Fresh commentary around India’s new labour regime has highlighted a less-discussed feature of the Industrial Relations Code: the statutory re-skilling fund for retrenched workers. A recent explainer points out that when retrenchment (non-disciplinary termination) occurs, employers now shoulder a dual obligation. In addition to classic retrenchment compensation of at least 15 days’ average pay per completed year of service, they must contribute another 15 days’ last-drawn wages to a re-skilling fund for the affected worker, to be paid within 45 days. This contribution cannot be merged with or substituted for retrenchment compensation; it is over and above, designed specifically to support workers transitioning into new skills, sectors or roles in a rapidly changing economy.
The Economic Times
For employees facing job loss, especially in sectors hit by automation or restructuring, the existence of a re-skilling fund could be the difference between free-fall and a softer landing — but only if implemented with care. Workers often experience retrenchment as a personal failure, even when it is clearly structural. The emotional journey mixes shock, shame, anger and fear for dependants. Many hesitate to invest in training because family cash needs are immediate and pressing. Knowing that at least some money is earmarked and ring-fenced for re-skilling can psychologically legitimise taking a course or certification instead of rushing into the first low-paying job available. For HR professionals tasked with delivering difficult news, being able to point to a clear, legally mandated pathway for learning support could temper some of the trauma.
For leadership and compliance, the re-skilling fund fundamentally alters the cost calculus and governance expectations around layoffs. Headcount reduction can no longer be modelled just on severance and notice; re-skilling contributions must be budgeted, documented and paid on time. Organisations will need robust internal processes to calculate eligible amounts, credit them, and potentially partner with training providers aligned to realistic labour-market outcomes. Boards and auditors may begin to ask whether re-skilling fund usage is aligned with genuine capability building, or treated as a box-ticking payout with no tracking of outcomes. Strategically, companies that integrate re-skilling into workforce planning long before retrenchment — through internal mobility, future-skills academies and honest communication — will be better placed than those that treat it as an after-the-fact compliance cost.
If your company had to retrench a function due to automation, how could you design re-skilling support that people would actually trust and use?
Should boards insist on seeing post-retrenchment outcome data (new jobs, certifications, incomes) as part of their oversight on workforce transitions?
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7The Economic Times
For employees facing job loss, especially in sectors hit by automation or restructuring, the existence of a re-skilling fund could be the difference between free-fall and a softer landing — but only if implemented with care. Workers often experience retrenchment as a personal failure, even when it is clearly structural. The emotional journey mixes shock, shame, anger and fear for dependants. Many hesitate to invest in training because family cash needs are immediate and pressing. Knowing that at least some money is earmarked and ring-fenced for re-skilling can psychologically legitimise taking a course or certification instead of rushing into the first low-paying job available. For HR professionals tasked with delivering difficult news, being able to point to a clear, legally mandated pathway for learning support could temper some of the trauma.
For leadership and compliance, the re-skilling fund fundamentally alters the cost calculus and governance expectations around layoffs. Headcount reduction can no longer be modelled just on severance and notice; re-skilling contributions must be budgeted, documented and paid on time. Organisations will need robust internal processes to calculate eligible amounts, credit them, and potentially partner with training providers aligned to realistic labour-market outcomes. Boards and auditors may begin to ask whether re-skilling fund usage is aligned with genuine capability building, or treated as a box-ticking payout with no tracking of outcomes. Strategically, companies that integrate re-skilling into workforce planning long before retrenchment — through internal mobility, future-skills academies and honest communication — will be better placed than those that treat it as an after-the-fact compliance cost.
If your company had to retrench a function due to automation, how could you design re-skilling support that people would actually trust and use?
Should boards insist on seeing post-retrenchment outcome data (new jobs, certifications, incomes) as part of their oversight on workforce transitions?
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Implementing a trustworthy re-skilling support system in the wake of automation-induced retrenchments requires a strategic and empathetic approach.
Firstly, it's crucial to understand the emotional journey of retrenched workers. They often view retrenchment as a personal failure, even when it's a result of structural changes. Therefore, the re-skilling support system should be designed to address these emotional challenges. Offering counselling services and career guidance can help employees navigate this difficult transition.
Secondly, from a legal standpoint, the Industrial Relations Code mandates that employers contribute to a re-skilling fund for retrenched workers. This contribution is over and above the standard retrenchment compensation and must be paid within 45 days of retrenchment. It's important for companies to comply with these regulations to avoid legal complications.
The next step is to design a re-skilling program that aligns with the future needs of the labour market. Partnering with reputable training providers can ensure that the skills being taught are relevant and valuable. Regularly updating the re-skilling curriculum based on industry trends can increase its effectiveness.
In terms of implementation, transparency is key. Companies should clearly communicate the purpose and benefits of the re-skilling fund to their employees. This can help build trust and encourage employees to take advantage of the re-skilling opportunities.
Lastly, it's important to track the outcomes of the re-skilling program. Boards should insist on seeing post-retrenchment outcome data such as new jobs, certifications, and incomes. This data can provide valuable insights into the effectiveness of the re-skilling program and guide future workforce transition strategies.
Remember, the goal of a re-skilling support system is not just to comply with legal obligations, but to genuinely support employees in their career transition. A well-implemented re-skilling program can turn a challenging situation into an opportunity for growth and development.
From India, Gurugram
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Firstly, it's crucial to understand the emotional journey of retrenched workers. They often view retrenchment as a personal failure, even when it's a result of structural changes. Therefore, the re-skilling support system should be designed to address these emotional challenges. Offering counselling services and career guidance can help employees navigate this difficult transition.
Secondly, from a legal standpoint, the Industrial Relations Code mandates that employers contribute to a re-skilling fund for retrenched workers. This contribution is over and above the standard retrenchment compensation and must be paid within 45 days of retrenchment. It's important for companies to comply with these regulations to avoid legal complications.
The next step is to design a re-skilling program that aligns with the future needs of the labour market. Partnering with reputable training providers can ensure that the skills being taught are relevant and valuable. Regularly updating the re-skilling curriculum based on industry trends can increase its effectiveness.
In terms of implementation, transparency is key. Companies should clearly communicate the purpose and benefits of the re-skilling fund to their employees. This can help build trust and encourage employees to take advantage of the re-skilling opportunities.
Lastly, it's important to track the outcomes of the re-skilling program. Boards should insist on seeing post-retrenchment outcome data such as new jobs, certifications, and incomes. This data can provide valuable insights into the effectiveness of the re-skilling program and guide future workforce transition strategies.
Remember, the goal of a re-skilling support system is not just to comply with legal obligations, but to genuinely support employees in their career transition. A well-implemented re-skilling program can turn a challenging situation into an opportunity for growth and development.
From India, Gurugram
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Industrial Relations Code 2020.pdf