Implementation and Impact of the Maternity Benefit (Amendment) Act, 2021 on Workforce Participation

Implementation and Impact of the Maternity Benefit (Amendment) Act, 2021 on Workforce Participation

Written by Ms Bhaviya Singh

Introduction

A major legislative change in India’s labor laws was brought about by the Maternity Benefit (Amendment) Act, 2021, which improved the welfare of working women throughout pregnancy and the early stages of motherhood. While the Act promised progressive reforms, such as increased maternity leave and better childcare facilities, its broader implementation and impact on women’s employment participation and economic empowerment require rigorous investigation. This article examines the main points of the Amendment, the difficulties in enforcing it, and the fallout it has had for women’s economic involvement in India.

Key Provisions of the Maternity Benefit (Amendment) Act, 2021

The Maternity Benefit (Amendment) Act of 2021 amended the original Maternity Benefit Act of 1961. The key changes introduced were:

Increased Paid Maternity Leave: The Act extends the duration of paid maternity leave from 12 weeks to 26 weeks for women working in establishments with at least 10 employees. For women with two or more children, the leave duration remains 12 weeks.
Work from Home Option: The law includes provisions allowing women to opt for a work-from-home arrangement after their maternity leave, subject to the mutual agreement with their employer and the nature of their work.
Creche Facility: The Act mandates that establishments employing 50 or more employees must provide crèche facilities for their workers’ children, offering women the flexibility to visit the crèche four times during working hours.
Adoption and Surrogacy: The Act includes provisions for adoptive mothers and women using surrogacy services, allowing 12 weeks of maternity leave from the day the child is handed over.

Implementation Challenges

While the Maternity Benefit (Amendment) Act, 2021, introduced promising reforms, the implementation of these provisions faces significant hurdles.

Cost to Employers: The monetary burden created by the extended maternity leave is one of the main issues expressed by companies. Many private businesses contend that they are unfairly burdened financially by having to pay for six months of leave without receiving government reimbursement. Small and medium-sized businesses (SMEs) might be reluctant to hire women in the absence of government incentives, which would have a negative impact on women’s involvement in the workforce.
Non-compliance in the Informal Sector: A significant percentage of Indian women are employed in the unorganized sector, which is exempt from the Maternity Benefit Act. Because of the unstructured character of this industry and the lax government regulation, women find it challenging to obtain the benefits that are required by law. As so, a sizable portion of working women continue to be beyond the purview of this progressive legislation.
Creche Facilities and Infrastructure Gaps: The deployment of crèche facilities has been constrained as a result of shortages in infrastructure. Employers frequently lack the resources necessary to set up and run childcare services, especially smaller businesses. Furthermore, the logistical obstacles in rural areas and Tier-2 and Tier-3 cities make it challenging to put such regulations into practice.
Awareness and Accessibility: Many women are not aware of their legal rights under the Act, particularly those who live in rural areas and in lower socioeconomic classes. Women may continue to be exploited or denied benefits in a number of sectors if sufficient awareness efforts are not launched.

Impact on Workforce Participation

The impact of the Maternity Benefit (Amendment) Act on workforce participation has been mixed, with both positive and negative trends emerging since its enactment.

Positive Effects:
- Increased Retention in the Workforce: The increase in maternity leave from 12 to 26 weeks has been a welcome change, particularly for women in professional sectors like IT, finance, and healthcare. By providing an extended period for recovery and childcare, the Act has facilitated a smoother transition back to work for many women, thereby enhancing employee retention.
- Better Work-Life Balance: The option to work from home and access to crèche facilities helps in reducing the drop-out rates of women after childbirth. Women can maintain a balance between professional responsibilities and caregiving, potentially leading to increased long-term workforce engagement.
Negative Effects:
- Discrimination in Hiring: There is concern that the increased cost burden on employers has resulted in subtle discrimination during the hiring process. Companies, particularly in the private sector, may be reluctant to hire women of childbearing age due to the perceived financial strain of offering six months of paid maternity leave.
- Decline in Women’s Workforce Participation Rate (WFPR): Despite the introduction of progressive maternity benefits, India’s female workforce participation rate has continued to decline, standing at around 21% in 2021, according to World Bank data. This suggests that while the law aims to support women, other structural issues such as cultural attitudes, gender discrimination, and lack of access to skills development continue to inhibit women’s participation in the labor market.

Economic Empowerment of Women

The economic empowerment of women is one of the stated goals of the Maternity Benefit (Amendment) Act, but its actual impact remains limited due to various factors.

Increased Financial Security: The extension of paid maternity leave ensures that women do not lose their income during a critical phase of life. This helps in maintaining financial stability for families, especially in households where the woman is the primary or significant earner.
Encouraging Formal Employment: The Act could potentially encourage more women to seek formal employment, given the legal protections and benefits associated with it. However, as a vast majority of Indian women remain in the informal sector, the Act’s benefits are largely inaccessible to them, limiting its potential to economically empower women across socio-economic classes.
Challenges for SMEs and Startups: For smaller companies and startups, the cost of compliance with the Maternity Benefit Act may discourage them from hiring women in the first place. This unintended consequence can lead to a paradox where a law designed to empower women economically might lead to fewer opportunities in certain sectors, especially among small and medium enterprises that are crucial to economic growth.

Way Forward

To enhance the impact of the Maternity Benefit (Amendment) Act on workforce participation and women’s economic empowerment, certain steps can be taken:

Government Subsidies and Incentives: The government could provide subsidies or tax incentives to employers, especially in the SME sector, to alleviate the financial burden of extended maternity leave and crèche facilities.
Expanding Coverage to the Informal Sector: Considering the large number of women in informal employment, the government should explore ways to extend maternity benefits to this sector. This could include offering financial assistance or creating social security schemes that cater specifically to women in unorganized sectors.
Raising Awareness: An increased focus on awareness campaigns, especially in rural and semi-urban areas, is necessary to ensure that women are informed about their rights under the Act. NGOs, women’s organizations, and government bodies should collaborate to disseminate information widely.
Public-Private Partnerships for Crèche Facilities: Establishing public-private partnerships could help create cost-effective crèche facilities, especially in smaller organizations and rural areas, making it easier for employers to comply with the law.

Conclusion

Although the Maternity Benefit (Amendment) Act, 2021 is a step in the right direction toward improving women’s rights in the workplace, structural and practical issues will likely restrict its influence on women’s economic empowerment and labor participation. The Act has the potential to give women greater financial stability and work-life balance, but in order to guarantee that these benefits are realized for all women in all economic sectors, a more welcoming and encouraging environment is required. In order to make India’s workforce more egalitarian and gender inclusive, several issues must be resolved.