Why Ignoring Employment Regulations Can Cripple Your Startup
Anyone who has ever established a business is aware that they are being watched from the moment they hire their first employee. One employee on your payroll automatically binds you to comply with a plethora of laws governing employee management, any of which can be inadvertently broken.
Compliance violations don’t typically happen because you’re seeking to avoid obligations. Simply put, there are so many requirements to follow that it’s simple to overlook something.
Compliance Violations
Governance Concerns
In most startups or new businesses, there isn’t much focus put on compliance management as the entire company is focused on growth. To skirt around the restrictions, most adopt ideas that they come across a simple Google search but rarely do they understand the implications of the violations. In the past few years, one would have come across multiple stories celebrating the success of some of India’s fine startups but rarely does one come across the numerous penalties that have been imposed on them. Many startups that face funding issues are also caught up with labour violations, which leads to bigger problems as new investors turn worry about governance within the organisation.
Lack of Expertise
In most cases that we have comes across, the company failed to adhere to the norms due to lack of knowledge rather than as a cost-cutting exercise. With a visit to any labour court in India, you will come across cases in the thousands filed by ex-employees against some of the most celebrated startups across India. Most of the startups take these cases lightly assuming that they will be written down in due course of time. However, they fail to recognize the fact that Courts in case of non-availability of a company representative, pass the judgement in favour of the employee. These judgements come up with fines, which may appear to be small in the start but as interest accumulates, it becomes a large liability that will cause further issues once you embark on a quest to raise debt funding for banks within India.
Legal Challenges
Most banks before providing debt funding, undertake a review of all pending cases in different courts. In most cases, the startup is then made aware of pending cases, which if tackled in the early stage could have been avoided but now facing heavy fines. Secondly, many startups hire and fire based on business and funding cycle, which leads to employee anger during employment termination. Most choose to file a case in labour courts, which suddenly leads to numerous legal battles for the organisation, which is already facing business challenges.
Why ignoring regulations could cripple your success
Compliance problems frequently aren’t the employer’s fault in the strictest sense. An ignorant manager or other corporate representative is frequently to blame for the conduct. All of these occurrences, however, point to one thing: managing people in small organisations today comes with significant, high-cost risks. However, following rules is not only necessary for success; it is also a legal duty. Finding a solution that safeguards your company can make a huge difference.
Hire Staffing Agency
In our perspective, one of the most beneficial services a staffing agency can provide is compliance management. Even if your business expands, the staffing agency will do everything in its ability to ensure that you are not infringing on any employment regulations by alerting you whenever you hit a new regulatory threshold, and explaining how the new legislation will impact you in the process. Any new regulatory thresholds you cross will be applied to the job the staffing agency is already performing for you because it is handling other HR-related parts of your organisation. Therefore, if the staffing agency is handling your payroll and compliance management, those changes will be applied right away, not when you finally get around to opening the email someone gave you about the subject three weeks ago.
Conclusion
In the past 3-4 years, there has been a sudden rise in Startups outsourcing most of their payroll to third-party agencies, allowing them the flexibility to scale at ease while also avoiding compliance violations. If you are a new business looking to hire blue collared workers or a short term employees or flexible workforce, feel free to connect with us to understand how we can be of assistance to you
We at Knighthood have been working with over 100+ organisations for over 5 years. We focus on ensuring high service levels at affordable prices. You can read more on why our customers choose to work with us.