Labour Ministry has directed  to exempt startups from inspection and filing returns for 3 years.In line with Prime Minister Narendra Modi's vision to nurture startups, to self-certify their compliance with 9 labour laws.

Labour Secretary Shankar Aggarwal in a letter said startups should not be inspected or asked to file returns for 3 years under 9 laws including Employees' Provident Fund and Miscellaneous Provisions Act and Employees State Insurance Act.

"Promoting startups would need special hand holding and nurturing. Thus, such ventures may be allowed to self-certify compliance with the Labour Laws," he added.

They will be exempted from inspection under the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, Payment of Gratuity Act and Contract Labour Act. Startups will also be exempted from filing returns under the Industrial Disputes Act, Building and other Construction Workers Act, Inter-State Migrant Workmen Act, Contract Labour Act, EPF Act and ESI Act.

There will be a blanket exemption from inspection and filing returns for the first year and would be asked to file an online self declaration form. They will also not be asked to file return or inspected for the next two years, but will be inspected in case a "very credible and verifiable" complaint of violation is filed in writing and the approval has been obtained from the Central Analysis and Intelligence Unit (CAIU), Aggarwal said. Except the EPF and Miscellaneous Provisions Act and the ESI Act, the implementation of other seven laws lies in both central and state government's sphere. Labour Ministry had directed its officials as well as the EPFO and ESIC to regulate inspection of startups, under laws which lie in the centre's sphere.

 Simplification and Handholding

1. Compliance Regime based on Self-Certification

Objective

To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low

Details

Regulatory formalities requiring compliance with various labour and environment laws are time consuming and difficult in nature. Often, new and small firms are unaware of nuances of the issues and can be subjected to intrusive action by regulatory agencies. In order to make compliance for Startups friendly and flexible, simplifications are required in the regulatory regime.

Accordingly, the process of conducting inspections shall be made more meaningful and simple. Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years.

Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

In case of environment laws, Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases.