Fight Corruption by Staying Compliant

Corruption due to lack of clarity on the compliances

Posted by on October 14, 2016

There are numerous instances where the local authorities bully companies in the name of inspections. They are able to coerce businesses into giving them money or favors. In one such instance an inspector asked a company to arrange transportation for his personal use. When the company refused to oblige, he ended up slapping notice with fines for every possible violation as per the labour laws. While many of the line items were ridiculous and stood no chance if the company contested there were some genuine slipups that were highlighted in that notice. The fines were further compounded and the overall damage was very significant. They ended up settling by paying some fines and pleasing the inspector by giving him more favors.

In another instance a factory worker demanded his colleague be sacked over personal enmity and threatened the company with fines (his close relative was a local factory inspector) and when the company refused to heed to his demands, the company was slapped with massive fines. Inspector dug up every labour law, excise law, PF, ESI provision that he could find and sent a notice with massive penalty.

There are instances where labour inspector or PF/ESI inspectors would walk in any company and demand to be treated like kings and threaten to fine companies who wouldn’t keep them happy. This is becoming a way of life and is being called as Inspector Raj.

I am sure everyone will have some experience or the others with these authorities and feel helpless. Most of the companies finds it easier to deal with it by outsourcing their compliances or hire consultants to handle these elements. In spite of this every company ends up experiencing these incidents.

There are ways to avoid it:

  • Timely Registrations: It is human nature to put off things to be done later and either end up forgetting or delaying completion. Most common mistakes are done with registrations and license (issuance or renewal). These delays carry fines with interest that can be compounded into a heavy penalty.
  • Policies and Procedures: These are another set of compliance activities that companies tend to default mainly due to lack of information. There are several such guidelines some of which are not even relevant while others that are quite crucial. Maintaining a checklist and periodic review of its compliance will be very useful
  • Payments & Filings: These are typically not something that companies default on as the impact is heavy and quick and there are many ERP solutions that automate this process.
  • Maintaining Registers: Just like various guidelines there are some records or registers that companies need to maintained. Lack of awareness and lax attitude are two common mistakes which gives the local authorities some fuel to go after companies. Formats are sometimes confusing and in some cases the information on how to maintain these records is unclear or misleading. Though these are important compliances there are sufficient provisions in the laws to give companies time to produce those in case of an inspection.

 

Having a system in place to store and track these compliances is a reasonable investment to keep companies stay worry free and not be easily bullied by the Inspectors. If companies have these in place the inspectors will have nothing to scare the companies thereby reducing the corruption and improving the ease of business.

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