Expecting in India: Employee Maternity Pay and Leave

In an interview last year, Kiran Mazumdar-Shaw – founder of Biocon, India’s biggest biotechnology company – spoke of the obstacles facing India’s female workforce. Namely, the attitudes of women returning to work after taking a leave of absence, such as maternity leave.
 
According to Mazumdar-Shaw, women in India tend to backtrack, opting for less ambitious roles which waste their expertise and experience. She identified mentorship and not policy as the means to instigate change. Before this, however, ensuring employers are in compliance with maternity laws can be its own challenge.
 
While violations can be penalized with fines, compliance also ensures employers retain the valuable experience of their employees. Numerous studies have shown that improved retention rates generate greater profits and avoid costly staff turnover.
 
The Maternity Benefits Act,1961, grants employees mandatory paid leave and extends to the whole of India, but is implemented with variable success. Increasingly, Indian employees have been challenging breaches to the Maternity Benefits Act in court, adding much needed pressure on employers to comply.
 
In August this year, the Maternity Benefit (Amendment) Bill, 2016 was passed in the upper house of India’s parliament. Key changes proposed in the new bill include the increase in maternity leave for working women from 12 weeks to 26 weeks, which can be availed before eight weeks from the date of expected delivery, instead of six weeks. However, in case of a woman with two or more children, the maternity benefits will remain unchanged. A revolutionary new aspect to the impending law concerns the category of a commissioning mother – defined as a biological mother who uses her egg to create an embryo implanted in another woman – and will be granted 12 weeks of maternity leave. The bill also makes it mandatory for an establishment to provide a crèche (childcare) facility, where the number of workers is 50 and above. To become an act of law, the Maternity Benefit (Amendment) Bill, 2016 must be passed in the lower house as well before being signed by the President. This resolution is a matter of time as the ruling government holds a party majority in the lower house.
 
Maternity laws in India are not highly convoluted, but this area of Labor and Employment Law is still tricky. With the flurry of recent legal cases and changes to precedent, employing a specialist consultant is advisable.
 
Eligibility for Maternity Benefit
The Maternity Benefits Act applies to every factory, mine and plantation, and any shop or establishment which has had ten or more employees on any given day over the preceding year.
 
Employees must also have worked in the establishment for 80 days in the 12 months preceding the date of delivery.  They should inform their employer of the leave period at least seven weeks before the delivery date, and name the person to whom payment should be made in the case of absence or death.
 
Case study: Municipal Corporations of Delhi vs. Female Workers, 2000
 
In 2000, a union of female workers who were treated as temporary workers and employed on Muster rolls claimed they were eligible for maternity benefits. The court held that the provisions of the Act entitled maternity leave to women engaged on a casual basis or on a muster roll basis on daily wages, as well as those in regular employment.
 
Paid and Unpaid Benefits
Currently, employees are due a maximum of 12 weeks full paid leave with six of these weeks to be taken after the date of delivery. An additional medical bonus for US $56 (Rs 3,500) is also available.
 
In order to claim six weeks leave prior to expected delivery, the employee should give a notice in writing stating the date of absence from work and a certificate of pregnancy. The employer is obliged to make payment in advance of this period. Following the date of delivery, the employee must also send another notice with a certificate of delivery. Notably, remaining payment must be transferred within 48 hours.
 
Ten weeks before delivery, employees are exempt from night shifts or any activities which would adversely affect their health, pregnancy or fetal development. After returning to work, employees are permitted two nursing breaks until the child is 15 months old.
 
Proof of any further complication related to pregnancy, delivery, premature birth, miscarriage or medical termination warrants an additional month of paid leave, with two weeks allocated for a tubectomy operation.
 
Legal Obligations under the Maternity Benefit Act
 
As India’s female workforce grows, so too are the number of legal disputes regarding the Maternity Benefits Act. Legal experts advise taking steps to minimize the risks attached with unlawful dismissal by preparing and maintaining requisite documentation, including muster-rolls and other records, to avoid penalties.
 
Under the Maternity Benefit Act, no employer can employ a woman in the six weeks following the date of her delivery or miscarriage. It is also illegal to discharge or dismiss her on account of such absence.
 
Employees cannot be discharged or dismissed while on maternity leave, nor can there be any disadvantageous change to their conditions of employment. This can be overruled in cases of gross misconduct or if employees take up work for another establishment during their leave. It is important to note, however, that pregnant employees who are discharged or dismissed may still claim maternity benefit from the employer.
 
In cases of gross misconduct, the employer must inform the employee of the termination of maternity benefits and the employee may appeal this decision within 60 days of the termination.
 
An employee receiving maternity benefits may give written notice to her employer during pregnancy or as soon as possible after delivery. On receipt of this, employers must allow her to continue her paid leave until notice is complete. Employees are no longer entitled to receive maternity benefits if they fail to give written notice.
 
Duties and Penalties for Employers 
 
Employers must maintain records or registers of employees on their payroll, as well as any distributed maternity benefits. Failure to do so can result in imprisonment from three to 12 months and a fine of US$32 – $80 (Rs 2,000 – 5,000).
 
Case study: Indrani Chakraverty vs. Idiom Consulting Ltd., 2012
 
In 2012, Indrani Chakraverty brought a criminal case against the design company Idiom Consulting Ltd. for violating the Maternity Benefit Act, 1961.
 
The court issued summons to five officials from the company who, upon discovering her pregnancy, halved her salary, forced her to relocate to Bangalore and then sacked her. The Delhi High Court ordered that Chakraverty should be paid US$ 10,956 (Rs 750,000) as settlement if criminal proceedings were dropped.
 
Alternatives to the Maternity Benefits Act
It is important to note the complex alternative options offered by India’s developing welfare system. In lower income jobs, the Employees’ State Insurance, a self-financing social security and health insurance scheme for workers, may be an alternative source of maternity benefits. The ESI is due to employees earning US$240 (Rs 15,000) or less per month, with the employer contributing 4.75 percent and the employee contributing 1.75 percent. Those who qualify may receive maternity benefits under the ESI scheme instead of the Maternity Benefits Act.
 
While enforcement of the Maternity Benefits Act is becoming increasingly stringent in the organized sector, implementation is still notoriously poor in the unorganized sector. In an attempt to protect the welfare of these workers, the government passed the Unorganized Workers’ Social Security Act, 2008. This includes coverage of hospitalization expenses and maternity benefits, but the legislation is unlikely to affect companies involved with FDI in India.
 
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
 
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