Covid 19 Impact: Corporate Social Responsibility at the Expense of Employees?
– Nitya Jain
As Coronavirus sprawls and spreads, the unemployment rate in the country goes skyrocketing. Numerous companies are laying off employees on a daily basis. Very recently on 21st May 2020, the India Bulls group fired around 2000 employees without prior notice. The employees voiced their outrage on social media stating that the Company initially deducted their salary and after a few days’ slacked employees over a Whatsapp voice call that cannot be recorded. The outrage amplified when India bulls announced that it will contributing Rs 21 Crore to the PM Relief fund. On 04th May 2020 Curefit – a fitness company laid off 800 employees and closed its physical centers whilst donating Rs 5 Crore to the PMCARES Fund. The corporate giant – Reliance announced salary cuts because of Corona Virus and pledged Rs 500 Crore to the PMCARES Fund in the same breath.
While donating the whopping amounts these corporates state that they hope to support the center and the state authorities in conjunction with the medical professionals all over the country. While such support is commendable, it has raised eyebrows of thousands on the irony – How can a company that is sacking thousands of employees because of non- affordability of their salaries, donate Crores to charity?
Many corporate giants have donated huge amounts for the government relief fund to fight the virus. Besides compassion, the main reason because of which some of the Companies make such huge donation is the Corporate Social Responsibility. Every year a company has to donate a certain amounts to its earning to a social cause say, poverty, education etc as a part of CSR Compliance. Under Section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 Crore, turnover of Rs 1,000 Crore or more, or a minimum net profit of Rs 5 Crore during the immediately preceding financial year has to make a CSR expenditure. Apart from this CSR can be in other forms- Reducing carbon foot prints or improving labor/ employee policies. Overall the CSR aims at the improvement of the social structure of the society. India is the only country where CSR is mandatory. CSR has now become a metric to see how well a company is doing.
In the times of Covid 19, The Ministry of Corporate Affairs circular dated 28th March, 2020 and stated that Donations to PMCARES fund for fighting Corona will qualify as Corporate Social responsibility under item no (viii) of Schedule VII of the Companies Act, 2013. The same circular also stated that paying of salary/ wages to the employees during the lockdown period is a “moral obligation” and thereby does not qualify as CSR expenditure. In this light numerous Companies namely Hyundai, Cure fit, India bulls, Vedanta and numerous others donated to this fund. These donations have had laudable impacts on the society and increased the government funds by multifold.
The corona virus has pushed the global economy into recession and employees being sacked is now every day news. Don’t the companies owe a responsibility towards their employees during these dreadful times? The MCA notification of 28th March marks paying of wages only as a moral obligation. It is ironical for a company to be sacking employees and donating Crores at the same time. Under such circumstances, employees wonder if voluntary contributions to relief funds outplay a firm’s contractual obligations to workers and employees. This trend of companies shows that liability of CSR, is indirectly being passed on to the shoulders of the employees. Excessive donations while retrenching workers have developed a sense of mistrust between employees and corporates.
This trend in these unprecedented times calls for new perspective in CSR compliance. A company must not be made to compromise with its own employees. The payment of salaries and other aids provided to workers and employees during the pandemic can be considered as CSR and not just a mere moral obligation. Sneha Oberoi, Suzuki Motor’s CFO also suggests on the same line – “I would like to suggest that salaries paid to the contact staff during the shutdown to be taken in the CSR activity as there was no productivity for the companies during this shutdown time”. A certain companies can be exempted from CSR compliance, especially those who are so financially drained, that they are unable to comply with their responsibilities, even towards their employees. Employees should be a part of the priorities of a company in the times of Pandemic.
CSR is about putting a human face on business entities by communicating empathy, thoughtfulness and upkeep, both moral and financial, for those who need it most. Laying off one’s own employees in times of a global pandemic is in contradiction of the objective of CSR itself. Apart from CSR, Companies like Reliance themselves owe a responsibility towards their employees. Reliance, who must be flushing with cash because of recent Facebook Jio deal at least must not be the one to abandon their employees.
The whole donating drive further serves the outrage when the authenticity of the PMCARES fund is itself under question. One wonders the need of separate fund bank which has no legal mandate and is outside the scope of Comptroller and Auditor General of India while Prime Minister’s National Relief Fund still exists!
This article is authored by Nitya Jain. She is a student of law at Nirma University.