MD of my company wants to reduce his manpower. To be precise, he wants to lay off people who are non-performers or under-utilised to save costs as the company is not making much profit. Management has asked me to prepare a strategy for the same and the process which needs to be followed after we identify which employees will be laid off.
Process of laying off has to be such which does not create a panic and a sense of insecurity among other employees. Request all to share your inputs.

From India, Delhi
Dinesh Divekar
Business Mentor, Consultant And Trainer
Labour Law & Hr Consultant
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Deputy Commissioner Of Labour..a.p.
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Nagarkar Vinayak L
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Prashant B Ingawale

Are the non performers are from Workman Category or Other than worker category? Because for Specifically worker category you need to conduct domestic enquiry before terminating any Workman for other Staff members please follow principles of natural jutice so that there is no any Panic Situation.
From India, Pune

Dear Shweta,
Once confirmed, every employee gets protection of employment which can either be statutory or under the contract of employment or by both depending upon his /her cadre. Therefore, no employer can simply send them out under the pretext of surplusage or under - performance at his sweet will.
There is no mention about the total no. of employees in the organization with category - wise break up.
There are two lawful options before the management. One is retrenchment and the other is voluntary separation.
In the case of retrenchment, if the average number of employees in the cadre of "workman" as defined u/s 2(s) of the Industrial Disputes Act, 1947 in the preceding 12 months is 100 or more , the employer has to obtain prior permission from the appropriate Government u/s 25N. Even if it is less than 100, one months notice or one month's pay in lieu thereof and retrenchment compensation @ 15 days wages last drawn for every completed year of service have to be paid by the employer. Moreover, the management can not pick and choose the people for retrenchment. It should be strictly based on seniority only i.e., the juniors should be sent out while the seniors are kept. Getting Government permission for retrenchment is a cumbersome quasi judicial process because it involves the employees or their unions also. That apart, no popular Government would grant permission for fear of adverse criticism.
Therefore, the better and easily workable option is voluntary separation provided your management is willing and affordable. But the possible inherent minus point in VRS is that the deadwood may stay back while some efficient lot may opt to move out. It depends how you tolerate poor performance and document it and reward efficient ones .

From India, Salem

Please get it clear in the present environment where PHDs are applying for peons job,any lay off will be stressful and create panic.
Laying/Retrenchment off workers will fall under Industrial Disputes Act.The provisions of the act need to be followed in letter and spirit.
Generous golden hand shake can be considered as it will be a one time expenditure.
Identify non performers, bad workers and make list ready.
See whether your golden hand shake will tempt them.
It is not easy to get rid of workers in bulk.
A good labour law consultant available locally can be consulted in confidence and strategy prepared.

From India, Pune
Dinesh Divekar

Dear Shweta,
Two terms are important in your post. One is "lay off" and another is "under-performance".
If you wish to remove the employees on account of under-performance then it would be incorrect to term it is as "lay off". To refer the definition of lay off, click the following link:
Special Provisions relating to lay-off, retrenchment and closure under Industrial Disputes Act
Removal of the employees because of under-performance is common across the spectrum of the industries. However, what matters is whether you had issued warning letters once the under-performance was discovered. There should not be sudden termination. Employees need to be given sufficient chance to improve their performance.
Your concern is that employees may get overwhelmed because of the fear or anxiety. However, if you are following the principles of natural justice, then neither there is a need for you to worry nor to the employees. Panic could prevail provided employees feel that there is environment of injustice in the company. To remove the misplaced fear or anxiety amongst the employees, organisational communication plays a big role. Communicate to them that leadership of your company values performance and those who attain the standards of performance can have smooth sail.
Going further, removal on account of under-performance should be an ongoing process. You should not wait for everyone's removal at a time. If the removal because of under-performance is a regular feature in the company, then also employees will overcome the fear.
Lastly, please use the correct HR terminology not just while raising the queries in the public forum but in regular work also.
Dinesh Divekar

From India, Bangalore
Nagarkar Vinayak L

Dear Colleague,
Your interchanging lay-off for termination of services is improper. The ID Act defines lay off and retrenchment specifically and conditions governing them.
Lay off means temporary suspension of employment contract for legal and justified reasons and it is not ending employer- employee relationship as in case of termination/resignation/retirement and retrenchment.
Retrenchment is discharge of surplus labour and can be resorted to only by complying with the provisions of ID Act/Rules.
Termination on account of under- performance requires following disciplinary action procedure by adhering to the principles of natural justice .
Your MD does not seem to be aware of his legal obligation and thinks he can hire and fire at his sweet will.
Vinayak Nagarkar
HR- Consultant

From India, Mumbai

Hey Shweta,
I recommend the following
1. Never mix up non-performance, redundancy, lack of projects, making loss, and restructuring for profit while discussing this topic with the management or employees.
2. If you trust your MD and having excellent rapport, then only continue with this project. My honest suggestion is to act carefully and never become a scapegoat.
3. If you are having people come under the classification 'workmen', recommendation from your labour law advisor is a must before any further action.
4. As you know well, Layoff is the most difficult and painful exercise in India. Once done, the blackmark stay forever and unfortunately HR will be at the receiving end. It is not ethical to come all on a sudden and say "Hey, you guys are not performing and I don't have money to pay. So fired".
5. Study the problems, make all sorts of information to see the real problem. No sales, no viability, no market, no cash to run business, etc. Then what ? winding up the business through proper channel.
6. Restructuring by removing a fraction of employees is pretty tough in India. If it is the wish of the management, as an employee, you have no choice. However prepare it with due diligence.
6.1 Understand the expectation of management - what is the expected outcome. Could be resize the firm, save office space, reduce capital cost by 50% and so on. Make a statement and start from there.
6.2 If your organisation has no formal performance appraisal process, HR can not announce that Mr.ABC is an under performer. However as per appointment order terms, management can dismiss anybody from employment by giving notice and compensation.
6.3 The standard way of performance related separation require, regular performance check, placing under performers in a periodical PIP (performance improvement programme), PIP review, sending the case to a committee for final decision and then separation.
There are many rude and unethical practices (unnecessary transfers, blame game, keeping employees idle, not paying salary in time, push for unrealistic targets etc.) to coerce employees and expel from the company. I recommend not to follow such unfair practices.

From India, Bangalore

As rightly said by others, lay off and retrenchment are two different cases, your case comes under termination through disciplinary action, without issuance of any Showcase letter/warning letter you cannot terminate the employee irrespective of their category.
You need to first understand, why the management needs to take this action. Then only you can formulate different strategy to terminate the employee.

From India, Patna

Hello shweta
I will suggest following options:
1.To go for the VRS , If any performing employee opt for the same you or management can discuss the same with him strategically for retaining him.
2. Do not directly remove the people , It will create panic among the employees even though you try to take precautions, At the time of performance appraisal you can give the feedback to non performing employees for performance improvement (PIP). Parameter should be clear for the performance and non performance .
Just make sure that there should not be injustice, In term of favoritism or seniority.

From India, Faridabad

Dear Connections, Thankyou all for your valuable inputs. This was of great help to me. Regards, Shweta Gehlot
From India, Delhi

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