The Maternity Leave Incentive Scheme, 2018 for working women in India

The Maternity Benefit Act, 1961 (MB Act) was amended in 2017 (Amendment), to enhance/ increase the maternity leave period to 26 weeks from the previous 12, for a woman employee, for the first two children. This blog follows on from our previous posts wherein we discussed the obligations under the Amendment that were solely applicable to an employer. Read our previous post here.

Since the Amendment was aimed to ensure the health of women employees pursuant to giving birth, and to also ensure safety of the new born child, it appeared to be a positive development for women employees in the private sector. However, the implementation of the Amendment has been inadequate and ineffective.

The Ministry of Labour and Employment, Government of India (Ministry) seems to has 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 report of the World Bank, female participation in the labour force dropped to 27% in 2017 from 35% in 1990. The perception is that employers do not want to employ women as they would then be required to sponsor them for a 26-week long paid maternity leave. Therefore, the amended MB Act seems to have become a bane for women working in the private sector discouraging employers to employ them.

In an attempt to tackle the above mentioned problem, on November 16, 2018, the Ministry proposed the Maternity Leave Incentive Scheme (Scheme) whereby seven weeks’ wages would be reimbursed to employers who employ women workers with a wage ceiling up to INR 15,000.00 a month (USD 209 approximately) and provide them maternity benefit of 26 weeks paid leave, subject to certain conditions. Currently, the Scheme is in draft stage and more is yet to be seen. However, the Scheme 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 such as Australia and Canada follow models whereby the benefits of maternity are entirely financed by public funds. There are also countries such as the United Kingdom 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 some countries such as South Africa, this responsibility is shared by three stakeholders – i.e. the employer, employee and the Government.

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. Due to the partial cost being borne by the Government, the Scheme, if implemented, would be an encouraging factor to employers to hire female employees.

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. The Scheme, if implemented, would be another step to curtailing gender discrimination in the workplace.

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 INR 15,000 (USD 209), the overall cost upon the government for the implementation of the Scheme is likely to be approximately INR 400 crores (US$ 56 million approximately). While the Ministry has issued a clarification that the source of the funds would not be a Labour Welfare Cess since no such cess is collected by the Ministry, clarity regarding the source of the funding would be achieved only after the requisite budgetary approvals are obtained and the Scheme is officially implemented by the Ministry. However, it appears that 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 INR 15,000 (USD 209). With the rise in inflation and increase in minimum wages (pan India basis), only a few female employees may be covered under the Scheme. Therefore, 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 the employers use the 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, employees’ state insurance, etc.

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.