On the path to recovery: Compliances that retail industry needs to adhere to

Owing to remote working solutions, the MCA has also announced a new format of report of the statutory audits of companies, namely Companies (Auditor's Report) Order, 2020.
On the path to recovery: Compliances that retail industry needs to adhere to

The retail sector has been one of the fastest growing sectors, directly employing close to 46 million people and sustaining the livelihood of over 250 million Indians. However the current COVID-19 lockdown has shifted the gear in the retail sector. Industry body ‘Retailers Association of India’ has anticipated that the sector may require close to nine to twelve months to get back on track. Players across the segment have been urging the government to extend extensive support to the sector. They are looking for capital infusion, assistance in payment of wages to employees, moratorium for payment of principal and interests among other reforms.

Now, though the lockdown has eased in certain cases, the future of the retail sector is still unclear. A shift in the standard operating processes is expected and during this time it is important that companies are compliant with labour policies and other regulations. While the larger gamut of laws would remain the same, companies will have to take conscious efforts for the wellbeing of the labour workforce. They will have to regularly keep a close eye on the directives from the government and ensure compliance to the same.

Some of the compliance aspects that retail players need to be mindful of are:

  • The Central Government has invoked the Disaster Management Act 2005 and issued an advisory note to all the employers. Under this, employers have been instructed to neither terminate employees nor reduce their wages during the lockdown.
  • Additionally, in cases where the place of employment is currently non-operational due to the lockdown, employees will need to be considered on duty and paid full wages on time without any deductions.
  • In fact, the government in the current scenario has allowed companies to operate with only 33% workforce. Even though companies will be slightly short staffed, they need to still ensure that they do not violate guidelines, especially when it comes to working hours, safety and precautions and payment of wages to all those who are present.
  • One of the key compliances that will need to be re-looked at is the current “work from home” policy. In reality most sectors have not been traditionally poised for this work model. In the retail sector, while most roles can’t be confined to work from home, organizations still need to gauge the scope of making the policy applicable to relevant job profiles.
  • Owing to remote working solutions, the MCA has also announced a new format of report of the statutory audits of companies, namely Companies (Auditor's Report) Order, 2020. Additionally they have also postponed applicability of CARO 2020 to the financial year 2020-21. A newly established retail sector company is required to file a declaration for commencement of new business (Form 20-A) within 6 months of its incorporation. However, considering the hardships being faced by the newly incorporated companies, the MCA has extended the timeline for such compliance from 6 months to 1 year from the date of incorporation. This will significantly reduce the burden on the companies and its auditors to deal with more than 25 additional checks introduced under CARO 2020.
  • Furthermore the government has also announced reliefs for EPFO allowing a grace period of 30 days (from 16.04.2020 to 15.05.2020) for filing of Electronic Challan cum Return (ECR) to the employers of those establishments which have disbursed the wages for March, 2020 to their employees.
  • The Companies Act, 2013 and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 entrusts management bodies of the company such as the Board, Audit Committee and Risk Management Committee (where applicable) to have organization level controls for the identification of risk, disclosure and mitigation. Further, these regulations mandate compulsory reporting of threats, risks and concerns, among other things, that would impact business performance and financial outlook. In light of the current COVID-19 situation, companies should assess the risk of COVID-19 to their business and make necessary disclosures in the financial reports and annual reports. Listed entities are additionally mandated by the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 to make immediate disclosure to stock exchanges of defined critical events which impact the company at a financial, operational and economic level which are self-assessed by the company through its event materiality policy,
  • The Centre and some state governments have also suspended the use of biometrics for employees. States are yet to notify this, but many organizations have already exempted their employees from biometric checks and have implemented manual attendance processes until the outbreak is contained. Telangana is also working with IT companies to come up with a Standard Procedure Protocol (SOP) on how to handle matters if they have a suspected COVID-19 case.
    Apart from these larger aspects, retail employers need to obviously follow basic protocols to prevent any spread of the virus. Workplace hygiene and physical distancing should be maintained at all times and in cases where employees show any symptoms, employers should ensure self-isolation for these employees and make best efforts to prevent them from coming in contact with others on the site.
     
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