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Economy

Indian companies must do more to lure mothers back to work

Maternity rights law a step in the right direction, but broader changes needed

| India
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India's female workforce participation rate fell to 22.5% in 2016, from 37% in 2005.   © Reuters

A new Indian law that more than doubles paid maternity leave and requires employers to provide child care facilities at work is a step in the right direction. It will likely improve India's female workforce participation rate, and alleviate a shortage of skilled employees that has constrained economic growth prospects.

However, given that 90% of Indian workers are employed in the unorganized sector, the new regulation marks only the beginning of the reforms that are required. Companies will also need to do more to attract and retain female employees.

The Indian parliament recently passed an amendment to the Maternity Benefit Act 1961 mandating companies with more than 10 employees to provide 26 weeks of paid leave, up from 12 weeks. Companies with more than 50 employees will also have to provide child care facilities. The reforms move India into the same league as some wealthy Western nations, in this respect, and will encourage more women to join the workforce and return to their jobs after childbirth.

The female workforce participation rate fell to 22.5% in 2016, from 37% in 2005, shaving an estimated 2.5% from growth in India's gross domestic product every year. Given that only 2-3% of India's workforce is skilled, according to the government's economic survey for 2014-2015, the country cannot afford to ignore the potential of such a large proportion of its female population.

Critics say the new regulation will not go far toward closing the workplace gender gap because it applies only in the organized sector, where just 2 million or so women work. It would be difficult for the government to enforce the law, even if it is so inclined, in the unorganized sector, where about 50 million women are employed. Besides, extending the law to these companies could expose them to over-zealous government inspectors, which might have an impact on their growth prospects, and hence on GDP growth.

Opponents also argue that the new law could discourage companies from hiring female employees and encourage wage discrimination -- lower wages for women -- to cover the additional cost of providing extended maternity leave and day care facilities. Indian women are paid 30% a month less on average than their male counterparts, according to surveys conducted by the National Sample Survey Office under the Ministry of Statistics and Program Implementation.

Nevertheless, the new law is a progressive move. A survey by the Associated Chambers of Commerce and Industry of India in 2016 found that 25% of urban Indian women quit their jobs after becoming mothers, and recommended that extended maternity leave might help to keep them in work.

Amity University, a private institution in Noida, Uttar Pradesh, is a case in point. By providing good child day care facilities, the university has been able to maintain a high proportion of female employees in its workforce.

Similarly, faced with a serious shortage of skilled employees and high attrition rates, large Indian companies such as ICICI Bank and Tata Group are trying to lure back women employees by extending benefits, including flexible hours and the option of working from home.

Key sectors such as banking and finance, fashion retailing, fast-moving consumer goods, education and health, information technology services, hospitality, retail and market research stand to gain. These sectors typically have a relatively high proportion of women employees

Blatant discrimination

India's economy cannot continue to grow at 7-8% a year if it ignores the importance of women in the workforce. Less than a third of university-educated women in India work, compared with four-fifths in China, according to a 2012 survey by Gallup, a U.S.-based opinion polling and consultancy group. The difference represents a significant opportunity cost to the Indian economy since many of those who leave work or never join the workforce are highly educated.

Women often face blatant discrimination, gender stereotyping and sexual harassment at work. Such a working environment for women is disparaging at best, and negatively impacts their productivity. Many companies do not have proper systems in place to deal with such issues, despite Supreme Court guidelines on what constitutes sexual harassment and what businesses need to do to deal with such complaints.

Even top companies tend to discourage women from reporting problems, and encourage them to withdraw complaints. Companies will need to take tough in-house measures to deal with sexual harassment if they are serious about retaining women employees.

More broadly, companies may not feel comfortable hiring female staff unless there are concerted efforts to prevent crimes against them, especially for late shifts, and particularly in the Delhi region, which is perceived to be particularly unsafe for women. Companies also have to consider the added costs of arranging safe transportation for women employees.

A change in the national mindset is also required to ensure that employment opportunities for females ceases to be seen solely as a women's issue. Companies should consider offering paternity leave, so that men are able to become more involved in maternity and child care issues.

To encourage companies to spend to retain female staff, the government could tweak the new law to allow them to recover part of the additional cost of offering more maternity benefits through nominal fees paid by female employees. Most women would not mind bearing part of the additional cost if that helps them to retain their jobs.

Investing in fighting crime against women, extending maternity leave and helping families with child care will be crucial to encouraging greater female participation in the workforce. The government cannot achieve this alone; companies will also have to improve gender equality and women's rights if they are to retain female employees.

Prerna Sharma is vice president and head of agriculture, food and retail at Biznomics Consulting, a research and policy advocacy specialist in Mumbai.

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