Under a newly amended law, many employers in India are required to increase paid maternity leave and offer on-site day care services; some of the new standards await clarification.

The 2017 landmark amendment to the Maternity Benefit Act of 1961 (MBA), effective as of the 1st of April, 2017, has been welcomed by employees and employers. The key changes include: (i) increased paid maternity leave from 12 weeks to 26 weeks for women employees, unless they have two or more surviving children; (ii) recognition of the rights of an adopting mother and of a commissioning mother (using a surrogate to bear a child) for the first time, who may claim paid maternity leave for 12 weeks; (iii) a “work from home” option that may be of benefit after the maternity leave expires; (iv) and, effective as of the 1st of July, 2017, mandatory crèche (day care) facilities for every establishment employing 50 or more employees, including the right of mothers to visit the crèche four times per day.

Employers are obligated to educate employees about these benefits. However, certain aspects of the MBA will need further clarification. For instance, it is not clear whether the amendment is applicable to establishments with 50 women employees or 50 employees in total. More significantly, employers have questions about who bears the costs of crèche facilities and how the facilities need to be provided. Fortunately, other social welfare legislation in India can provide helpful guidance pending the promulgation of rules under the MBA.

Costs

Although the amendment is silent on costs, other social welfare legislation, such as the Factories Act, 1948, the Contract Labour (Regulation and Abolition) Act, 1970, the Karnataka Shops and Establishment Act, 1961, and the Karnataka Factories Rules, 1969, places the burden clearly on the employer. Moreover, in response to a Right to Information Application, the Ministry of Labour & Employment has stated that the costs for providing crèche facilities are required to be borne by the employer.

Provision of facilities

Some employers have chosen to comply with the new amendment by providing an allowance to their employees, or by reimbursing them, for crèche facilities located outside of the workplace. This practice may not be in line with the legislative intent, however, which appears to require that accessible crèche facilities be set up within a prescribed distance of the workplace. For instance, rules specifically applicable to mines and circuses require that the crèche be located within 500 meters from the main entrance of the establishment, either separately or with other establishments.

Other social welfare legislation in India also provides for similar crèche facilities and contains clear specifications. For example, under the Factories Act, 1948, a factory employing more than 30 women is required to maintain a suitable room for the use of children under the age of 6 years. Such rooms are to be kept under the charge of women trained in the care of children and infants. And under the Karnataka Factories Rules, 1969 (made by the state government pursuant to the federal act), the crèche may not be situated in close proximity to any part of the factory where obnoxious fumes, dust or odours are given off or in which excessively noisy processes are carried on. The building in which the crèche is situated is required to be of sound construction and all of the walls and roof must be made of suitable heat-resisting materials and be waterproof. The floor and internal walls of the crèche are required to be so laid or finished as to provide a smooth, impervious surface. The height of the rooms in the building may not be less than 3.7 meters from the floor to the lowest part of the roof and there may not be less than 1.86 sq. m. of floor area for each child to be accommodated. The employer is required to ensure that there is adequate ventilation of fresh air and suitable toys and furnishing, with cots and cradles and bedding.

The Kerala Shops and Commercial Establishments Act (KSCEA) also provides for free crèche facilities to be provided by establishments employing more than 20 women. The crèche is required to be conveniently accessible to the employees and to be utilized by children of employees who are under six years of age. The employer is required to engage woman with sufficient training and experience in the field of infant and child care to be in charge of the crèche. The children are to be provided with milk and other refreshments. KSCEA also provides specifications regarding the construction of the crèche, including not less than 15 sq. feet of floor area for each child, adequate protection against heat and moisture, and a smooth and impervious floor surface. In addition, adequate fans, wholesome drinking water, fresh air, natural and artificial lighting, hygienic washrooms and sufficient mattresses and cradles are required.

It should be anticipated that rules to be promulgated under the MBA will be similar, including with respect to proximity, the age of the children, the qualifications of the women in charge, lighting and ventilation, sanitary conditions and the other construction requirements.

Current practice

A recently published circular (Circular dated November 17, 2017 issued by Ministry of Labour and Employment, Government of India) requests that all state governments propose rules to be promulgated for amenities and facilities under the MBA as soon as possible. In the meantime, employers have chosen to adopt various models to comply with the new amendment, including the following:

  • Providing an in-house crèche facility which is self-administered by the employer;
  • Providing an in-house crèche facility where the administration is outsourced to a third party;
  • Setting up a dedicated crèche facility outside of the establishment;
  • Partnering with an external crèche facility; and
  • Utilizing the spare capacity of another employer providing an in-house crèche facility.

Of these models, the most popular choice appears to be arrangements with third party service providers close to the establishment. Employers select a daily, weekly and a monthly rate to meet the needs of their employees. Interestingly, the number of employees who are actually using the crèches does not appear to be high. Indian parents prefer to leave their children in the care of extended family or nannies who provide child care within the comfort of their homes.

Taxation concerns

Under Indian income tax laws, a “perquisite” is understood to mean any benefit that is extended to an employee by an employer. Perquisites are generally taxable, unless specifically exempted. In the absence of a specific exemption, a crèche facility provided by the employer may be taxable. However, in view of the different models that are being adopted by employers, it may be challenging to determine the total costs incurred by the employer and thereafter apportion them to each employee. Further guidance is required from the Indian tax authorities.

Conclusion

There is no doubt that the lack of quality child care is a major factor when women choose not to return to work after childbirth. The new amendment should be helpful, but clearer rules need to be promulgated for employers as quickly as possible.

India now surpasses many European and Asian countries in terms of maternity benefits. Prime Minister Narendra Modi called the law a “landmark moment in our efforts towards women-led development.” Notably, India places all of the cost on the employer whereas other countries split the cost between the government, the employer, insurance and other social programs. Some are concerned that this circumstance might adversely impact the demand for female workers or their salaries. Another concern is that the new law only applies to India’s 1.8 million female workers in so-called “organized labour” and not to many other women who work outside of that classification.