Dear Seniors,
Our management was planning to lay off workers in one of the factories in Tamil Nadu, which was 25 years old. However, it has been experiencing significant losses for the past five years due to factors such as the tripling of raw material prices, power issues, and increased competition. Currently, the factory is almost generating no income for the past six months, with production at only 5 to 10% of its maximum capacity. Some key details about the factory are:
1. There are 20 permanent workers, all of whom are part of a labor union.
2. Management proposed downsizing the workforce by half, but the workers requested a lifetime settlement, and they all wish to leave simultaneously to avoid internal conflicts within the union.
3. The average salary for the workers is Rs. 10,000, with a basic average of Rs. 5000.
4. Most of the 20 workers have been with the company for 13 to 20 years.
Management is seeking guidance on the essential steps required to initiate the layoff process. Should we inform the Inspector of Factories or the Labor Commissioner about this plan? What are the grounds on which this process can be successfully carried out?
Please provide an explanation.
Thank you.
From India, Chennai
Acknowledge(0)
Amend(0)
153Our management was planning to lay off workers in one of the factories in Tamil Nadu, which was 25 years old. However, it has been experiencing significant losses for the past five years due to factors such as the tripling of raw material prices, power issues, and increased competition. Currently, the factory is almost generating no income for the past six months, with production at only 5 to 10% of its maximum capacity. Some key details about the factory are:
1. There are 20 permanent workers, all of whom are part of a labor union.
2. Management proposed downsizing the workforce by half, but the workers requested a lifetime settlement, and they all wish to leave simultaneously to avoid internal conflicts within the union.
3. The average salary for the workers is Rs. 10,000, with a basic average of Rs. 5000.
4. Most of the 20 workers have been with the company for 13 to 20 years.
Management is seeking guidance on the essential steps required to initiate the layoff process. Should we inform the Inspector of Factories or the Labor Commissioner about this plan? What are the grounds on which this process can be successfully carried out?
Please provide an explanation.
Thank you.
From India, Chennai
Acknowledge(0)Amend(0)
Dear Stephan,
I hope that your management intends to temporarily lay off some workers due to their inability to provide work for all employees, as stated. If the reasons provided are genuine and the information is accurate, you may proceed to lay off the necessary number of workers based on their seniority, while simultaneously informing the Area Conciliation Officer and the Commissioner of Labour (Form Q1). Please note that you will be required to pay 50% of the last-drawn wages for the days of lay-off.
I advise you to urge your management to conduct a thorough analysis of the current situation. If the prospects of recovery or improvement appear bleak or unattainable, it would be advisable to consider implementing a voluntary separation scheme in consultation with the workers. Act promptly on this matter as delaying the decision may result in your establishment becoming a financial burden.
Best regards,
[Your Name]
From India, Salem
Acknowledge(0)Amend(0)
I hope that your management intends to temporarily lay off some workers due to their inability to provide work for all employees, as stated. If the reasons provided are genuine and the information is accurate, you may proceed to lay off the necessary number of workers based on their seniority, while simultaneously informing the Area Conciliation Officer and the Commissioner of Labour (Form Q1). Please note that you will be required to pay 50% of the last-drawn wages for the days of lay-off.
I advise you to urge your management to conduct a thorough analysis of the current situation. If the prospects of recovery or improvement appear bleak or unattainable, it would be advisable to consider implementing a voluntary separation scheme in consultation with the workers. Act promptly on this matter as delaying the decision may result in your establishment becoming a financial burden.
Best regards,
[Your Name]
From India, Salem
Acknowledge(0)Amend(0)
Dear Stephen,
Mr. Umakanthan's suggestion is the need of the hour. Incidentally, you mentioned that your factory (manufacturing or fabrication industry?) has been running into losses for the past 5 years. If so, I presume that by now your net worth should have eroded beyond restructuring, in which case it has now attained the status of a "SICK" company. If so, it should get registered with the BIFR under the SICA (if applicable to you) and apply for closure. This is a binding provision under the Companies Act as well. However, you should consult your auditors for proper guidance before making any decisions.
On the other hand, to smoothen the process, it is necessary that all employees should be settled upon reaching a mutually agreed solution. Laying off or a lockout will only add to your burden, especially if you do not have a revival plan on hand for the foreseeable near future, considering the challenging power situation and bleak monsoon in TN.
From India, Bangalore
Acknowledge(0)Amend(0)
Mr. Umakanthan's suggestion is the need of the hour. Incidentally, you mentioned that your factory (manufacturing or fabrication industry?) has been running into losses for the past 5 years. If so, I presume that by now your net worth should have eroded beyond restructuring, in which case it has now attained the status of a "SICK" company. If so, it should get registered with the BIFR under the SICA (if applicable to you) and apply for closure. This is a binding provision under the Companies Act as well. However, you should consult your auditors for proper guidance before making any decisions.
On the other hand, to smoothen the process, it is necessary that all employees should be settled upon reaching a mutually agreed solution. Laying off or a lockout will only add to your burden, especially if you do not have a revival plan on hand for the foreseeable near future, considering the challenging power situation and bleak monsoon in TN.
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Umakanthan sir,
Thank you for your valuable suggestion. We are planning for a layoff at the moment and have the following queries. Could you please help us by clarifying the doubts below?
1. Does "last drawn wages" mean we need to pay 50% of their basic wages or 50% of their gross salary?
2. Should they be required to work 2 weeks (15 days) per month when there is work in the factory? If so, how many days in advance should we inform them to report to work?
3. If employees fail to show up for work during critical times in a layoff period, what actions can the company take?
The management currently does not want to resort to a lockout as they are optimistic that the situation will improve in the next few months.
From India, Chennai
Acknowledge(0)Amend(0)
Thank you for your valuable suggestion. We are planning for a layoff at the moment and have the following queries. Could you please help us by clarifying the doubts below?
1. Does "last drawn wages" mean we need to pay 50% of their basic wages or 50% of their gross salary?
2. Should they be required to work 2 weeks (15 days) per month when there is work in the factory? If so, how many days in advance should we inform them to report to work?
3. If employees fail to show up for work during critical times in a layoff period, what actions can the company take?
The management currently does not want to resort to a lockout as they are optimistic that the situation will improve in the next few months.
From India, Chennai
Acknowledge(0)Amend(0)
Dear Stephen,
1) Lay-Off compensation = 50% of Basic+D.A only. No compensation payable for intervening weekly holidays during the Lay-Off period.
2) During the entire period of Lay-Off, the laid-off workmen should present themselves for work at the establishment at the appointed time during normal working hours at least once a day.
3) Failure to do so will result in deprivation of compensation.
From India, Salem
Acknowledge(0)Amend(0)
1) Lay-Off compensation = 50% of Basic+D.A only. No compensation payable for intervening weekly holidays during the Lay-Off period.
2) During the entire period of Lay-Off, the laid-off workmen should present themselves for work at the establishment at the appointed time during normal working hours at least once a day.
3) Failure to do so will result in deprivation of compensation.
From India, Salem
Acknowledge(0)Amend(0)
Before giving a layoff, it is necessary to build up the correspondence intimating the workers and the union through circulars with a copy to Asst. Labour Commissioner or Labour Commissioner about the gravity of the situation of the factory. Also, separate letters should be addressed to the Union concerned marking a copy to ACL/DCL indicating the inability to run the factory/establishment. It is better to hold talks with the Union to make them understand the need to declare a layoff. Layoff wages are required to be paid for 45 days, and thereafter "No work, no pay" will apply. There is a clause in the Industrial Disputes Act for the layoff on account of a shortage of raw material or power. Alternatively, taking into confidence of the Union, on rotation, 50% of the workers can be engaged on full working and the remaining on layoff. However, everything depends on how the HR representative convinces the Union and the legal authorities.
Eswararao Ivaturi.
From United States, Cupertino
Acknowledge(0)Amend(0)
Eswararao Ivaturi.
From United States, Cupertino
Acknowledge(0)Amend(0)
Dear friends I doubt whether provisions of lay off in Industrial Disputes Act applies to a Factory having less than 50 workmen.See section 25 A(a) of ID Act. Varghese Mathew
From India, Thiruvananthapuram
Acknowledge(0)Amend(0)
From India, Thiruvananthapuram
Acknowledge(0)Amend(0)
Yes, Mr. Varghese, you are absolutely correct. As per Sec. 25A(1)(a), every industrial establishment employing fewer than 50 workmen on average per working day in the preceding calendar month is exempted from the provisions of Sections 25C to 25E. However, we should acknowledge the fact that the employer has no inherent right to lay off his workmen unless it has been specifically provided for in the contract of employment or governed by the provisions of any applicable law.
The resultant effect of a lay-off is temporary unemployment and a loss of earnings for the workmen if it is genuine or malafide. Therefore, there is room for argument that such establishments employing fewer than 50 workmen have no right to lay off their workmen by virtue of the exemption granted under Sec. 25A from Sections 25C to 25E. Even the High Courts have a divided opinion on this issue. The Kerala High Court held in South India Corporation v. All Kerala Cashewnut Factory Workers' Federation [1960 (II) LLJ 103] that the bar of Sec. 25A is absolute. Conversely, the Punjab High Court held in Kundan Iron and Steel Industries [1961 II LLJ. 599] that the award granting compensation was justified because the lay-off virtually amounted to a malafide termination of the services of the workmen.
Therefore, my suggestion was not based on a legal principle but rather on the expediency of crisis management.
From India, Salem
Acknowledge(0)Amend(0)
The resultant effect of a lay-off is temporary unemployment and a loss of earnings for the workmen if it is genuine or malafide. Therefore, there is room for argument that such establishments employing fewer than 50 workmen have no right to lay off their workmen by virtue of the exemption granted under Sec. 25A from Sections 25C to 25E. Even the High Courts have a divided opinion on this issue. The Kerala High Court held in South India Corporation v. All Kerala Cashewnut Factory Workers' Federation [1960 (II) LLJ 103] that the bar of Sec. 25A is absolute. Conversely, the Punjab High Court held in Kundan Iron and Steel Industries [1961 II LLJ. 599] that the award granting compensation was justified because the lay-off virtually amounted to a malafide termination of the services of the workmen.
Therefore, my suggestion was not based on a legal principle but rather on the expediency of crisis management.
From India, Salem
Acknowledge(0)Amend(0)
Friends,
There were some discussions on CiteHR earlier which probably did not provide a definitive answer to the query. You can read from these links:
- [Legal Provisions under Industrial Disputes Act](https://www.citehr.com/16363-legal-provisions-under-industrial-disputes-act-pg2.html)
- [Layoff Rules Policy India ID Act](https://www.citehr.com/260390-layoff-rules-policy-india-id-act.html)
- [Lay Off Without Any Wages Industrial Disputes](https://www.citehr.com/141472-lay-off-without-any-wages-industrial-disputes.html)
- [Regarding Lay Off Under Factory Act](https://www.citehr.com/145359-regarding-lay-off-under-factory-act.html)
Friends can find some references regarding lay off in an establishment where the employees are less than 50 (ID Act applies only to establishments where 50 or more employees are on the roll). You can read from the following link: [Labour Bulletin](http://www.psalegal.com/pdf/LABOUR%20BULLETIN-ISSUE%20III.pdf)
Still, I feel we have to find conclusive legal provisions that apply to lay off in establishments where employees are less than 50. Until then, it's "time out time," a strategic break.
From India, Bangalore
Acknowledge(0)Amend(0)
There were some discussions on CiteHR earlier which probably did not provide a definitive answer to the query. You can read from these links:
- [Legal Provisions under Industrial Disputes Act](https://www.citehr.com/16363-legal-provisions-under-industrial-disputes-act-pg2.html)
- [Layoff Rules Policy India ID Act](https://www.citehr.com/260390-layoff-rules-policy-india-id-act.html)
- [Lay Off Without Any Wages Industrial Disputes](https://www.citehr.com/141472-lay-off-without-any-wages-industrial-disputes.html)
- [Regarding Lay Off Under Factory Act](https://www.citehr.com/145359-regarding-lay-off-under-factory-act.html)
Friends can find some references regarding lay off in an establishment where the employees are less than 50 (ID Act applies only to establishments where 50 or more employees are on the roll). You can read from the following link: [Labour Bulletin](http://www.psalegal.com/pdf/LABOUR%20BULLETIN-ISSUE%20III.pdf)
Still, I feel we have to find conclusive legal provisions that apply to lay off in establishments where employees are less than 50. Until then, it's "time out time," a strategic break.
From India, Bangalore
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.