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Alert
Indian
Maternity
Benefit
(Amendment)
Act, 2017
Under a newly amended law, many employers in India are
required to increase paid maternity leave and offer on-site day
care services; some of the new standards await clarification.
By Sajai Singh, Lakshmi Ramachandran, Craig A. de Ridder, Jeffrey D. Hutchings1

Takeaways
•

Providing crèche (day care) facilities is now mandatory for employers with more than 50
employees.
•
Paid maternity leave has been doubled for women working at companies with at least 10
employees.
•

India is now ahead of most developed countries, including Australia, France, Japan and the U.S.
02.22.18

The 2017 landmark amendment to the Maternity Benefit Act of 1961 (MBA), effective as of the 1st
of April, 2017, has been welcomed by employees and employers. The key changes include: (i)
increased paid maternity leave from 12 weeks to 26 weeks for women employees, unless they have
two or more surviving children; (ii) recognition of the rights of an adopting mother and of a
commissioning mother (using a surrogate to bear a child) for the first time, who may claim paid
maternity leave for 12 weeks; (iii) a “work from home” option that may be of benefit after the
maternity leave expires; (iv) and, effective as of the 1st of July, 2017, mandatory crèche (day care)
facilities for every establishment employing 50 or more employees, including the right of mothers
to visit the crèche four times per day.
Employers are obligated to educate employees about these benefits. However, certain aspects of the
MBA will need further clarification. For instance, it is not clear whether the amendment is
applicable to establishments with 50 women employees or 50 employees in total. More
significantly, employers have questions about who bears the costs of crèche facilities and how the
facilities need to be provided. Fortunately, other social welfare legislation in India can provide
helpful guidance pending the promulgation of rules under the MBA.
Costs
Although the amendment is silent on costs, other social welfare legislation, such as the Factories
Act, 1948, the Contract Labour (Regulation and Abolition) Act, 1970, the Karnataka Shops and
Establishment Act, 1961, and the Karnataka Factories Rules, 1969, places the burden clearly on the
employer. Moreover, in response to a Right to Information Application, the Ministry of Labour &
Employment has stated that the costs for providing crèche facilities are required to be borne by the
employer.
Provision of facilities
Some employers have chosen to comply with the new amendment by providing an allowance to
their employees, or by reimbursing them, for crèche facilities located outside of the workplace. This
practice may not be in line with the legislative intent, however, which appears to require that
accessible crèche facilities be set up within a prescribed distance of the workplace. For instance,
rules specifically applicable to mines and circuses require that the crèche be located within 500
meters from the main entrance of the establishment, either separately or with other establishments.
Other social welfare legislation in India also provides for similar crèche facilities and contains clear
specifications. For example, under the Factories Act, 1948, a factory employing more than 30
women is required to maintain a suitable room for the use of children under the age of 6 years. Such
rooms are to be kept under the charge of women trained in the care of children and infants. And
under the Karnataka Factories Rules, 1969 (made by the state government pursuant to the federal
act), the crèche may not be situated in close proximity to any part of the factory where obnoxious
fumes, dust or odours are given off or in which excessively noisy processes are carried on. The
building in which the crèche is situated is required to be of sound construction and all of the walls
and roof must be made of suitable heat-resisting materials and be waterproof. The floor and internal
walls of the crèche are required to be so laid or finished as to provide a smooth, impervious surface.
The height of the rooms in the building may not be less than 3.7 meters from the floor to the lowest
part of the roof and there may not be less than 1.86 sq. m. of floor area for each child to be
accommodated. The employer is required to ensure that there is adequate ventilation of fresh air and
suitable toys and furnishing, with cots and cradles and bedding.
The Kerala Shops and Commercial Establishments Act (KSCEA) also provides for free crèche
facilities to be provided by establishments employing more than 20 women. The crèche is required
to be conveniently accessible to the employees and to be utilized by children of employees who are
under six years of age. The employer is required to engage woman with sufficient training and
experience in the field of infant and child care to be in charge of the crèche. The children are to be
provided with milk and other refreshments. KSCEA also provides specifications regarding the
construction of the crèche, including not less than 15 sq. feet of floor area for each child, adequate
protection against heat and moisture, and a smooth and impervious floor surface. In addition,
adequate fans, wholesome drinking water, fresh air, natural and artificial lighting, hygienic
washrooms and sufficient mattresses and cradles are required.
It should be anticipated that rules to be promulgated under the MBA will be similar, including with
respect to proximity, the age of the children, the qualifications of the women in charge, lighting and
ventilation, sanitary conditions and the other construction requirements.
Current practice
A recently published circular (Circular dated November 17, 2017 issued by Ministry of Labour and
Employment, Government of India) requests that all state governments propose rules to be
promulgated for amenities and facilities under the MBA as soon as possible. In the meantime,
employers have chosen to adopt various models to comply with the new amendment, including the
following:
• Providing an in-house crèche facility which is self-administered by the employer;
• Providing an in-house crèche facility where the administration is outsourced to a third party;
• Setting up a dedicated crèche facility outside of the establishment;
• Partnering with an external crèche facility; and
• Utilizing the spare capacity of another employer providing an in-house crèche facility.

Of these models, the most popular choice appears to be arrangements with third party service
providers close to the establishment. Employers select a daily, weekly and a monthly rate to meet
the needs of their employees. Interestingly, the number of employees who are actually using the
crèches does not appear to be high. Indian parents prefer to leave their children in the care of
extended family or nannies who provide child care within the comfort of their homes.
Taxation concerns
Under Indian income tax laws, a “perquisite” is understood to mean any benefit that is extended to
an employee by an employer. Perquisites are generally taxable, unless specifically exempted. In the
absence of a specific exemption, a crèche facility provided by the employer may be taxable.
However, in view of the different models that are being adopted by employers, it may be
challenging to determine the total costs incurred by the employer and thereafter apportion them to
each employee. Further guidance is required from the Indian tax authorities.
Conclusion
There is no doubt that the lack of quality child care is a major factor when women choose not to
return to work after childbirth. The new amendment should be helpful, but clearer rules need to be
promulgated for employers as quickly as possible.
India now surpasses many European and Asian countries in terms of maternity benefits. Prime
Minister Narendra Modi called the law a “landmark moment in our efforts towards women-led
development.” Notably, India places all of the cost on the employer whereas other countries split
the cost between the government, the employer, insurance and other social programs. Some are
concerned that this circumstance might adversely impact the demand for female workers or their
salaries. Another concern is that the new law only applies to India’s 1.8 million female workers in
so-called “organized labour” and not to many other women who work outside of that classification.
[1] Authors Sajai Singh and Lakshmi Ramachandran are a partner and associate, respectively, with the Indian law firm J.

Sagar Associates.

Tags
Craig A. de Ridder, Jeffrey D. Hutchings, Global Sourcing & Technology Transactions

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