In a move aimed at fostering a conducive environment for innovation and growth, the Karnataka government has extended the exemption of startups from certain labour regulations for a period of five years. This decision, following internal deliberations, reflects the government’s commitment to supporting the burgeoning startup ecosystem in the state.
Scope of Exemption and Regulatory Caveats
According to reports from Economic Times, the exemption encompasses new-age tech companies, including those operating in animation, gaming, computer graphics, and other knowledge-based industries, from the purview of the Industrial Employment (Standing Orders) Act until 2029. However, this exemption is not without conditions.
Startups availing of this exemption are mandated to establish internal committees in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Additionally, they are required to set up an employee grievance redressal committee (GRC) and provide reports to local labour authorities regarding disciplinary actions taken against employees, such as suspension, discharge, termination, demotion, or dismissal.
Rationale and Stakeholder Response
The decision to extend exemptions comes in response to concerns raised by the labour department regarding issues such as arbitrary terminations, mass layoffs, and instances of sexual harassment in the workplace. To address these concerns, the government has introduced caveats aimed at precisely defining working and service conditions for employees, ensuring adherence to relevant procedures before terminating employee services.
President of Karnataka Employers Association BC, in his response to the development, hailed the decision, emphasizing its potential to catalyze growth in the IT and ITES industries within the state.
Historical Context and Impact
This isn’t the first instance of such exemptions being granted. In January 2014, the state authorities issued a similar order exempting certain tech companies from standing orders until 2019, with the objective of accelerating their growth and recognizing them as sunrise sectors.
Amidst Funding Challenges and Startup Realities
The decision to extend exemptions comes at a crucial juncture for Indian startups, grappling with the fallout of a funding winter. The impact of this funding crunch has led many startups to resort to layoffs and salary delays in a bid to conserve cash and extend their operational runways.
According to reports by Inc42, since 2022, more than 37,260 employees in Indian startups, primarily based out of Bengaluru, have been affected by layoffs.
