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Workforce Flexibility and Government Incentives in times of Covid-19 - India

Short-Term Work State Aid

Covid-19 Questionnaire

Are there any regulations in place providing an employer with possibility for flexible workforce planning such as part-time work/temporary leave which are triggered in a situation similar to a pandemic outbreak as Covid-19?


If YES on question 1, please describe which type of regulation. Please confirm if and to what extent such leave can be supported by state aid and/or other extra-ordinary governmental support.

The Ministry of Home Affairs, Government of India ("MHA") has, vide order dated 17 May 2020, extended the nationwide lockdown till 31 May 2020 to contain the spread of Covid-19. For the extended period of lockdown, new guidelines, issued by the MHA, have come into force with effect from 18 May 2020 ("Revised Guidelines"), wherein certain activities are prohibited through out India such as air travel, hospitality services, metro rail services, educational institutes, etc. All commercial activities other than the prohibited activities will be permitted subject to restrictions, if any, placed by the relevant 'State Disaster Management Authority' established under the Disaster Management Act, 2005. The states have been further given the authority to demarcate territories into different zones depending upon the discovery of Covid-19 cases (i.e. Red Zone, Orange Zone and Green Zone). Further, certain areas (within Red and Orange Zones) wherein recent cases have been discovered have to be demarcated as containment zones wherein no commercial activities are allowed apart from provisioning of essential goods/services. Additionally, a new category of buffer zone have also been introduced around the containment zone requiring special attention of the relevant state authorities to prevent the spread of Covid-19.

The movement of individuals, for all non-essential activities, are strictly prohibited between 7p.m to 7a.m for all zones. Strict protocols are to be adhered to by residents within the containment zones. There are no provisions providing for part time or state aided employment for employees of private enterprises and the same may be allowed to work either from home or from office (subject to applicable restrictions).

Further, in addition to the above, various state governments in India such as Madhya Pradesh, Maharashtra, etc. have announced various exemptions to factories from applicable labour laws and has allowed such factories to increase their working hours from 8 hours to 12 hours.

The Central Government has withdrawn the notification requiring the employers of establishments (that have been mandated by government order to stop work) to treat its employees as being on duty on such days and to pay wages accordingly. Certain state governments have announced financial support for daily wage earners and construction workers through the direct benefit transfer system of the government. Additionally, the Central Government has also promised a special economic relief package of ₹20 Lakh Crores (as detailed below).

if YES on question 1, please describe which contacts that may need to be initiated with trade unions and/or works councils. Must a special process be followed?

Trade union consultation maybe required for wage/hour reduction (case assessment required).

Are there any governmental programs if a company needs to close totally or partially for a certain time period?

Certain state governments have announced wage support for daily wage earners, including building and other construction workers, through the direct benefit transfer system of the government. While direct financial support for companies closing down totally or partially is currently under discussion by the Ministry of Finance, certain compliance related relaxations have been announced. Further, Further, the Central Government has announced that for employers having upto 100 employees and 90% of whom earn under ₹15,000/- per month, the Government of India shall take care of payment of provident fund contributions for both the employer as well as the employee, under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("EPF Act") for a period of three months and the employer may approach the regional EPF authority in relation to the same.

If state aid and/or other extra-ordinary governmental support is available, please describe the necessary prerequisites to qualify for such state aid.

Certain state governments have announced wage support for daily wage earners through the direct benefit transfer system of the government and have also increased allocation of ration and in certain cases announced distribution of food grain for free. While most of these announcements are to support daily wage earners, the pre-requisites to qualify for such aid differs from state to state and case specific analysis shall be required.

The Government of India has also introduced a special economic and comprehensive package under the "Atmanirbhar Bharat Abhiyan" scheme with measures such as

  • 24% of monthly wages to be credited into the provident fund (PF) accounts for six months (from and including March, 2020) for wage earners below ₹15,000 in businesses having less than 100 workers under the Pradhan Mantri Garib Kalyan Package (PMGKP);
  • employee PF contribution reduced for employers and employees to 10% from 12% for all establishments for three months for employees not covered by government support under PMGKP;
  • introduction of the statutory concept of 'National Floor Wage';
  • universalization of right of minimum wages and timely payment of wages to all workers including unorganized workers;
  • all occupations opened for women and permitted to work at night with safeguards;
  • provision for Social Security Fund for unorganised workers;
  • gratuity for fixed term employment, i.e. provision of gratuity on completion of one year service as against five years;
  • portability of welfare benefits for migrant workers;
  • extension of Employee State Insurance Corporation (ESIC) coverage pan-India to all districts and all establishments employing 10 or more employees as against those in notified districts/areas only;
  • extension of ESIC coverage to employees working in establishments with less than 10 employees on voluntary basis;
  • mandatory ESIC coverage through notification by the Central Government for employees in hazardous industries with less than 10 employees; etc. Further, certain measures relating to provisioning of working capital loans/facilities have also been introduced.

The detailed guidelines for the scheme is still awaited and will be available soon.

If state aid and/or other extra-ordinary governmental support is available, please describe the application procedure for such state aid (e.g. how and when is the application filed with the government etcetera; what shall such application include).

Most of these announcements are to support daily wage earners who are registered with the relevant state government and financial aid shall be provided to those who are enrolled under the direct benefit transfer system of the government. The same may also differ from state to state and case specific analysis shall be required.

Please note that the COVID-19 scenario is constantly changing and that this information is current as of 21 May 2020. This publication should not be regarded as offering a complete explanation of the legal matters referred to and is subject to changes in the law and other applicable rules.