TeamLease RegTech hosted its latest compliance roundtable in Bengaluru on 17 July, 2024, gathering industry leaders and compliance professionals from various sectors. The discussion centred on the intricate dynamics of the legal and regulatory environment in India. The participants focused on how laws are written, interpreted, and enforced differently across regions and sectors.
Discussants talked about various concerns and insights into the complexity of the regulatory ecosystem and how it has affected employer compliance and ease of doing business. One of the primary concerns was the inherent ambiguity in laws, which keeps compliance officers apprehensive. Statutes, rules, and regulations are often written in ways that leave room for multiple interpretations, making it difficult for companies to determine the correct course of action. This uncertainty can lead to inadvertent non-compliance and significant legal and financial repercussions. Compliance officers are often left in a state of constant vigilance, trying to stay updated with the latest interpretations and amendments. The roundtable emphasised that compliance management cannot be the responsibility of a single individual. Given the sheer volume and complexity of regulatory requirements, expecting one person to handle all aspects is impractical. Instead, compliance must be a coordinated team effort involving specialists from various departments such as legal, finance, operations, and HR. Such a collaborative approach can ensure that all areas of compliance are adequately covered and reduce the risk of oversight.
The discussion moved towards the complexities of contractor compliance and how principal employers are accountable for their third-party service providers. The participants agreed that companies must extend their compliance oversight to include third-party vendors and contractors, ensuring they also adhere to relevant regulations. This is critical as third-party lapses can have direct consequences on the contracting company. Regular audits, stringent contract terms, and continuous monitoring are necessary to mitigate these risks. The discussion further highlighted the need to be cautious around procedural lapses. These lapses can lead to non-compliance and attract penalties. Implementing robust processes, regular training, and stringent checks can help minimise these lapses. The roundtable also discussed the issue of ‘Inspector Raj’ and the rent-seeking culture it has propagated. Discussants highlighted the need for clear escalation procedures defined by the government and approving bodies to mitigate this issue.
The discourse then moved towards deliberating over strategies to improve ease of compliance for India Inc. It was unequivocally agreed that effective compliance management requires adequate resources. This includes investing in technology for compliance tracking, hiring skilled professionals, and providing continuous training to employees. Maintaining compliance can become daunting without sufficient resources, leading to an increased risk of violations. The professionals zeroed in on the importance of the three-vector framework of rationalisation, digitisation, and decriminalisation in simplifying compliance processes.
For instance, merging certain secretarial requirements, such as AOC 4, DPT 3, and MGT 7, into a single filing would simplify the compliance process. It would reduce redundancy and save businesses time and resources. The need for a single-window clearance system for all licenses was strongly advocated. Such a system would streamline the approval process, reducing delays and enhancing transparency, allowing businesses to obtain necessary licenses and permits through a centralised platform. Furthermore, participants suggested digitising systems like Employee State Insurance (ESI) and Provident Fund (PF) could significantly enhance compliance efficiency. There was also a call to re-evaluate the frequency of Know Your Customer (KYC) validations to reduce the burden on businesses. Digital compliance management systems can help organisations stay on top of their obligations and reduce the risk of non-compliance. Consequently, the adoption of the Digital Personal Data Protection Act (DPDPA) was deemed crucial. Discussants delved into its implications on data security and employer compliance. The act requires companies to implement stringent data protection protocols, which can be challenging but are essential for protecting sensitive information.
Participants unanimously agreed that while compliance can be costly, the cost of non-compliance is far greater. Establishing a robust compliance culture mitigates risks and enhances the organisation's overall integrity and reputation. Non-compliance can lead to severe penalties, legal issues, and damage to the company's reputation, which can be far more detrimental than the costs associated with maintaining compliance. The roundtable also discussed the importance of leadership in fostering a culture of compliance. The ‘tone from the top’ is crucial in ensuring that compliance is ingrained in the organisational ethos. Leaders must demonstrate a commitment to compliance and set an example for the rest of the organisation. Digital certificates were praised as a positive step towards facilitating compliance, providing a secure and efficient way to verify and manage compliance documents.
Towards the end of the roundtable, Mr. Sudhir introduced the Four E Framework for compliance management: Engage, Educate, Enable, and Enforce. It requires employers to engage with key stakeholders to build a culture of compliance within the business ecosystem. Employers then need to educate their employees and third-party service providers on the importance of compliance and critical compliance obligations. Consequently, technology-based compliance management solutions can help enable ease of compliance through digital tracking and management systems. Eventually, they need to enforce compliance through regular audits and reviews.