Lay off and retrenchment

1. 1. Layoff
2. Suspension or termination of employment (with or without notice) by the employer or
management. Layoffs are not caused by any fault of the employees but by reasons such as lack
of work, cash, or material. Permanent layoff is called redundancy.
3. 2. Essentials of lay-off: (i) There must be failure, refusal or inability on the part of the employer
to give employment to a workman. (ii) The failure, refusal or inability should be on account of
shortage of coal, power or raw materials or accumulation of stocks or breakdown of
machinery, or natural calamity, or any other connected reason. (iii) The workman’s name
should be on the muster rolls of the industrial establishment. (iv) The workman should not
have been retrenched.
4. 3. Compensation for Lay-Off (Rights of Workmen): According to Section 25 C of the Industrial
Disputes Act, a workman who is laid-off is entitled to compensation equivalent to 50 per cent
of the total basic wages and dearness allowance for the period of lay-off. This right of
compensation is, however, subject to the following conditions: (i) He is not a badli (a person
who is employed as a casual workman who is working in place of another), or a casual
workman. (ii) His name should be borne on the muster rolls of the establishment. (iii) He
should have completed not less than one year of continuous service under the employer.
5. 4. A workman is entitled to lay-off compensation at the rate equal to fifty per cent of the total
of the basic wage and dearness allowance for the period of his lay off except for weekly
holidays which may intervene. Compensation can normally be claimed for not more than forty-
five days during any period of twelve months.
6. 5. Even if lay-off exceeds forty five days during any period of twelve months no compensation
is required to be paid for the excess period if there is an agreement to that effect between the
workman and the employer.
7. 6. Cases in which a Workman is not Entitled to Lay-Off Compensation:
8. Refusal to Accept Alternative Employment: If a laid off workman refuses to accept alternative
employment provided that such alternative employment is: (a) In the same establishment from
which he has been laid-off or (b) In any other establishment belonging to the same employer
situated in the town or village within a radius of five miles from the establishment to which he
belongs,
9. 7. (c) In the opinion of the employer the alternative employment does not call for any special
skill or previous experience and can be done by the workman and (d) It carries the same wages
which would normally have been paid to the workman in his original employment.
10. 8. Absence From the Establishment: If the workman does not present himself at the appointed
time during normal working hours at least once a day. Strike or Go Slow: If such laying-off is
due to a strike or slowing down of production on the part of workmen in another part of the
establishment.
11. 9. Penalty for lay-off and retrenchment without previous permission Any employer who
contravenes the provisions of section 25M or section 25N shall be punishable with
imprisonment for a term which may extend to one month, or with fine which may extend to
one thousand rupees, or with both.
12. 10. What is retrenchment? കെലവ ു്െവട്ടിക്ക റയു്ക്കല്‍െു് ്‌ Retrenchment is a form of
dismissal due to no fault of the employee, it is a process whereby the employer reviews its
business needs in order to increase profits or limit losses, which leads to reducing its
employees. The employer must give fair reasons for making the decision to retrench and follow
a fair procedure when making such a decision or the retrenchment may be considered unfair.
13. 11. Retrenchment Compensation Retrenchment is the termination of an employee by an
employer for reasons other than a punishment meted out by disciplinary action. Employees
terminated in such a manner are financially compensated by the employer. This kind of
compensation is known as retrenchment compensation.
14. 12. Eligibility for the Compensation An employee will be considered eligible for retrenchment
compensation on the satisfaction of the following conditions: The employee must be a
workman. The employee must have offered continuous service for a period of 240 days in the
previous 12 months, which will be calculated as a year of continuous service.
15. 13. Continuous Service Continuous service means performance of service without any
interruptions. It may be noted that sickness, authorized leave, legal strikes, lock-outs and
work-stoppages (where the worker is not at fault) cannot be considered as interruption of
service. The retrenched employee must be provided with 15 days of average pay for a year of
continuous service or any part thereof in excess of six months.
16. 14. Average Pay As already observed, an employee must be provided with 15 days of average
pay for a year of continuous service or any part thereof. He must be compensated in the
manner as described below: If the workman is being paid on a monthly basis – on the basis of
three calendar months. If the workman is being paid on a weekly basis – on the basis of four
completed weeks. If the workman is being paid on a daily basis – On the basis of the last 12
working days.
17. 15. Retrenchment doesn’t cover the following: Voluntary retirement of the employee.
Employee’s retirement at the age of superannuation െപന്‍ഷന്‍്ു് െ
േ്് ട ത്ത പിരിക്ക Termination due to non-renewal of the contract. Termination owing
to continued illness.
18. 16. Compliance Requirements The employer must comply with the following regulations in the
event of a retrenchment: The workman must be informed of the decision of retrenchment
through a notice. The notice must be issued a month before the decision is implemented. The
notice must state the reason for infringement. The workman must be compensated at the time
of retrenchment and not after it.
19. 17. Retrenchment Process and Procedures Process should be divided into 3 phase Pre-
Retrenchment Retrenchment and Post Retrenchment.
20. 18. During Pre- Retrenchment phase, the following steps must be undertaken. Notification in
writing to all employees on company’s planned retrenchment exercise detailing the reasons,
selection process and procedures Notify the Labour Department pertaining to the
retrenchment exercise and file Form Prepare retrenchment package in accordance to the
required regulations Conduct individual meeting session with selected employees and explain
clearly every detailed information on terms and lay off package offered and possible other
assistance if required Issue a comprehensive offer letter with details of the lay-off package, job
hand- over process, checklist of documents and other relevant information
21. 19. During Retrenchment phase, the HR department should:- Assist employees in job
counseling and job re-placement Provide the employees the necessary advice and information
on job openings within the industry Provide testimonial letters in support for job application
Post employees profile to the HR networking group within the industry circle
22. 20. During the post –retrenchment phase, the HR department must at least get in touch with
the employees and find out if they have secured any jobs. This is to show concern and value
their contributions to the company. Let them know that the company is willing is ready to give
feedback if their potential employers are seeking for reference check.
23. 21. PENALTY S.25-Q an employer who contravenes the provisions of s. 25 –N shall be penalised
as follows: • (1) imprisonment up to one month or (2) fine up to Rs. 1000 (3)with both.
24. 22. Lay-Off Lay-off is defined in Section 2 (kkk) of the Industrial Disputes Act, 1947 It is
temporary In lay-off, the employer is compelled to refuse employment under certain
circumstances, viz. shortage of raw materials, power, finance, etc., which arise temporarily in
the industry. When the employer declares lay-off, the industry stops its function. In lay-off, all
the employees or a group of employees are refused to employment. The laid-off employees are
paid laid-off compensation. The payment of gratuity does not arise in a lay-off. All of the laid-
off employees should be taken back in their usual posts, as soon as the lay-off lifted out.
25. 23. Retrenchment Retrenchment is defined in Section 2 (oo) of the Industrial Disputes Act, 1947
Retrenchment is permanent. They may again be appointed in appropriate cases. In
retrenchment, the employer lessens over-burdened employees under circumstances, viz.
Government policies, loss in some departments, etc. While the process of retrenchment is
going on, the industry does not stop its function. It continues to function. In retrenchment, the
last come first goes. i.e. last employed person is retrenched first. The Conditions Precedent are
to be followed in case of retrenchment, viz. notice to the concerned employee, notice to
Government in the prescribed manner, etc. (Sec. 25-F). The retrenched employees are paid
retrenchment compensation - payment of gratuity Re-employment of retrenched workmen
also takes place in certain circumstances. But it is, not mandatory that all the retrenched
workers should be re-employed. (Sec 25-H)
26. 24. Closure Section 2 (cc) defines 'Closure'. Closure means the permanent closing down of a
place of employment or part thereof. A closure is not a weapon in the hands of the employer. It
equally effects on both the employer and employees A bona fide closure can never be illegal.
Closure signifies the final and irrevocable termination of the business itself. In the Closure, the
relationship between them comes to an end. The causes for the Closure of industry are
permanent or lasting and cannot be cured. Generally, the cause of closure is economical, poor
quality of maintenance, poor management, non availability of raw material, Government
policies, etc. Closure cannot be turned into a lockout.