Every company that employs a certain number of people comes under the ambit of the labour laws of India. You would be amazed to know that there are more than 20 different labour laws that are applicable to all companies. Some of these laws are :
Shops & Commercial Establishments Act
Contract Labour Act
Minimum Wages Act
Employees Compensation Act
Payment of Wages Act
Payment of Gratuity Act
Sexual Harassment of Women At Workplace Act
The above list is just an indicative one, but it gives us an idea of the myriad aspects of a company’s functioning these laws cover. It is a cumbersome job for any company to keep track of whether all its departments are complying with all relevant aspects of the labour laws. This is called labour law compliance, and it is a source of a lot of heartburn and anxiety for companies, so that they do not fall foul of the law.
The human resource department within a company can be expected to keep track of compliance and handle all labour law audits. But that might not always be a great idea, primarily due to the following reasons :
Human resources might not have complete access to and expertise of all the current updates to labour law legislation
They might have access to local support groups and local wisdom which can help in the correct interpretation of labour laws in the local context
During statutory audits, the human resource department might not have adequate bandwidth to handle the extra workload
This is the reason why many companies appoint an external agency or firm as their labour law advisor. This move can have several advantages, some of which are listed below :
Having the in-house team handle its own compliance assessment could result in several clashes of interest. Having the compliance assessed by and handled by an external agency would result in good governance practices.
The internal human resource team would have to handle labour law compliance along with all other functions. This might result in some lapses which could cause loss of reputation as well as financial losses. Entrusting an external agency with complete responsibility would make them completely responsible and ensure that the quality of compliance is maintained.
Because the entire job would be done by an external agency, therefore the company wouldn’t need to hire additional manpower to handle labour law compliance. This would reduce the labour costs and overheads for the company.
Because the adherence to labour laws would be completely handled by an external agency, therefore the human resource team would be able to devote more time and energy to other strategic initiatives in the area of human resources.
Because of all the above reasons, it makes much more sense for a company or business house to entrust the important job of labour law compliance to an expert agency instead of loading the in-house human resource department with this job. There are several good companies who would be able to take up this responsibility.