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.
Government's silence on providing tax breaks to service providers and employers is another area of concern. Unlike many other countries having progressive maternity policies, funding of this 6-month maternity benefit will have to be borne entirely by the employer in India. “While larger companies have the ability to absorb the costs, medium and smaller companies feel burdened by the mandate to provide Childcare facilities”, stated Priya. Another downside of the act could be that organizations may adopt a myopic view and reduce the percentage of women in their workforce”, adds Kameshwari. She believes that using the bill as an excuse to reduce intake of women into the workforce would be short-sighted and will have an adverse impact on clients and customers. Going on maternity leave is not a stigma rather such life experiences add another dimension of perspective and maturity in women that can prove to be extremely valuable. Organizations need to learn how to harness these qualities to deliver greater impact for themselves and society at large.
Organizations mostly remain clueless about the role which female employees will return to after her maternity break -will it be the same role, a new role, a project based role or on the bench. Such ambiguities need to be minimized for a returning mother through detailed counseling and discussion sessions. The need is to develop empathy and sensitivity so that people can understand the increased roles and responsibilities of new mothers and the need to have such bills.
There are a few organizations which are taking several steps to ensure that women feel supported before, during and after their life experience of having a child. Sapient India believes that this bill has helped the organization in building and promoting supportive ecosystem for women employees. It has a robust support system for women (and men) to help them achieve sustainable careers, including innovative working policies such as flexible working hours and work from home that enable them to manage their home and career. They have the benefit of a strong Employee Assistance Program that helps them through these life changes. Tools like 'All about You!' and mobile application enables parents-to-be with an efficient online system that helps them keep updated with aspects related to their health, wellness, and childcare. Post maternity support is another area hugely supported by the organization which ensures re-alignment of the returning mothers with their work. The organization strongly feels that having a 6-month break and any additional time off has been one of the many reasons why Sapient has been able to retain more women in the workforce.
We are living in an era where organizations are facing a paucity of talent. The inclusion of more and more women in the workforce would help in bridging the talent gap. Workplace diversity will also play a critical role in driving economic growth in future. Research increasingly shows gender diverse workforce improves business outcomes. A report by McKinsey & Company8 found the most gender-diverse companies outperformed less diverse organizations by 15 percent. The Maternity Benefits (Amendment) Act raises our hopes of having a richer, more gender diverse and empowered workplace. Indeed, there are a few areas which demand more clarity – like provisions around crèche facilities, paternity leave, and cost borne by the employers. Standardization on these aspects would help address liability issues to some extent, which could be a significant cause of worry for several establishments but overall it is well begun and hopefully, it will not be half done.