Amendment to Maternity Benefits Act is a case of good intentions backfiring, ends up disincentivising hiring of women

Great policies are hardly the outcome of great intentions. What is often required, for a policy to be robust, is a holistic, comprehensive assessment of risks that the policy may bring about, and what mitigation strategies can be put in place for the smooth functioning of the policy. The Amendment to the Maternity Benefits Act, 1961 in 2017 is one such policy. The legislative intent of the policy was commendable — it was a progressive legislation that put the needs of the ‘working mother’ at the centre, and this reinforced the work-life balance that extant workplaces hold significant in their organisational policies. And the purported effect of the policy was to encourage retention. However, the policy disincentivises companies and organisations from hiring more women — this results in the further decline of the labour force participation of women in India.

A extensive report titled ‘The Impact of Maternity Benefits on Business and Employment’ by TeamLease Services, compiled after surveying 350 start-ups and SMEs, stated that in this financial year, between 11 to 18 lakh women are likely to find it difficult to enter the labour force. This number does not include the annual attrition rate of women employees in 2018-19. The study was conducted across ten key sectors which included education, aviation, real estate, e-commerce, manufacturing, retail, tourism and information technology. The report suggests that about 26 percent of the respondents in the survey explicitly admitted to preferring male candidates as employees, instead of hiring women; 40 percent of respondents expressly stated that they would vet the additional cost of paid maternity leave while hiring female candidates — thereby creating one more invisible criterion that women in the labour force participation will have to fulfil during the hiring process. Therefore, a total of 66 percent respondents expressly stated that they would discriminate against female candidates because of the Maternity Benefits Amendment Act. Moreover, 35 percent of these respondents stated that they anticipated a negative impact of the Amendment Act, and believe that it will impact both cost and profitability of their business.

Representational image. AP

The report does not bring forth anything widely shocking — it simply portrays how companies and organisations strategise while considering the intake of women in the work force. However, it is significant to ask ourselves whether the legislative intent had taken into account the patriarchal nature of industries and sectors while drafting the amendment, and provided for a risk mitigation design around this.

The Maternity Benefit (Amendment) Act was passed in April 2017, and was lauded for its endeavour to make workplaces more inclusive. India was considered the third most progressive country, after Canada and Norway, to have moved in the direction of providing for fair maternity benefits and a workplace policy that upheld the interests of working mothers. The Act extended paid maternity leave for female workers in the organised sector from 12 weeks to 26 weeks, and ensured that women would remain a part of the work force even after childbirth. But what the Act was unable to predict was that this regulatory model, while protecting the retention of women, would adversely affect the ways in which women are able to enter the labour force. A policy that had all the good intentions, and endeavoured to “bring women in the workforce closer to workplace equality” is now the reason why companies and businesses are reluctant to hire more women.

A report of the International Labour Organisation (ILO) states that India’s female labour force participation rate (LFPR) has fallen from 34.1 percent in 1990-00s to about 27.2 percent in 2011-12. According to the TeamLease report, the amendment has supported the retention of women in the work force — the retention rate of women has increased to 56 percent from 33 percent, but the negative impact has been that new women are being turned away from joining the work force, thereby, contributing to the decline of the female LFPR.

The Amendment Act has no safeguards for this decline. It does not take into account the deep, intricate socio-economic factors that determine a low female LFPR. The ILO report points out the complex interaction of these factors in India - “Based on global evidence, some of the most important drivers include educational attainment, fertility rates and the age of marriage, economic growth/cyclical effects, and urbanisation. In addition to these issues, social norms determining the role of women in the public domain continue to affect outcomes.” Had the legislation kept these things in mind, it would have made space for the various risks in the sourcing of employment for women.

In India, companies and businesses still perceive women as resource-draining, and the Amendment came as a “gender-specific” restraint. The Amendment pushes for social change without incentivising the businesses for doing so, and this in turn, results in them shirking from hiring more women. Sadly, this is a legislative loophole. A comprehensive regulatory model of maternity benefits would not put the entire burden of financing paid leave on businesses and organisations, that already have biases against hiring women. An alternate model of paid maternity benefits is one where the State and the employer jointly share the costs of such benefits. This makes for a holistic approach where the State is also invested in the process of increasing female labour participation, while simultaneously, businesses ensure that female workers are retained. Another ILO report from 2014 that focusses on laws and practices on maternity (and paternity) at work, states that 58 percent of all countries make the policy of paid maternity benefits possible through social security, and 16 percent fund paid maternity benefits through a state and employer shared model. Only a quarter of all countries, therefore, put the full liability of maternity benefits on the employer; this is not to say that this model is not feasible globally, but in India, where businesses already don’t hire many women, implementing this model is difficult.

Women in India already have to navigate between the public and the private, and are culturally expected to uphold the double burden, and the Amendment does not incorporate this dilemma (and its solution) within the policy.