Industrial Relations And Labour Laws
Industrial Relations
Assistant Manager Human Resources
Ir & Contract Labour Management
Legal Counsel
Hr Deptt.
Asst. Hr Executive
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Dear Sir
As per ID act retrenchment compensation payable 15 day for every completed year of services.
we are paying salary to staff for 30 days & 26 days to worker, Is it possible we can pay e Retrenchment compensation for 15 days(30/2) to staff or 13 days (26/2) to worker?
Pls enlighten on query.

From India, Mumbai
Dear Sacheein
please check this thread started by myself.....
I think this will help u...
Jawed Alam

From India, Dhanbad
For calculating retrenchment compensation monthly salary shall be divided by 30 whereas for calculating gratuity it should be divided by 26 Regards, Madhu.T.K
From India, Kannur
Dear Sir
Assume that if wages paying to worker for 26 day (150(per day )x26=3900/-)
RC= gross salary/30*15
= 1950 (This amt exactly same if we pay 13day (26/2) for every completed year of services)

From India, Mumbai
For daily rated worker, pay 15 days pay for each year. If your worker is paid Rs 150 per day, then retrenchment compensation should be paid at the rate of Rs 150 X 15. Regards, Madhu.T.K
From India, Kannur
Dear Sacheein,

The simple answer to your query is that if any employee has completed 240 days in your establishment and you want to terminate his service for any reason whatsoever other than by way of punishment for any misconduct you will have to give him the salary equal to his 15 days average pay for per completed year of continuous service or any part thereof in excess of six month.

Suppose he worked for 3 years and 6 months you will have to pay 15 days pay * 4 = 2 months average pay. if he works 3 year 5 months you will have to pay 15 days pay * 3 = 1.5 months average pay.

the relevant section of Industrial Disputes act is reproduced herein for your reference.

2[25F. Conditions precedent to retrenchment of workmen. —No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—
(a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;
(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay 4[for every completed year of continuous service] or any part thereof in excess of six months; and
(c) notice in the prescribed manner is served on the appropriate Government 5[or such authority as may be specified by the appropriate Government by notification in the Official Gazette]].

So don't even think of 13 days just because you pay them salary for 26 days the act clearly says about 15 days. As perLaw 240 days working in an year completes a full year of service. so whosoever has completed it will be entitled to the compensation as per the calculation given above.

Hope this will resolve your query. :)


From India, New Delhi
Dear Kamal Kantji,
This is perfect solution. I was aware of the compliance of ID ACT, but your answer is very practical.
Please keep it up & give us junior's this type of practical knowledge.

From India, Pune
Dear Sir
Above my query is clear,thanks to all for valuable cooperation, but for calculating continuous service(240) for daily rated worker weekly off should be consider even if they are not getting payment for that day (W-off)
Pls suggest.

From India, Mumbai
240 days means 240 paid days. In the case of daily rated workmen who are not paid for the weekly off days, take only actual physical days present for work. In case of others who are paid for the off days and casual or other kinds of leaves and holidays, take such paid days also to calculate 240 days.

From India, Kannur
Dear Sacheein,

240 days rule is a very controversial rule on which Different High Courts have their different views. However i will try to explain this to you.

In my opinion if you are paying any daily rated employee Weekly or Monthly on voucher basis you should calculate their days as 30 per month while calculating 240 days. The reason being that this rule is governed by the respective Shops an Establishment Acts of different States and more or less one section which is related to close day or weekly off is same in every act. for Example i reproduce the sections from Delhi Shops and Establishment act.

"17. Period of rest (weekly holiday).—Every employee shall be allowed at least twenty-four consecutive hours of rest (weekly holiday) in every week, which shall, in the case of shops and commercial establishments required by this Act to observe a close day, be on the close day.
18. Wages for the holiday.—No deduction shall be made from the wages of any employee on account of the close day under section 16 or a holiday granted under section 17 of this Act.
If an employee is employed on a daily wage, he shall nonetheless be paid his daily wage for the holiday and where an employee is paid on piece rates, he shall receive the average of the wages received during the week."

Section 18 Clears all the Ambiguity on the subject. Please also see the definition of workman in the act. Reproduced Here:

(7) “employee” means a person wholly or principally employed, whether directly or otherwise, and whether for wages (payable on permanent, periodical, contract, piece-rate or commission basis) or other consideration, about the business of an establishment and includes an apprentice and any person employed in a factory but not governed by the Factories Act, 1948 (43 of 1948), and for the purpose of any matter regulated by this Act, also includes a person discharged or dismissed whose claims have not been settled in accordance with this Act;

The definition of Employee itself says any person wholly or principally employed, whether directly or otherwise, and whether for wages payable on permanent, PERIODICAL, contract, piece rate or commission basis. Here the daily wager will fall in the category of periodical paid employee. PLEASE KEEP THIS IN MIND THAT LABOUR LEGISLATION IS A BENEFICIAL LEGISLATION SO FOR EVERY SECTION WE HAVE TO GIVE THE MOST LIBERAL INTERPRETATION POSSIBLE. Going as per this rule, the daily rated employees are also entitled to the wages for their weekly off, IF THEIR EMPLOYMENT LASTS FOR ATLEAST 6 DAYS IN A WEEK.

One more suggestion if you are not paying your daily rated employees, the payment for weekly off please start paying it to avoid any unfavorable situation or pay them off daily end of day on voucher their wages for the day.

Hope this will clear the situation. Suggestions and further point of views are invited to enlighten the knowledge.


From India, New Delhi

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