Labour Law Due Diligence Audits - The New Labour Law Rules

Labour Law Due Diligence Audits - The New Labour Law Rules

Labour Law Due Diligence Audits | The New Labour Law Rules

The Indian labour law landscape is rapidly evolving as per the contemporary needs. It is important to stay updated and ensure compliance with the latest regulations. Labour law due diligence is an effective way to identify the applicability of different compliances, how compliant you are and the potential legal risks. Let’s check out the new labour laws rules in India and how labour law audits help you with their compliance.

New Labour Laws in India

The government implemented the four new labour laws repealing and merging all the erstwhile labour laws. These laws include:

  • Code on Wages, 2019: It focuses on the areas relating to wages, equal remuneration, minimum wages etc.
  • Code on Social Security, 2020: It deals with matters relating to welfare, social security, gratuity, provident funds etc.
  • Industrial Relations Code, 2020: It deals with matters relating to employer-employee relationships, trade unions, dispute resolution and employment terms.
  • Occupational, Safety, Health and Working Conditions Code, 2020: It deals with matters relating to the health, safety and working conditions of the employees.

What are Labour Law Due Diligence Audits?

Labour law due diligence audit is a review and evaluation of the adherence to labour laws and regulations. This is also important in case of major corporate transactions like mergers, acquisitions etc. It helps employers identify key labour laws applicable to them and the compliance requirements and helps them dodge significant penalties.

Why Labour Law Due Diligence Audits?

If you are an employer, here’s why you should conduct labour law due diligence audits in your organization:

  • Legal Compliance: It ensures that the company is compliant with the current labour law regulations which helps avoid significant penalties and potential disputes.
  • Risk Management: It helps organizations identify potential liabilities and risks relating to employment practices that can harm the organization financially and legally in the long run.
  • Operational Efficiency: It helps align the HR and employment practices of the organization in line with the laws of the land. This improves the overall operational efficiency of the organization in terms of hiring and employment.
  • Corporate Transactions: Labour law due diligence becomes an important aspect when a company is contemplating a merger, acquisition or any other corporate transaction.
  • Improves Employee Relations: Labour laws are meant to protect the interests of employees and workers of an organization. Therefore, being compliant with the labour laws portrays your organization as being working in the interest of the employees.

Key Components of Labour Law Due Diligence Audits

The following are the key components of the labour law due diligence audits in India:

  • Review of Employment Contracts: The audit involves a review of your employment contracts and the terms and conditions offered to your employees. This involves equal remuneration, minimum wages working hours, employee benefits, termination terms etc.
  • Compliance with the Employment Laws: The audit helps in identifying the key employment laws and compliances applicable to the organization and whether it is ensuring compliance with the laws or not.
  • Evaluation of Employee Benefits: Here, the different employment benefits provided to the employees and workers are assessed and their legal and financial implications on the organization are determined.
  • Assessing the Workplace Policies: The workplace policies implemented by the organizations should be in line with the applicable laws. This usually includes discrimination, harassment, health and safety, leave entitlements etc.
  • Litigation Review: Here, the past, current and potential litigations relating to the employees are examined. It also involves the potential liabilities and fines that the company may have to pay. This helps the company create better policies and ensure timely compliance while also minimizing the risk and potential liabilities due to ongoing litigations.
  • Reviewing the Training and Compliance Programs: This involves checking the training and compliance programs of the organizations. This not only involves technical training but employees are also made aware of their rights and responsibilities as per the applicable laws.

Steps Involved in Labour Law Due Diligence Audits

Following are the key steps involved in the labour law due diligence audits:

  • Planning and Preparation: This involves defining the scope and objectives of the labour laws due diligence audit.
  • Document Review: This involves gathering all the necessary information and documentation like employment contracts, compliance records, policy manuals etc. A thorough review of this documentation is carried out to understand the exact position of the organization.
  • Interviews and Surveys: Interviews are conducted with the management, HR personnel and the employees or workers. Surveys are conducted to get anonymous feedback and opinions of the employees relating to the existing work culture and employment practices.
  • Site Inspections: Site inspections are carried out to check the health and safety regulations of the organization. This helps in verifying the actual working conditions in the organization and ensuring that they match the documented policies.
  • Reporting: After the completion of the audit, a detailed report is prepared outlining the observations, highlighting the areas of non-compliance and the potential risks that the organization faces. This is followed by recommendations for corrective actions.
  • Implementation and Follow-up: This involves assisting the organization in implementing the corrective action and follow-ups to ensure compliance with the ongoing compliances.

Why ASC Group?

Labour law due diligence audits are crucial to stay compliant with the applicable laws. Further, it becomes important when the company is contemplating a major corporate transaction like a merger, acquisition or sell-off. ASC Group can assist you with a comprehensive audit for labour law due diligence followed by a recommended course of action for improvement and helping the organization stay compliant. It ensures adherence to the legal compliances to mitigate risks and promote a positive environment in the workplace. Further, we help in navigating your organization through the complexities of the Indian labour laws to maximize your operational efficiency and avoid any legal tussle. Reach out to us for more information!

Also, Check "Social Security Compliances and Labour Laws in India"


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