Start ups are the primary source of job creation in not only Indian Economy but also World Economy. No one can undermine how much new and young companies contribute towards creating new employment opportunities for ever growing working population of country like India.
This is the reason why the government of India has started various programmes to support the growth of start ups. However, there are certain concerns as to how will it be viable for start ups to survive in the market.
Raghuram Rajan nails it for start ups:
Rightly so Reserve Bank of India (RBI) Governor Raghuram Rajan had to advise start ups that if they are earning revenue and not profit by selling based on 50 percent discount then it won't be a viable solution for them in the long run.
Mr. Rajan's comments follow fall in value of many successful start ups and their high stress on following discounting as business model.
Mr. Rajan was also of the opinion that one should not worry about huge number of start ups leaving market as it is part of the economy. Though he mentioned that we should facilitate their easy exit from the market so that resources can be employed more gainfully.
Labour Law concessions to Start Ups:
In order to promote the start up ecosystem in the country and incentivising the entrepreneurs in setting up new start up ventures and thus catalyse the creation of employment opportunities through them, the Ministry of Labour & Employment has issued an advisory to the States, UTs and Central Labour Enforcement Agencies for a compliance regime based on self-certification and regulating the inspections under various Labour Laws.
It has been suggested that if such start ups furnish self-declaration for compliance of nine labour laws for the first year from the date of starting the start up, no inspection under these labour laws, wherever applicable, will take place. The nine labour laws, included in this advisory are:
- The Industrial Disputes Act, 1947;
- The Trade Unions Act, 1926;
- The Building and Other Constructions Workers' (Regulation of Employment and Conditions of Service) Act, 1996;
- The Industrial Employment (Standing Orders) Act, 1946;
- The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
- The Payment of Gratuity Act, 1972;
- The Contract Labour (Regulation and Abolition) Act, 1970;
- The Employees' Provident Funds and Miscellaneous Provisions Act, 1952; and
- The Employees' State Insurance Act, 1948.
From the second year onwards, up to 3 year from the setting up of the units, such start ups are required to furnish self-certified returns and would be inspected only when credible and verifiable complaint of violation is filed in writing and approval has been obtained from the higher authorities.
Rules need to be followed by start ups:
The advisory to State Governments is not to exempt the start ups from the ambit of compliance of these Labour Laws but to provide an administrative mechanism to regulate inspection of the start ups under these labour laws, so that start ups are encouraged to be self-disciplined and adhere to the rule of law.
These measures intend to avoid harassment of the entrepreneurs by restricting the discretion and arbitrariness. Punitive action shall, however, be taken whenever there is a violation of these labour laws.