India: Another Step Towards Labour Reforms

Continuing with its push for labour reforms, the NDA government has ushered in a series of progressive steps during the Parliament's recently concluded monsoon session.

In this Newsflash, we take a close look at what these reforms mean for the industry and how it affects the Indian workforce.

  1. Maternity Benefit (Amendment) Bill 2016 (MB Bill)


The Maternity Benefit (Amendment) Bill 2016 to amend the Maternity Benefit Act 1961 (MB Act) was passed in the Rajya Sabha on 11 August 2016. Subject to approval by the Lok Sabha and Presidential assent, the MB Bill is all set to be a statute on and from the date that it is notified in the Official Gazette. Post the recently concluded monsoon session of the Parliament, the MB Bill is now expected to be introduced in the Lok Sabha only in the upcoming winter session (typically, held during November-December), unless the proposed amendments to the MB Act are introduced by way of an ordinance in accordance with Article 123 (1) of the Constitution of India any time sooner.


The MB Act regulates the employment of women employees in factories, mines and shops or establishments for certain periods before and after childbirth and provides for post –partem care and other related benefits.  The proposed amendments to the MB Act were recommended by the 44th session of the Indian Labour Conference (ILC) held in 2012.

Some of the highlights of the MB Bill are as follows:

  • Increased Paid Maternity Leave: The MB Bill seeks to increase the duration of maternity leave available for women employees from the existing 12 weeks to 26 weeks.  Earlier, under the MB Act this benefit could be availed by an employee starting up to 6 weeks before the expected delivery date and extending up to 6 weeks after the childbirth. This has now been increased to 8 weeks before the expected date of delivery and remaining 18 weeks to be availed post childbirth. For women who have 2 or more children, the duration of maternity leave shall continue to be 12 weeks (i.e. 6 weeks pre and 6 weeks post expected-delivery date).
  • Maternity leave for adoptive and commissioning mothers: Keeping in line with the times, the MB Bill progressively seeks to extend certain benefits under the MB Act to adoptive mothers as well. The MB Bill provides that every woman employee who adopts a child shall be entitled to 12 weeks of maternity leave, from the date of adoption.
  • Work from Home option: The MB Bill has also introduced an enabling provision relating to "work from home" for women employees, which may be exercised after the expiry of the 26 week period. Depending upon the nature of work, women employees may be able to avail this benefit on terms that are mutually agreed with the employer. Though not a statutory entitlement, it provides an encouraging tool to employers to adopt flexibility in the way women employees could function without disrupting the much needed care for their ward.
  • Crèche facility: The MB Bill seeks to make crèche facility mandatory for every establishment employing 50 or more women employees. Women employees would be permitted to visit the crèche 4 times during the course of the day.
  • Employee awareness: The MB Bill makes it mandatory for employers to educate women employees about the maternity benefits available to them at the time of their appointment.

This is a welcome and much anticipated change. The amendment in the duration of maternity leave would benefit women employees by offering them better opportunities to balance their professional and personal responsibilities. In our view, this will also help employers in preventing attrition due to childbirths. From an employer perspective, it would bring about some additional cost in the short run as certain establishments would need to set up crèches for their employees. It is also not clear whether such a service could be offered by the employer to the employees on a chargeable basis or not.

  1. The Factories (Amendment) Bill 2016 (FA Bill)


The Lok Sabha on 10 August 2016, approved the FA Bill to amend certain provisions of the Factories Act, 1948 (Factories Act). The FA Bill will now be placed in the Rajya Sabha for approval in the winter session. The FA Bill aims to augment the ease of doing business and also to enhance employment opportunities, especially, for the manufacturing sector.


The Factories Act aims to promote and protect the health and welfare of workers employed in factories.

Some of the highlights of this FA Bill are as follows:

  • Overtime: In a significant change, the government has proposed increasing the existing limit of overtime hours for factory workers from 50 hours to 100 hours, per quarter. The FA Bill also proposes to increase the permissible overtime working hours in cases of "exceptional" work load from 75 hours to 125 hours per quarter.
  • Empowering Central government and State governments: The FA Bill seeks to empower the Central government to make rules and orders in relation to employees who are currently exempted from the provisions under Chapter V (Working hours for adults) of the Factories Act. These powers are presently vested only with the respective state governments.

The amendments are reformative. The amendments seek to unlock latent productivity in the manufacturing sector enabling higher productivity in times of increased demand. Once implemented, they shall provide employers an opportunity to achieve greater efficiency by offering increased flexibility in managing their workforce.

  1. The Employee's Compensation (Amendment) Bill 2016 (EC Bill)


The Lok Sabha, on 9 August 2016, approved the EC Bill, which proposes to amend key provisions of the Employee's Compensation Act, 1932 (EC Act). The EC Bill will now be placed in the Rajya Sabha for approval in the winter session.


The EC Act mandates the payment of compensation to employees and their dependants in case of death or injury caused by industrial accidents. The Law Commission of India, in its 62nd Report of 1974 and 134th Report of 1989, recommended the review, amendment or repeal of certain provisions of the EC Act, in order to protect the interest of the employees.

Some of the highlights of this EC Bill are as follows:

  • Employee awareness: The EC Bill proposes to make it mandatory for every employer to inform and educate the employees of their rights to avail compensation in case of industrial accidents. Further, the EC Bill also proposes to penalise employers if they fail to do so. Such penalty may range between INR 50,000 and INR 1,00,000.
  • Penalty: The EC Bill proposes to enhance the penalty provisions for various contraventions under the EC Act from the existing INR 5,000 to INR 50,000. It also seeks to introduce a monetary threshold (of INR 10,000) for disputes between an employer and employee which may be appealed before the High Court. The Central Government may further raise this amount from time to time by way of a notification.
  • No withholding by the commissioner: The EC Bill proposes to omit Section 30A of the EC Act which authorises the Labour Commissioner to withhold the payment of any sum deposited with him in cases where an appeal is filed by an employer in the High Court. Going forward, Labour Commissioners may be able to withhold such amounts only pursuant to a stay or an order to that effect granted by the relevant High Court under the appeals.

The amendments are expected to increase awareness amongst employees' – with a higher clarity regarding entitlement for compensation for injuries suffered in course of employment and also in respect of unnecessary withholding of compensation amount by the competent authority.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

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