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The advent of technology has led to a significant transformation of crucial business processes, resulting in enhanced efficiency, simplicity, and cost-effectiveness. In the current era of automation, it is imperative for organizations to proactively embrace digitization as a fundamental element of their compliance objectives.
Labour, covered under the concurrent list of the 7th schedule, is a highly regulated area in our country. Labour acts, rules, and regulations developed over the past 200 years have laid the foundation and created the present regulatory framework for labour in our country and all over the world. Businesses in India are subject to 1,536 acts and rules, which translates to 69,233 compliances and 6,618 annual filings. Among these, 26,134 compliances prescribe imprisonment as a penalty for violations. Labour alone accounts for 463 acts (30.1%), 32,542 compliances (47%) and 3,048 (46%) filings. Of these, 17,819 (54%) prescribe incarceration as a penalty for compliance failures. Considering the total number of compliances that prescribe jail terms, we find that 68% (17,819 out of 26,134) of them belong to labour. Under the Maharashtra Factories Rules, 1963, for instance, failure or lapse in maintaining certain lighting standards, the quantity of drinking water, and reconstituting the canteen committee every two years can result in a maximum sentence of two years in prison. The threat of indictment compels companies to constantly be on their toes when it comes to compliance requirements. The lack of robust compliance management processes often leads to compliance teams dealing with pending requirements on an ad hoc basis.
On average, any enterprise has to deal with hundreds of labour compliances such as licenses, registrations, consent orders, permissions, renewals, and statutory payments (challans and returns) under various rules and regulations covering Payroll related compliances (EPFO, ESIC, etc.), Shops & Establishments related compliances (Minimum wages, payment of wages, etc.), Factory compliances (Factories Act, etc) and Contract Labour related compliances. A significant number of these have varying levels of frequencies ranging from monthly to quarterly to annual to biannual. As such, keeping track of pending and upcoming obligations can become difficult. Whether related to payroll, factory premises and operations, workmen, or payment of various benefits, employers have to ensure that they are up-to-date with applicable provisions and any regulatory updates issued on over 2,000 government websites. In addition, they must maintain several Registers like muster rolls, wage registers, leave & attendance registers, registers for bonus payments, fines, deductions, benefits, among others. Manual processes for managing and preparing these compliances are inefficient, highly error-prone, and expensive.
The advent of technology has led to a significant transformation of crucial business processes, resulting in enhanced efficiency, simplicity, and cost-effectiveness. In the current era of automation, it is imperative for organizations to proactively embrace digitization as a fundamental element of their compliance objectives. The field of compliance management has experienced advancements in the form of regulatory technologies (RegTech) platforms, which have enhanced the levels of transparency and accountability within compliance processes. Additionally, integration of automation layers in these RegTech platforms facilitates higher accuracy and reduced cost of compliance by automating various tasks such as preparing and upkeep returns, registers, and challans, among other obligatory obligations.
The impact of the rapid expansion of Artificial Intelligence (AI) capabilities is being observed in various sectors, sub-sectors, and industries. The rapid transformation of business processes is being driven by AI/ML-driven innovation, and this development has also impacted compliance automation. It has the potential to assist in predicting the residual risk associated with non-compliance, identifying inadequacies in documentation, and identifying inadvertent delays by leveraging historical performance data of organizations. Furthermore, the integration of AI by regulatory bodies can facilitate the correlation of data from various obligations, enabling the identification of fraudulent or insufficient payments and other types of submissions. Another crucial factor to consider is the need to remain updated on legal developments. More than 2,000 state, government, and local websites disseminate amendments or revisions to regulatory requirements. AI/ML can not only consolidate these updates but also organize them into categories and determine their relevance to the specific business operations of the enterprise.
Significant advancements are currently being made in the automation of compliance document generation for various regulatory bodies that are not limited to Labour Laws (registers and returns). SEBI requirements (PDF Intimations / XBRL Filings) and MCA Laws (meeting related documentation and E-Forms / other Filings) are also moving towards automation in their compliance processes. Implementing these automation layers facilitates the digitization of the entire compliance process, thereby diminishing the necessity for manual intervention, yielding enhanced precision and substantially reducing compliance expenses. Straight Through Filings (STF) facilitates the complete digitization of compliance procedures for both corporate entities and regulatory bodies. The Finance Ministry’s implementation of the Goods and Services Tax (GST) facilitated the utilization of API-based filings. It enabled private operators to integrate their systems with regulatory platforms, fostering the adoption of automated filing processes.
Consequently, due to its numerous advantages, digital compliance software has become a crucial tool for contemporary enterprises. These include the ability to personalize checklists, an integrated database, real-time monitoring of regulatory updates utilizing artificial intelligence, automated alerts and reminders, a built-in document management system, and periodic analytics. Additionally, it integrates various functionalities such as dynamic workflows, timely generation of reports, and digital repositories, among other features, to enhance the convenience of adherence to regulatory requirements.
Organizations utilize the capabilities of web, mobile, cloud, and analytics technologies to facilitate a shift from a “reactive” approach to compliance towards a more adaptable and responsive “dynamic” compliance strategy that aligns with the evolving regulatory environment. These systems offer comprehensive automation, encompassing various tasks such as tracking and managing processes, processing data, preparing statutory filings, maintaining digital records, and automatically identifying potential instances of non-compliance. Additionally, they can identify and detect instances of defaults and delays automatically.
Going digital allows an entrepreneur to ensure compliance without lapses, delays and defaults. Smart and automated compliance management can enable enterprises to constantly stay alert, aware, and ahead of the curve. Businesses today must adopt smart and automated compliance solutions that provide enhanced control and visibility of their labour compliance functions.
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