Retrenchment Compensation - Notice Pay - CiteHR
Director, Target Hr Solutions
Human Resource
Hr And Psychometrician
S. Suman
Manager- Hr & Compliance
Mis, Excel
Hr Generalist
+2 Others

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Dear all,

I have a query regarding retrenchment compensation payable to employees who are shown an exit on account of downsizing due to cost escalation.(ITES Company)

The Management has already served the notice to the employees and asked the employees to look for some other job. And, also it gave an option to some of the employees to come for work till the end of Notice period , but still promised to pay the notice period. Meanwhile, some of the employees got job outside and joined them immediately.

Now, the question is whether Notice Pay and Retrenchment compensation payable to employees who have joined other Comapnies.

2) If required, is it possible to revoke the Notice served and ask the employees to join back?

3) Whether Salary to be paid to the employees who are served Notice but asked to come for work.

4) What is the reason for separation to be mentioned in their service certificates?

If i have missed anything, please include your comments for the same also along with your query.


M.T.K.S. Vasan

Dear Vasan
You have raised a good question at the right time.
1. The notice pay has to be paid to the person though he got employment in other company. How do you prove that he is employed in other company.
2. Already you are downsizing the company, why you are calling him for rejoining for the sake of notice period. Better wish them to employ the new company.
3. Certainly salary has to be paid for notice period if employee works for the company.
4. You can mention as retrenchment of service due to adverse market
Hope these clarifications sufficient for you
HR Professional

Dear Vasan,
What is the content of the "served notice". If the employees has resigned and moved on then no retrenchment compensation has to be paid.
Regarding notice pay, your company has already promised to pay the notice pay. Therefore you need to pay this. None the less, since you have asked them to separate then you need to pay the notice pay.
Whether this is a case of retenchment or not will be determined by the content of the "Notice" served. If it says that the service of the employee is being terminated for reasons stated in the definition of retrenchment in the ID Act, then you will have to pay the retenchment compensation.
For still specific answer pl put specific questions with relevant details.

Severance pay

In case of retrenchments, employees with more than one year’s service, and other than temporary or casual employees, are entitled to compensation equivalent to 15 days’ pay for each completed year of service (sec. 25F(b), IDA).
However, a distinction is made for cessation of business for reasons beyond the control of the employer. This might include force majeure, frustration of contract, etc., but does not include financial difficulties or loss of stock. In such circumstances, the employee is still entitled to a redundancy payment, but the amount is less than that given for termination of employment due to other reasons, being a sum equivalent to no more than the average of three months’ pay (sec. 25FFF, IDA).
Under the Payment of Gratuity Act, 1972, a worker continuously employed for five years or more is entitled to a gratuity payment upon termination of service, except where such termination has been as a result of his or her wilful omission or negligence resulting in damage or loss of the employer’s property, in which case the gratuity is forfeited to the extent of the damage caused. Where the employee has been dismissed on account of his or her riotous, violent or disorderly conduct or for an offence involving moral turpitude committed in the course of employment, the gratuity shall be wholly or partly forfeited. The sum is calculated at 15 days’ average pay for every completed year of service.
Avenues for redress

Since the 1965 amendments to the IDA (sec. 2A), the dismissal or retrenchment of an individual is deemed to be an industrial dispute, hence the ability of a worker to take his or her claim to the Labour Courts. Under sec. 2(a) of the IESA, a worker dissatisfied with his or her termination of employment is entitled, in the first instance, to raise the matter as a labour dispute with an officer from the conciliation department of the Ministry of Labour. The officer will attempt to conciliate the matter and must submit a report to the Government if conciliation fails, pending a decision from the governmental authority on whether the matter merits adjudication before the Labour Court or Tribunal.
Challenges to dismissal can be made to the Labour Court under sec. 11A of the Industrial Relations (Amendment) Disputes Act, 1971. The Labour Court may review a termination of employment and set aside a dismissal if it decides that the dismissal was not justified.
No time limit is prescribed within which an aggrieved worker may raise a labour dispute. However, excessive delay may prejudice a worker’s case. The burden of proving that dismissal was for a valid reason rests with the employer.
The Labour Court, Industrial Tribunal and National Tribunal have wide discretion to review disputes relating to termination of employment, including the examination of the evidence, and to award relief as they see fit including compensation in the form of damages and reinstatement (sec. 11A, IDA). Before reinstating an employee, the judicial body will inquire into the feasibility of reinstatement; for example, whether the employee has lost confidence in the employer and whether industrial peace and harmony will be threatened.

I got retrenchment from my company along with a number of people.The company is paying two month salary and 15 days salary for each completed year as the compensation.Is it the correct compensation? As mentioned under the law,the compensation should be three month salary.If this is the case what should I do?

i ahve completed 4 years 8 months and 18 days in my office, now for the purpose of cost cutting that want resign ion from from me. company is ready to pay 1 month salary. My question is can i resgn or ask company to terminate me? from which mode i can get the maximum benefit and good for me in future.
Please Answer ASAP

if a person is working in an organisation from last 5 years.and now company want to terminate his services by harassasing him and forcing him for that case what compensation should given to that employee and for what he is eligible
In this case the employee should not resign at his own. Let the employer terminate him. If so, he will be entitled to get termination benefit of 120 days salary and termination benefit of 30 days salary for every completed one year service.
May be the answer is clear.

Dear Suman, In such situation how HR should draft Termination letter in simpliciter manner. If possible please help me to get the sample draft ofg such letter. Regards

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