Difference Between IT and non-IT Recruitment
24/08/2023
Build Patients Trust through an Effective Patient Support Program
25/08/2023
Businesses don’t want to be non-compliant, because apart from inviting fines and possible penalties, it can impact productivity and the morale of the workforce. This is because when an organisation is non-compliant, it lowers employee engagement and hampers creativity and innovation. Employees don’t feel valued. In this article, we will try and address the problem of non-compliance at the organisational level and from employees. But let us now define non-compliance.
What is non-compliance?
Failure to adhere to rules and regulations in HR set by the Government (both State and Central), regulatory bodies, the company itself, or labour unions is referred to as non-compliance in HR. The non-compliance could happen from the company itself or its employees.
What is the Difference Between Compliance and Non-Compliance?
Compliance and non-compliance in HR are direct opposites. An organisation is either fully compliant or not fully compliant with the law and regulations. Each compliance violation will secure a separate penalty, fine and needs different remedial measures.
Types of Non-Compliance
There are four different types of non-compliance. They are:
1. Statutory Non-Compliance
There are strict laws regarding the wages that must be paid, the working conditions of employees and the benefits that they must be awarded set by the central and state governments. Not following these rules leads to statutory non-compliance.
2. Regulatory Non-Compliance
Regulatory bodies also set certain rules and regulations that organisations are supposed to follow. These regulatory bodies often conduct checks to ensure that the organisation meets those requirements necessary to earn a clean certificate.
For instance, the Telecommunications Regulatory Authority of India (TRAI) provides general eligibility conditions for jobs in the telecom sector under its HRM policies document.
This includes such things as job specifications and minimum age requirement. This helps fight non-compliance in the telecom sector, improve quality of operations and level the playing field to a certain extent.
3. Corporate Non-Compliance
Sometimes the organisation itself has certain rules in place to ensure proper functioning of the company. These rules and regulations are generally because of obligations the company might bear towards its customers, the members of the board and its employees.
An instance of corporate non-compliance could be that of an employee taking more leaves than is desired or allocated, often with a loss of pay. At the end of such a duration of employment, the employee may be terminated or asked to resign for the non-compliance. Managing such employees so that the risk of non-compliance is reduced is a priority for most organisations.
4. Union Law Non-Compliance
Unions exist in India to protect the interest of workers and employees. Any violation of the stipulations set by a union for a particular industry and job role could lead to a union law non-compliance.
An example of such non-compliance is an airline overworking it stewards, hostesses or pilots when an aviation union’s guideline sets a maximum time that each staff in the airline must work for and the responsibilities they must be assigned.
What Are the Consequences of Non-Compliance to Organisations?
Non-Compliance can be very costly to any organisation. It can affect employees and managers alike and invite dissatisfaction from investors and penalties from the government too. Let us look at some of the consequences of non-compliance to organisations:
- Affects employee engagement and productivity. Employees do not feel wanted and their productivity can get lowered over time if they overwork or their salary is not paid on time.
- Affects the reputation of the organisation. The reputation of the organisation is damaged too if it remains non-compliant. It could spread on social media and affect even the quality of talent you are able to source.
- Invites penalties from the government. The government can also penalise the company and impose fines for any violations of employee protection enactments. Fines may be imposed by regulatory bodies as well if the organisation does not comply.
What Are the Penalties Levied for Non-Compliance?
If the consequences of non-compliance in an organisation does not deter it from contravention of the laws instituted by the government, then the penalties and fines imposed should. Let us look now at some of the laws in the workplace and the penalties and fines in effect if an employer is found contravening the laws.
Wage and Work Hours Laws and Penalties
The minimum wages and the salary structure for an employee or worker depends on several factors, some of them being the state and the development of the particular area in the state, skill level required for the job, the type of industry etc.
Workers in India are classified as skilled, semi-skilled, unskilled and highly skilled. The minimum wages are periodically changed (to consider factors like inflation) across states and union territories and therefore must be considered when a company is trying to set up a branch there. What happens if you do not follow the law?
The penalties levied for low wages varies from state to state. The detention period for a wage non-compliance could start at 1 month and extent to 6 months. A court fine must also be paid for the offence. The exact penalty and fine to be paid and the duration of detention all vary from state to state.
When it comes to work hours, the maximum set by ILO (International Labour Organisation) is 48 hours per week, with only a maximum of 8 hours per day. In India, as per the Shops and Establishments Act and the Minimum Wages Act of 1948, the maximum worktime for an employee is 48 hours per week and 9 hours per day. Under the new labour code, the maximum worktime can extend up to 12 hours a day.
Remember and make a note of this penalty for overtime. In case the number of hours constituting a normal working day exceeds the given limit, then the employer will have to pay the employee for every hour or for part of an hour for which he/she has worked in excess at the overtime rate.
Sometimes the company policy restricts that employees work only a certain duration. In such a case, the organisation may pay the employee for pro rata for every additional hour worked or give a consolidated increase in the salary based on the number of hours worked overtime.
Leave Policies and Related Penalties
In India, every state has its own Shop and Establishment Act, which decides how many types of leaves (casual, sick, privileged) are possible, how these leaves are defined, how they are to be allocated and how they can be accrued.
In general, there are 12 days of sick leaves available for any employee and 15 days of privileged leave in most states. The leaves accrue throughout the year and the sick leaves may or may not be carried over. As per company policy, corporates are allowed to provide more leaves as well.
According to the Maternity Act of 1961, a mother is eligible for several weeks of paid leave if she has worked for a specified duration 12 months before the delivery. The company can offer her more leave than is mentioned in the Maternity Act too. Conditions at childbirth can entitle a mother to further leaves.
For contravention of the Maternity Act of 1961, the possible fines are up to 5000, and up to 3 months’ imprisonment with greater fines or more imprisonment for obstruction of justice, and payment of compensation due to the mother.
Health and Safety Law and Penalties
The Occupational Health, Safety and Working Conditions Code of 2020 aims to bring together the laws under several other enactments in a compact form to improve workplace health and safety of every worker and employee, also allowing special provisions for those with disabilities.
In the case of contravention or non-compliance with the code by an employer, the penalty that they would incur is around 2 lakhs and can go up to 3 lakhs, including any cost of treatment for any condition arising from the contravention, which depends on the court’s order.
How to Address Non-Compliance of an Organisation?
To address non-compliance in an organisation, there are several ways. Some of them are mentioned below:
1. Hire an Expert and Knowledgeable In-house HR Team
Hire an HR team with knowledge of the laws and enactments of the country you are located in. this can be a challenge as you would need then to hire HR teams in every country you have a branch in, and all of them must be well-versed with the laws of the land. This does not seem too feasible.
2. Have Legal Consultants on Your Payroll
Having legal consultants on your payroll now seems like a good idea, as they can help you with addressing non-compliance in the organisation, but if your HR team is not familiar with the laws and regulations, you will fail to get the necessary buy-in from them. Your employees may also not be aware of their rights with regards to benefits, leave policies and safety at the workplace.
3. Conduct regular compliance audits
Once a rule or regulation is enacted by an organisation, it must not be set in stone, because it is very important to comply with statutory and regulatory compliance to begin with. It is also necessary to conduct regular compliance audits in your organisation to ensure that the employees and HR team are well-educated to deal with any compliance issues, should they arise and that you do not have any ongoing compliance issues or challenges. For this reason, also listen in to all compliance allegations with an attentive ear.
4. Hire a Third Party as a Compliance Safeguard
Now we come to the most viable solution of all, which also ensures that the first three requirements are also met. While outsourcing your HR functions to a third-party HR consulting company, which includes functions like recruitment and staffing, you can also outsource your payroll and compliance functions, ensuring that the rights and safety of your employees is with them and that your organisation always has a reputed and respected name and remains a great place to work.
How to Address Non-Compliance in the Workplace?
Correcting non-compliance goes both ways. While an employer must ensure that the employees have a safe place to work, do not overwork or are paid their salaries on time (among other things), employees must also be dedicated, law-abiding and supportive. How do you deal with non-compliant employees at the workplace?
1. Begin a Conversation
Try to understand why an employee is upset and discuss the reason for his/her non-compliance, so that you can work out a solution for it.
2. Keep Calm
Keep calm under pressure. Sometimes, the reason why an employee is just an individual or a group within your organisation, and not the HR team or the organisation itself. Listen fully to what the employee has to say calmly.
3. Explain the Why
Explain why the laws are the way they are, in case of any special conditions in your workplace or any rules your company has put in place. Clarify any doubts they have and continue to listen patiently and try to convince them to be compliant.
4. Explain the What
Now since you have tried asking them to be compliant, but they have refused to then let them know how non-compliance will be dealt with and the possible penalties they could face. Also inform them what rights they have in such a case and how they would be supported should they choose to correct themselves.
5. Nip the Problem in the Bud
Employee non-compliance can quickly spread through your organisation. Be aware of what your employees are doing and if there is any risk for non-compliance anywhere. Nip the problem in the bud and do not let it spread. Take strict action against defaulters and wrong-doers, including limiting their bonuses or promotions or even terminating them if the behaviour continues. But make sure you are not violating any of the existing laws at any stage of the process.
Are you looking for a permanent solution for non-compliance?
If you are looking for a permanent solution for non-compliance, be it compliance with external regulations (issued by the government and other bodies) or internal rules and regulations, an HR consulting company can help you in both instances.
An HR consulting company can manage all your compliance and payroll requirements for you while also dealing with non-compliant employees on your behalf. It’s the compliance geek you always wanted on your side.
Better yet, if you outsource your staffing or recruitment services to them, then they can hire the right employees with the right attitude and temperament for you after doing extensive background and reference checks.
Alp Consulting is an HR consulting services company with over 25 years of experience handling multiple HR functions ranging from recruitment and staffing to payroll and compliance. So, when are you talking to us about your compliance challenges? Your journey from non-compliance to compliance could begin today. Let’s eliminate the challenges of compliance together!
