Retrenchment means termination of employment. The rules relating to retrenchment are provided in the Industrial Disputes Act, 1947 and rules frames thereon. According to the said Act, no employee who has been in continuous service of at least one year shall be terminated without giving one month notice of the intention of the management to terminate his service. In case of companies employing more than 100 workers to which chapter V B of the Act applies, three months notice is to be served. In lieu of notice pay for sufficient number of months shall also be paid. One who has actually worked for 240 days (above the ground) and 190 days (below ground, mine) during the last 12 months shall be presumed to have continuous service. An employee retrenched shall be eligible for retrenchment compensation at the rate of 15 days wages for every year of service. In absence of any agreement to the contrary, the last employee employed in a particular category shall be the first person to be retrenched. Similarly, if reappointed, the first person to be retrenched shall be given first opportunity of being reappointed. Regards, Madhu.T.K
From India, Kannur
4243From India, Kannur
Hi Mr.Madhu, I have a doubt here.in case of retrenchment if one is liable for gratuity .then as you have written 'retrenchment compensation' at the rate of 15 days wages for every year of service.so we have to pay the employee RC as well as bonus at a time of retrenchment ? Secondly what are the reasons that are justifiable for retrenchment as per act. Thirdly ,as we see many companies are kicking people out in the name of resession .what it is ? retrenchment or termination or what ? Please clarify Thanks a ton in advance Rajeev Dixit 9901436213 ..................................................
From India, Bangalore
From India, Bangalore
Retrenchment compensation is apart from the gratuity payable. Gratuity becomes payable only when an employee is terminated after five years of service. Therefore, an employee who has worked for at least 5 years need to be paid both retrenchment compensation as well as gratuity. It is implied that settlement should include bonus also. There need not be any specific reason for retrenchment. t may be due to recession also. If the employer wants to reduce the number of employees, he can retrench the excess employees but after complying with the rules laid down in the ID Act. As such, prior intimation to the concerned employee and the government shall have to be made before terminating employee(s). If the company employs 100 workers then not mere intimation to the Govt will not be sufficient but permission by the government shall have to be obtained for retrenchment. Economic recession is not a ground which will waive an employer form paying compensation. Certainly, a provisio to section 25FFF of the ID Act says that if an establishment is closed down due to 'unavoidable reasons' then the compensation payable to the employees shall not exceed average pay for three months. But economic recession and financial losses shall not be treated as reasons beyond the control of management. Companies kicking people out of the establishments should understand one thing. If the employees have served for at least one year they are entitled for compensation. There is no concession given to companies with regard to Labour Acts. If an employee comes under the definition of employee/ workman, then he should be given compensation. The basic Act has put a salary ceiling for deciding whether one is an employee or not. But now there is no such ceiling. Any one who is employed exclussively as manager or supervisory capacity shall be exempted but all others are covered. Regards, Madhu.T.K
From India, Kannur
From India, Kannur
i an mba in finance, but working in HR Department... can any suggetst me that.. it is good form my future... guide me
From India, Patiala
From India, Patiala
With most companies either retrenching or freezing recruitment plans, human resources personnel across sectors are a worried lot. Recruitment-related HR executives are being moved to other HR functions like training and development and other day-to-day HR functions, or being taken on contract. If things worsen, there could also be layoffs. A Sudarsan, vice-president, sales and marketing, Expertus HR (a wholly-owned subsidiary of US based Expertus Inc), admits: "There will be layoffs in the near future, and companies will increase temporary staff. Meanwhile, I don't forsee any hikes for HR executives." Moreover, the mix of contractual employees in the HR team across various sectors is expected to increase. Vodafone, for instance, has 25 per cent of its HR staff on a contract basis. Visit on the below given link to know more on retrenchment. COST OF CITY GOVERNMENT; SUGGESTIONS FOR RETRENCHMENT BY EXPERIENCED M... - Article Preview - The New York Times Regards, Priyanka Vinda
From India, Ahmadabad
From India, Ahmadabad
Dear Mr.Madhu, could youc also please advise on the rule of the layoffs of the confirmed employees as well as employees on probation? Like what should be the notice period.Whether we need to pay a one months severance pay. What if the company just ask the employees to leave without any notice. Our company has provided the letters to the employees mentioning the subject line as re-organization of our technical staff.
From India, Mumbai
From India, Mumbai
Prinyanka's link seems to have no relevance to India. Lay off : Lay off is possible when there is recession. But all employees except those purely on managerial/ supervisory category are to be laid off by following provisions in Industrial Disputes Act. As such an employee who has been in service for at least one year ( worked for at least 240 days in the preceding year) shall be laid off with payment of half the amount of normal wages for every day of lay off. In case of establishments employing 100 employees (to which chapter VB of the ID Act applies) prior permission by the appropriate Govt. is also required. Only badli worker who has been employed to replace a regular worker for the time being and casual workers are excluded. The term temporary employee should be confined to an employee who works on a temporary job, say, while washing, repair work etc and if an employee has been engaging a permanent job for the last one year, he is also presumed to be a regular employee who should be paid lay off compensation and retrenchment compensation, if retrenched. The term probation will not make any difference. If the terms of appointment says that no notice is required to terminate service during probation, it should be done for unsatisfactory performance and not for reorganisation of factory/ office systems. Regards, Madhu.T.K
From India, Kannur
From India, Kannur
Dear Madhu sir Can you pls give the break up for 240 days ,that is mentioned in all the acts but how we can get that figure. Regards Ansari
An employee is presumed to have worked for one year provided he had worked at least for 240 days (above the ground) or 190 days (below the ground) For calculating this 240/ 190 days, the number of casual or other eligible leave days availed by him during the year, the number of days he was laid off, number of days he was on sick leave after any employment injury, number of days of maternity leave, in case of woman employee, will be treated as days worked. Therefore, if taking all these in to account, the employee had at least 240/190 days, he is suppose to be served with notice and paid compensation. Regards, Madhu.T.K
From India, Kannur
From India, Kannur
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IMPACT OF RETRENCHMENT ON RECESSION.ppt
RETRENCHMENT ANNEXURE.doc