on Ease of Doing Business.

Let’s keep our fingers crossed and more importantly, let’s do our share to make the new initiatives work by switching ourselves to Digital Mode and let’s start Compliance and track compliances digitally.

With 20 years of experience in the Compliance Market handling thousands of Compliance issue areas across 1400 plus organisations across 44 plus industries, Aparajitha also offers a global e- compliance platform to easily track, trigger and keep you updated with your organisation’s compliance status.

With domains running across multiple domains such as Labour, Finance, Commercial, Industrial, Environmental, Health and Safety, Corporate, Secretarial and Employment laws our e- compliance platform helps your organisation handle your compliance and be Audit ready through an easy dashboard and ready consolidated reports anytime!!

Call or write to us for all your online and offline compliance needs on marketing@aparajitha.com

 

Suryaprabha

Aparajitha Corporate Services

Consultation and Audit Department

 

 

Disclaimer: “The article represents the opinions of the author and the author is solely responsible for the facts, cases, and legal or otherwise reproduced in the article”

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