The private sector’s termination complex

Divorcing a partner is easier than terminating a worker. With fluctuations in economy, the most common fear is of termination. As it’s a lengthy subject, I’d only deal with private sector here. 

Published: 17th June 2012 12:07 AM  |   Last Updated: 17th June 2012 12:07 AM   |  A+A-

Divorcing a partner is easier than terminating a worker. With fluctuations in economy, the most common fear is of termination. As it’s a lengthy subject, I’d only deal with private sector here. 

Unlike popular ‘at will employments’, and ‘hire and fire’ structure of the US, Indian law is complex when it comes to termination. It is often said that it may be easier to open business in India, but it’s very difficult to close it down.

There are various terminations under the Indian laws—resignation, retrenchment, dismissal, etc. Or else the employee retires, which too is of various types such as retirement in the normal course, compulsory retirement, voluntary retirement, etc.

While it may be easier to terminate an employee who is not a workman — or in other words, a manager, supervisory or administrative category employee — there is a lengthy process involved in terminating a workman category employee. A workman, as defined under the Industrial Disputes Act (IDA), is someone who does clerical, technical, mechanical or operational kind of work .

Manager can be terminated in terms with contract of appointment. A workman who has completed 240 days of service and is not required anymore has to be retrenched by complying with the provisions given under IDA. Same includes giving 15 days’ wage for every completed year of work, notice or notice pay. If the company has 100 or more workmen, government permission is required which is practically given in rarest of rare cases. In case there are 50 to 100 workmen, only intimation to government is required. The government need not be involved if there are less than 50 workers. ‘Last come first go’ is to be complied with, i.e. the senior-most worker must be retrenched last. Retrenchment can be done only if the company is virtually abolishing the said work/post. If it brings back the post, opportunity to the worker retrenched has to be given first before fresh hirings.

It is interesting to note that there is a branch of employees known as “fixed term” or contract-based employees. If an employee has been kept for certain contingencies and his appointment is made fixed term, no retrenchment is required. This type of appointment is commonly found in project-based companies. For example, the Commonwealth Games, or construction companies etc. Even if there is no project, fixed-term employees can always be appointed. Precaution should be taken that appointment letter clearly states the time period. Contract should not be renewed time and again as that would be a camouflage. Even during the probation period, retrenchment need not be complied with. However, probation should not be continued for years, and the period should be clearly stated.

In case the worker has done some misconduct that calls for dismissal, proper procedure needs to be followed — chargesheet be given; reply be called for; enquiry be done; and an opportunity of leading evidence and cross-examination be given to worker and management. After the enquiry report is prepared and charges proved, showcause notice should be given to the worker. If his reply is found unsatisfactory, action against him, including dismissal, can be taken. If the employee concerned is a manager and the management wants to make termination punitive rather than simple termination as per appointment letter, prima facie enquiry is sufficient depending on facts of case. When doing mass terminations, advice is to have VRS schemes and golden handshake schemes which attract employees to resign, and is also in interest of industrial peace.

Need of changing economy is that labour laws be amended and simplified, so that employers have flexibility and more investments can be attracted.

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 The opinions expressed in this column are the author’s own

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