Economic and talent implications of maternity benefits amendment act
The Maternity Benefit (Amendment) Act1, passed by the parliament last year, has made it mandatory for the private establishments with more than 10 employees to grant 26 weeks maternity leave to women. The act further mandates that every company with more than 50 employees must establish crèche facilities and should have the provision of work from home if the nature of work permits to do so. With these amendments, India now stands at the third place2 after Canada (50 weeks) and Norway (44 Weeks) in the world to provide for a longer duration of maternity leave. The government has also introduced a bill in Lok Sabha to raise gratuity limit for employees and also to notify a higher period of maternity leave3. The impact is immediately realized based on the proposed amendment to Payment of the Gratuity Act 1972, Employers who have a gratuity capped at INR 10 lakhs will have to provide enhanced gratuity at INR 20 lakhs.
Through the Maternity Benefit (Amendment) Act, the government intends to empower women by increasing their workforce participation and overall well-being. As per the ‘India Development Report’ by World Bank4, India has one of the lowest female participation rates in the workforce; it merely stands at 27%, whereas countries like China and Brazil boasts of good participation rates somewhere in between 65-70%. There is a myriad of reasons for this abysmal rate – women taking break post childbirth and lack of childcare facilities at the workplace are the chief causes among many other. In the coming years, India has mega plans to add a good proportion of women in the workforce to provide a boost to economy -a report by Mckinsey Global Institute suggests- if India can increase women’s workforce participation even by 10 percent points (approx 6 million more women) by 2025, India could increase its GDP by 16%. Equal participation by women would add as much as $28 trillion, or 26%, to the world’s 2025 GDP5.
With this amendment, the government also seeks to facilitate breastfeeding and improve infant and maternal mortality rate which will have a direct bearing on the economy. A 2017 report6 released by the Global Breastfeeding Collective, led by UNICEF and the World Health Organization, termed breastfeeding the “best investment in global health” which generates $35 in global return for every dollar invested. India hopes to catch up on this in the years to come.
Business leaders across the sectors have different takes on the Maternity Benefits Amendment Bill. Some consider this as a milestone bill with a great intention while others say that there are chances that the bill might backfire on a female employees’ career. Kameshwari Rao, Vice President, People Strategy, Sapient India, believes that “the Maternity Benefits Act is a progressive step taken by the government which is in line with India’s initiatives towards changing the gender balance in the country. The act will not only help women to maintain a balance in their personal and professional lives but will also contribute to the economy of India. In comparison to the monetary investments, the maternity benefits act provides a far more sensitive and effective way to manage retention”. Priya Krishnan, CEO, Founding Years Learning Solutions, feels that “this act has certainly come as a major incentive for women, who would inevitably drop out of the workforce after the three-month maternity break and it was almost becoming a norm”.
There has been a lot of discussion about the impact of the Amendment, and there are divergent views on whether the Amendment will be beneficial in the long run. In spite of all the apprehensions, the Maternity Benefits Amendment Bill has become an Act. The provisions of the Bill are quite generous and have been widely welcomed. Indeed, there are a few areas which demand more thoughts and clarity. Priya feels, that “the act does not specify the minimum or maximum geographical distance between the childcare facility and the office. It neither talks about the age limit for children to avail the facility nor clarifies compliances such as quality checks of the facilities. Also, there is no clarity whether women of all grades can access the facilities or not”. There is no one size fits all approach in this case. Companies will need to decide their daycare strategy and roll out their own plans accordingly. Many companies have expedited their efforts and approaching daycare centers with their enquiries; Bengaluru-based Klay, which runs a chain of daycare centers in offices and gated communities across the city, today has tie-ups with 200 companies, compared with just 50 in April 20177. “Multinational and publicly traded companies are leading the way,” said Priya Krishnan.