Legal Counsel
+1 Other

Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
i am presently working in a partnership firm from past 13 years. The firm has 10 employees on its pay roll. The firm pays ESIC and PF. Last month my employer informed me to take an early retirment by next month (ie May 2011). I am presently 56 years old and the age of retirement fixed for employees as per firm's internal law (Rules of services and pay scales) is 58 years. The firm is not shutting down its business and infact hiring new people at higher pay scales. Considering the above facts can i ask my employer for a retrenchment compensation? Also is ther any legal basis for my claim as i concur the Industrial Disputes Act applyes only to such organisations where emplyee strength is more than 50 people?
Your quick response to the above would be highly appreciated, as i have only 10 days pending to stake my claim, if any!
Thanks in advance


If ten or more are employed Gratuity Act will become applicable and the entitlement will be there on fulfillment of the conditions .It will be better to see a few provisions of Payment of Gratuity Act, 1972. Sub-Section (3) of Section 1 provides as under:- (3) It shall apply to:-

(a) every factory, mine, oil field, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed or were employed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government, may, by notification, specify in this behalf.

3A. A shop or establishment to which this Act has become applicable shall continue to be governed by this Act, notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.

4. Payment of gratuity:-

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.

(a) on his superannuation, or

(b) on his retirement or resignation or

(c) on his death or disablement due to accident or disease. provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

xxx xxx


(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned provided that in the case of a piece-rated employee, daily

wages shall be computed on the average of the total wages received by him for a period of three months. Immediately preceding the termination of his employment and for this purpose, the wages paid for any over time work shall not be taken into account.

Section 7 of the Payment of Gratuity Act, 1972 provides for the determination of the amount of grautuity. Under sub-Section (1), an eligible employee under the said Act has to make a written application, while sub-Section (2) makes it binding on the employer to determine the amount of gratuity and specify the same to the controlling authority, even if such application is not made. The mandate of sub-Section (3) is to make the payment of gratuity within 30 days of the date, it becomes payable to such eligible employee. Section 3A provides for the interest, where gratuity is not paid within the prescribed period.


Dear Mr.Umesh

Ordinarily, the certified standing orders of the establishment will indicate the age of retirement. In case the certified standing orders are not available, then the model standing orders will apply and the age of retirement as indicated in the model standing orders will be the age of retirement. In case the Industrial Employment (Standing Orders) Act are not applicable to the estalishment in which you are employed, then the appointment order will indicate the age of retirement. Do you have any appointment order? If so please check whether it indicates the age of retirement. In case the appointment order is also silent on this then you have to see what is the practice in your organisation. That is what is the age at which individuals who were older to you were retired. This may guide in determining the age of retirement. Please also check whether the Industrial Employment (Standing Orders) Act is applicable to the establishment in which you are employed, because in certain States there are other laws which have replaced the Industrial Employment(Standing Orders) Act. If your employer retires you before the age of retirement applicable to the establishment in which you are presently employed, you may just receive the order, without doing anything else, and if you are convinced and have sufficient proof/evidence that the age of retirement is 58 then you can treat your premature "retirement" as retrenchment. You may have to raise an industrial dispute under the Industrial Disputes Act for your "illegal retrenchment". In some States in India, the dispute may have to be raised under a different law. Please also check on this. Any how it is advisable to entrust this matter to a lawyer for perfect handling.

Dear Mr. Umesh
If you resign then you are not entitled to retrenchment compensation. If an employer terminates the services of an workman then workman is entitled to retrenchment compensation.
If your employer is recruiting fresh hand then it can't be as thumb rule a case of retrenchment. The Industrial disputes act does not contemplate that there must be 50 employees in order it to apply.
P M Patel

Dear All,
Thank you very much for your quick responses. I have summarised the discussion and the take away points below:
1) Since my employer is terminating my services, i am entitled to retrenchment compensation.
2) My employer is based from Mumbai...therefor i would be subject to the Industrial Disputes Act ('IDA').
3) The provisions of IDA would be applicable irrespective of the no. of employees.
4) I would be entitled to retrenchment compensation (over and above and in addition) to gratuity payments calculated as per the IDA
Do let me know if the above conclusions are correct and please provide additional suggestions.

Dear Mr.Umesh Please check whether the Industrial Disputes Act is applicable. There is a law relating to settlement of indstrial disputes applicable exclusively to Maharashtra. Please check
Dear Sir
You have correctly summarised.
IDA is applicable in Maharahstra . The MRTU & PULP ACT,1971 & The BIR Act,1946 are in addition to IDA. But retrenchment compensation is governed by The IDA Only.
P M Patel

This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2020 Cite.Co™