February 25, 2020

New Bill Passed in parliament – 9 months of assured income if an employee gets terminated. How Beneficial Is This?

General Money   || Personal Finance   || Stock Markets  ||  Real Estate ||

Employers Benefits:

As highlighted earlier, MSME sector will certainly be hugely impacted with this bill now being introduced. To consider the positives – we could expect to see some serious commitment from the companies to run its business. This can put an end to earlier policies of hiring & firing with illegitimate reasons, which put employees life at risk. Companies will invest more time to strategically turn around a company during a tough phase & thus it will certainly keep incompetent business ideas out of the market.

Having said that, we should all also note MSME sector is the process of evolution to become future MNC companies. All business ideas will need meticulous planning which would involve higher budgeting of capital than earlier as it will need to be more accommodative of employee termination benefits. Given this nature of business risk, this may also lead to fewer companies to be legally incorporated. This leaves the market high & dry of entry level jobs in the market.

It’s quite natural that experimental nature of entrepreneurs leads to building up of most Small & Medium scale companies. So when enterprising talents become reluctant to take risks in the market, you can expect lesser people leaving the companies to pursue dreams which is again beneficial for sort after companies in containing this talent. Over all from a broader economic perspective – lesser experimental companies also means lesser competition to settled business. Eventually very settling nature of certain business can also give way to business monopoly.

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–    Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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