How Can the Maternity Benefit Act Increase Female Workforce Participation?

In order to promote women’s participation in the workforce, the Maternity Benefit Act, 1961, was amended to provide more beneficial entitlements to women employees. However, they appear to impose the entire cost of these benefits on employers, which could lead to a negative trend in hiring women in meaningful roles.

In 2017, the Parliament of India passed an amendment to the Maternity Benefit Act, 1961 (MB Act), which brought about three key changes. While the MB Act had previously granted female employees maternity leave, the amendment increased the duration of leave entitlement from 12 weeks to 26 weeks. Further, the amendment also introduced leave for adoptive mothers and surrogate mothers. Finally, the amendment mandated that every establishment with 50 or more employees shall have the facility of a crèche. 

The MB Act was instituted to ensure that young mothers’ ability to participate in the workforce is not hindered because of childbearing and child-rearing responsibilities. Women have customarily had a primary role when it comes to childcare, even when they have partners or spouses. For working women who do not have adequate support in caregiving, this often becomes an impediment to their ability to work efficiently. In order to combat this and give female employees the time and space required for a new child, the law mandates employers to provide female employees with paid leave. With the amendment, the requirement to provide a crèche has also been introduced to encourage women to return to work without having to worry about leaving their young children unattended. 

While the legislation is definitely well-meaning, it is critical to examine its socio-economic implications. In the case of any legislation, especially those enacted to benefit specific groups, it is paramount that there are no negative outcomes which counteract the positive intent of the statute. Without this assessment, laws are likely to be infructuous, yielding nothing but an empty promise at equality. 
Under the MB Act, the employer bears the cost of maternity leave by ensuring paid leave for the employee during her absence. This benefit is not given to male employees, and is, therefore, a gendered benefit. So by hiring women employees, many employers run the risk of incurring an additional gendered cost if such women choose to become mothers. 

While the MB Act itself has been drafted with an objective of securing equal opportunity, the ground realities reflect a stark difference. It is not uncommon for female candidates to be asked intrusive questions about their current, and intended marital status, along with similarly personal questions about whether they have, or intend to have children. Among many employers, there is a reluctance to employ and engage women in meaningful roles.   There are comments made behind closed doors about how expensive it has become to hire women on account of the law’s increased stringency (Johari 2014).  

Consequently, it is likely that the MB Act will be counterproductive because employers will choose to cut costs by not hiring women at all, which will reduce female workforce participation. The law, therefore, has the potential to foster gendered discrimination at the workplace.

Interrogating the State’s Role 

The primary problem with the MB Act is that the onus of bearing the cost of maternity leave is placed squarely on the employer which makes hiring women a burden for them. However, this does not mean that women should not be entitled to maternity benefits, which means that the state’s role in supporting working mothers is vital to minimise workplace discrimination and to encourage female participation in the workforce. 
While private players can be made to work towards social issues, such as increased employment and equal opportunity, the government has a vital role to play in truly implementing it. An example can be found in the government’s Pradhan Mantri Protsahan Rozgar Yojana Scheme, under which the government makes a portion of provident fund contributions for certain employees in an endeavour to generate more employment. 
It is relevant to note that under the Employees’ State Insurance Act, 1948 (ESI Act), maternity benefit payments can be claimed by female employees as a part of the social insurance scheme. Although the employer does incur a cost in the form of regular contributions to the Employees’ State Insurance Corporation, which in turn funds the maternity benefit payable, these contributions are not gendered, that is, the quantum of contribution does not differ based on the gender of the employee. Employers and employees are required to pay the same percentage of contribution irrespective of whether they are male or female. Under this scheme, therefore, while the output payment may be gendered (in that only female employees can claim maternity benefit), the cost incurred by the employer is not gendered. 

However, in order to be eligible for any payments (including maternity benefit) from the Employees' State Insurance Corporation (ESIC), there are two important qualifications. First, the establishment that the employee works at should be covered under the ESI Act. The law prima facie covers all factories, but has been extended to other types of establishments by way of individual state government notifications. Second, the employee herself must not be earning beyond the wage threshold specified under the ESI Act. Currently, the threshold is ₹ 21,000 per month. However, female employees who fall outside of this income bracket or whose workplaces are not covered under the ESI Act can claim maternity benefits only from their employers and not from the ESIC. 

Redistributing Costs

In order to somewhat redistribute the cost of maternity benefits, the Ministry of Labour and Employment had announced an incentive scheme under which the government would reimburse Sevan weeks’ worth of maternity benefit payments. However, this benefit is applicable only for employees whose wages do not exceed ₹15,000 per month, who have been registered with the Employees’ Provident Fund Organisation for one year, and who are not covered under the ESI Act. 
There are several issues with this as well. First, the minimum wages in several states (for instance, Delhi) exceeds ₹15,000 for certain types of employment. Therefore, the scheme would be redundant for such employees simply because employers, by law, must pay them over ₹15,000 per month. Second, given that employees earning up to ₹21,000 in ESI-covered establishments would receive ESI benefits, this scheme would cover only employees working in non-ESI covered establishments who earn below ₹15,000 per month. It, therefore, remains to be seen how many women would actually benefit from this scheme. This careful delineation of eligibility is unlikely to create the desired kind of inclusion and may result in lower wages for female employees, which would allow employers to claim the benefit. 

Overcoming Discrimination

One strategy which could help mitigate the risk of discrimination is to expand the ambit of compulsory social insurance (such as ESI) to all employees, irrespective of their wages. Under this model, contributions should be paid for all employees and in turn, they will all receive insurance benefits, including for maternity leave. Under such a model, even if the contribution amount is calculated at a percentage of capped wages, there is enough scope for all female employees to receive a minimum amount as maternity benefit. While employers will be required to contribute towards this, the input cost will be diversified across employees of both genders and will not be focused on only female employees. A similar model is followed in Canada, where employees can receive a percentage of their regular income through employment insurance as maternity benefit (Government of Canada).  

Additionally, another step towards mitigating the gendered aspect of parental leave is through the introduction of paid paternity leave. Even where an employer is made to bear the entire cost of paid leave on account of parenthood, the cost will no longer be gendered. Introducing paid paternity leave has other advantages, particularly that it seeks to reorient a societal structure in which mothers are expected to be the primary caregivers while also managing early parenthood and a career. By introducing mandatory paternity leave, the responsibility of childrearing can be split between both parents.

Another cost issue that must be addressed is that of the crèche facility. While the law does not explicitly say that the employer must bear the cost of the facility, a beneficial reading of the legislation (as is often adopted in labour laws) renders this interpretation. Although without legal force, a Right to Information (RTI) response from the Ministry of Labour and Employment also indicates that the intent of the legislation was to ensure that employers sponsor the cost of the crèche. This effectively places the cost of early childhood care on the employer. Further, the view that is taken by labour authorities is that the facility may be used by the children of male employees also, depending on the employer’s discretion, but it must definitely be made available for the children of female employees. 

This also contributes to the possibility of excluding female employees from the workforce, and for their being given reduced wages to make up the cost of the crèche. While there are government schemes in place where crèche facilities are provided for young children, these are often poorly implemented and apply only to households where the family income is below ₹12,000 per month. If the intent of the law is to ensure that women are not disadvantaged during and after an absence on account of maternity, it is absolutely crucial for the government to also step in to fund and implement schemes which will aid in this endeavour. Simply passing laws and imposing obligations on employers (who are often private entities) may appear to favour female employees, but it is sure to have a detrimental effect on hiring and retention in the long run. 


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