Labour Laws & Ir
Hr ( Generalist)
Manager Hr & Admin
K C S Kutty
Labour Laws
Ajay Shukla
Oil Exploration
+4 Others

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Difference between retrenchment & layoff in a company?
From India, Gurgaon
Dear Go through chapter VA & VB of the Industrial Disputes Act, 1947 for having details on Lay Off & Retrenchment. R.N.Khola Office: (M) (O) 0124-4264449
From India, Delhi

LAY OFF : a. Failure , refusal or inability of an employer on account of :
i. shortage of coal OR ii) Power OR iii) Raw Materials OR iv) the accumulation
of finished stocks OR v) Breakdown of Machinery OR vi) Natural Calamity OR
vii) Any other connected reasons.
1) Any workman whose name is borne on muster rolls and who presents himself for work on any day and is not given employment with in 2 hours shall be deemed to have been laid - off for that day.

2. If a workman not given employment is asked to present himself during second half of the shift and given employment then, he shall be deemed to be laid off only for 1/2 of that day.

3. If he is not given employment even after so presenting him self, he shall not be deemed to have been laid off for second half of the shift, and shall be entitled to full wages and dearness allowance for that part of the day.

* The muster roll is a record of only those workmen who are employed on a regular basis.
** Lay off means to discontinue work or activity, to dismiss/discharge temporarily.
*** Definition clause does not confer any power on the management to lay off
workers, Held in Workman V Firestone Tyer & Rubber Co. (1976) I. LLJ 493.
**** Financial stringency can not constitute a ground for lay off , held in Hope
Textiles Ltd V State of MP (1993)1 LLJ 603: (1992) 65 FLR 770.

The temporary closing of a place of employment OR The suspension of Work OR Refusal by an employer to continue to employ any number of persons employed by him.


Termination by the employer of the service of a workmen for any reason whatsoever other wise than as punishment inflicted by way of disciplinary action.

a) Voluntary retirement of the workmen Or
b) Retirement on reaching the age superannuation Or
c) Termination as a result of non-renewal of the contract of employment Or
d) Termination on the ground of continued ill health.

Retrenchment means "To End" , conclude , cease as per Judicial Interpretations
b) Automatic termination of services on efflux of contractual period amounts to retrenchment.
c) Discharge of probationer also amounts to retrenchment.
d) Termination of temporary worker on ground of surplus labour is retrenchment.
e) Termination of service on ground of reduction in volume of business is also retrenchment.
f) When retrenchment is held bad, the worker is entitled back wages with the shelter of the courts.

Finally as Mr. R.N. Khola said above ,you can refer to Chapter V-A and V-B of Industrial Disputes Act, 1947 for more clarification , with Case Laws.

Mohan Rao
Manager HR

From India, Visakhapatnam
Dear Mr Mohan Rao
Termination of the Employee from service is not Retrenchment.
To reduce the no of workmen or workforce due to financial problem. For Example the Company wants to reduce the workmen from 1000 to 500 due to financial implications = RETRENCHMENT

From India, Coimbatore
It is clearly mentioned in ID act as per the Mr. Mohan Rao's statement, i think is true.
reducing means nothing but termination of services. how can we reduce other than disciplinary action.= retrenchment.

From India, Hyderabad
If a company terminated an employee ,how he can claim for payments ?Is there any law by which he can claim the balances?
From India, Mumbai
Mr Manokavin, If you want to add or clarify what Mr Rao explained, please come with your views. Please tell us what is retrenchment with examples.
From India, Madras
Dear Mr Mohan Roa, very well explianed. but for retrenchment & layoff prior permision must be taken from the govt if 50/100 or more employees are working. regards, ramnath
From India, Bangalore
Dear All, I am Fully convienced with Mr. Mohan Rao, the thing is that the employer has to be taken the permission of Govt for the same. Ajay Shukla Labour Law Consultant, Kanpur
From India, Calcutta
lay off is temporary but can can continue for a longer period retrenchment is termination due to bad spell of the company and where without any fault of workmen they loose jobs
From India, Calcutta

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