Why Do Companies Prefer Resignations Over Terminations? Understanding the Financial Implications

I have observed that many companies prefer that the employee resigns instead of the company firing the employee. Is this due to differences in the way amounts payable to the employee get calculated?

As I understand, the basic legal requirement for the employer is to pay all outstanding salary and gratuity dues when an employment ends. How does it matter if the employee resigns or the employer terminates?

Regards,
Uttam.

Dear friend,

Your question is very vague. Please be specific about the situation or the circumstances under which the employee's resignation occurred. Only then will it be possible to provide an answer.

Regards,
Martin

The grounds for leaving could be normal. Suppose the employee resigns to pursue better prospects. Alternatively, the company could be downsizing or relocating, leading to the termination of employment. How would the payments differ? I have observed that even when employers are terminating employment, they often prefer to receive a resignation from the employee.

Uttam.

Legally obliged, the company should efficiently prove to meet the termination conditions, for example, violating the regulations or being a low performer. Especially for low performers, most employees were dismissed for this reason. It's somewhat difficult to prove a low performer because performance indicators are mostly qualitative rather than quantitative, and different evaluators will have different opinions.

Basically, when firing an employee, the company would prefer negotiating with the employee and receiving a voluntary resignation to avoid conflict. As a compromise, normally, the company is willing to offer the same compensation as if they were fired.

For the employee, it's hard for them to stay in the company when the company decides to let them go. In most circumstances, they will have to accept the conditions if they are to receive legal compensation.

My question is: How does it really matter whether the employee has resigned or has been terminated if the payment to be made in both cases involves normal dues of salary, bonus, encashable leave, and the eligible gratuity? I don't think that the gratuity amount is dependent on resignation or termination.

I have heard of companies in the USA which have plans that involve a large payment (a kind of gratuity) upon termination, which is otherwise not payable if the employee resigns of his own accord.

Hi!

I need to know whether it affects you as a person or from the point of view of the company? (In case you want to know from the employee's point of view - it is wise to leave when asked to rather than getting the sack).

In case it is from the point of view of the company - the payment made out is usually the same for both cases, and they are subject to the terms of the contract.

Regards,
Shyamali

Hi Uttam,

1st point: If an employee resigns, then he will have to pay the notice period, and if the employer is willing to terminate him, then the employer will have to pay the notice period. (So this is regarding money.)

2nd point: To terminate someone means that you should have a solid ground, then a domestic inquiry, and other required formalities. (So this is about legal formalities.)

3rd point: The employer does not want to be involved in this type of legal cases because it depletes your money and resources too (might involve a hefty amount if the case lingers on). So, generally, what the employer does is ask the employee to resign and pay them the notice period.

Hope the matter is clearer now.