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Total compliance key to corporate success

By Pooja Prabhakar, Director, BCP Associates

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Pooja Prabhakar, Director, BCP Associates

Compliance with the law is an essential part of Corporate Governance and is integral to an organization’s Business Ethics. In India, CEOs, MDs and Boards of Directors of a company are accountable for compliance and are culpable for any lapses in compliance. In order to avoid the risk of prosecution and to prove and demonstrate ethical behavior, legal compliance is an imperative. Total compliance with the law is also a part of Corporate Social Responsibility.

In such an environment, compliance conscious companies are already relying heavily on the capabilities and experience of labour law consultants to ensure the effective handling of day-to-day compliances and this is a trend that is continuing to grow. In the earlier days, statutory compliances were handled internally within companies by ‘Personnel Officers’ or ‘Personnel Managers’. In the past 15 years however, this has changed to give way to labour law consultants where companies have outsourced this function entirely and viewed consultants as compliance partners. Their role has evolved into ‘keepers’ of statutory compliances and in this capacity, consultants have become critical to the success of organizations. This arrangement helps companies focus on their core business and provides peace of mind and comfort in the knowledge that implementation and maintenance of compliance, which is often a tedious task, is handled by dedicated members of the consultant’s organizations. Maintaining high levels of compliance helps in building a better image of the company, both in the public eye as well as with inspecting authorities, while boosting employee morale and reducing unwanted and unnecessary expenses that may arise out of disputes and litigations due to non-compliance.

While good corporate governance at a macro level is a necessary ingredient for business success, at the micro level, internal controls are the key to achieving legal compliance. Labour law consultants must adopt a diligent and methodical approach based on accurate data and knowledge. Being process driven, rather than people driven, with the help of tools and technology is the key to long term success and sustenance. Compliance management is a tedious and repetitive task, that which warrants the need for automation in the form of effective compliance management tools with comprehensive reporting dashboards for senior management and company boards. In the ever changing environment and culture within organizations, labour law consultants must be effective in liaising with multiple stakeholders, including external entities. They must strive to bring homogeneity to compliance even if compliance management within a company is fragmented and spread across multiple functions and divisions. In many cases, consultants fail when they are not able to exercise discipline, consistency and effective follow-throughs. One of the critical success factors for consultants is their ability to provide accurate and timely updates to companies on changes in the legal environment accompanied with the rapid and successful incorporation of the same into the entire end-to-end compliance management methodology followed by them.

India has a myriad of labour statutes and their interpretations by the Supreme Court and various High Courts periodically change the meaning of the sections within these statutes. Additionally, multiple notifications issued by various Governments (Central Government and 30 State Governments) from time-to-time complicate matters further. To keep abreast of these decisions and notifications, specialized knowledge is essential. Most importantly, labour reforms are underway in our country and trends initiated as a result have to be accurately understood and captured. Disruptive trends in this area must also be tracked. Therefore compliance itself is a challenge and the need for labour law consultants is not only necessitated but also becomes perennial. However, to tackle these complications and changes, understand future trends and guide managements of companies effectively, consultants must in turn be advised by experts in the field of Labour & Employment Law. Experts with the knowledge of Labour Economics, HR trends, IR Issues and Labour Laws must guide consultants to effectively handle compliance. Consultants must prepare and update their compliance checklists in consultation with these experts and companies must commission independent audits to check on the same. A three way relationship between companies, labour law consultants and legal experts is the key to achieving an environment conducive to labour law compliance in the industry.

With multiple changes occurring in all spheres in our country and more significant shifts on the horizon, the labour law consulting market is poised for further growth. It is therefore important for labour law consultants to continue to align themselves to such changes, stay ahead of the curve and evolve further to become indispensable partners to the companies they serve. Compliance with the law is a culture and must become a part of the DNA of an organization. The cost of compliance is almost always lower than the cost of non-compliance and a greater number of organizations are taking a proactive approach. With this in mind, the industry as a whole, with all its players must strive to achieve an environment of total compliance.

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