Dismissal During Probation: Can an Employee Claim Notice Pay and What Are the Legal Steps?

Dear All,

There is this case. In one of the industries, one employee was dismissed without giving any reason and without conducting any inquiry when he was under the probation period. The employee approached the Labor department seeking two months' salary in lieu of the two months' notice period mentioned in the appointment letter. The Labor department has issued a letter to the industry. My queries are:

(i) Will the employee receive two months' salary or not?
(ii) What is the procedure for dismissal during the probation period?
(iii) What is the maximum probation period according to labor laws? In this industry, it is two years.

Regards,

Dear Vijay,

You have to have a Standing Order of your company for the probation period. Now, a few things come to mind, even if we follow the Model Standing Rules. I need clarification on the following to answer your query:

- Whether the employee is covered under the ID Act?
- How long he has been in the service of the company?
- What was the reason for dismissal?
- What does the clause about the probation say in your Appointment Letter issued to the Employee?

Dear Friend,

Regarding your query, the following points should be taken into consideration:

1. How many people are working in your organization?
2. Is your organization in the manufacturing or service industry?
3. Does your organization have either Model or Certified Standing Orders?
4. If your organization already has Standing Orders or service rules, under which clause is the period of probation mentioned?
5. Under what circumstances can an employee be dismissed from service during the probation period?

If your organization does not have the above provisions mentioned in the Standing Orders (either Model or Certified), the employer is liable to pay either 2 months' wages or provide a 2 months' notice in lieu of wages for dismissal from service for any reason as mentioned in the Appointment Order. The employer has already agreed to the terms and conditions of employment as specified in the appointment letter; under what terms and conditions should the employee be engaged?

This is for your information.

Regards,

P.V. Rama Rao

Hello Vijay,

If you have mentioned two months' notice or two months' pay in lieu [in the appointment letter], then you have to give him either of the two. It's as plain as that. If you have thrown him out without giving notice, then you have to give him two months' pay; there's no doubt about that. Regarding the probation period, there is no rule regarding the length of the probation period.

Riyaz

Dear All,

Thanks to Rajiv, Ram, and Kriyaz for your valuable suggestions. This industry is presently under construction, and the employee who was working as a Trainee Production Operator joined on 01/02/08. However, he was verbally instructed not to come for duties effective 01/5/08 due to some remarks made while leaving in the company bus. This situation arose from backbiting by individuals who were against him. Currently, the industry lacks any policies, standing orders, or HR guidelines.

I also have a query regarding the registration under the Factories Act and EPF Act. Should this registration be completed during the construction phase or upon the completion of construction just before production commences? As production is still approximately 6 months away, with around 140 employees currently on the company's payroll, your insights would be greatly appreciated.

Please provide your valuable suggestions.

Regards,

Hi all,

I also had the bitter taste of the topic you discussed. I was also terminated, and they gave the salary for which I worked, but they didn't give me a relieving order. Please suggest how to handle this situation because I have an offer from an MNC. They asked for all the details about what happened. My question is, during the third-party verification process, what will the HR say to the verifier? Will they say that I worked in that company and my conduct is good, or will they speak negatively about me?

Regards,
Sameer

Dear,

You can terminate his services without giving any salary in lieu of notice. Basically, he is a workman as per the ID Act, and as he has not completed 240 days, you can terminate his services. Now the question comes to the license under the Factories Act. Yours is not a factory because there is no production going on at this premises. You complete construction, buy machines, and take a license before starting production, which can be obtained from the Factory Act department after preparing approved plans. You should register for the Provident Fund.

Thanks,
J.S. Malik

Dear Sameer,

Generally, during verification, HR provides information about an individual. If someone is good, HR will only mention the positive aspects.

Thanks,
J S Malik

Dear Malik,

Please inform me whether we are required to pay his salary if we have not given him a two-month notice, as stated in our appointment letter.

Regards,

The termination of service must follow the principle of "Natural Justice." Hence, either the terms of dismissal/termination should be set out in advance in the Offer Letter/Appointment Letter or through published Service Rules in the Company manual. In case an employee is then given a termination notice with the laid-down notice period, the action will be deemed legal and will withstand scrutiny of the law. This is my opinion and not an assertion!!!! Regards, Neeraj

Mr. Neeraj,

What are the principles of natural justice? If it is for a confirmed workman who has not completed probation or 240 days, we are not required to apply the principles of natural justice. We are simply not satisfied with his performance and are terminating his services.

Thank you,
J. S. Malik

Dear Mr. Vijay,

As per the rule, the employer must take this into consideration as prescribed in his appointment letter. The company is liable to pay 2 months' salary or provide a two-month prior notice as per the standing order.

Jitendra

Dear All,

We really had a meaningful discussion on this topic. The following emerged after this discussion:
- We have to pay two months' salary to the employee.
- We should have issued notice two months before.
- Terms and conditions of the dismissal during the probation period should have been mentioned in the Appointment letter.

I am still not convinced by Mr. Malik's remarks that we can sack an employee at any time during the probation period. I think he has the full right to know the valid reason for his dismissal.

I welcome more recommendations and remarks on this topic.

Regards,

Which country did this take place in?

Does your company have Policies and Procedures (P&P), Standing Orders, or an Employee Handbook for its staff? Is the appointment letter clear, and does it cover the employee's position during probation? If the above is standard in your company, then you have to ensure that the company's commitments to the employee are honored.

Regards,
PVQ

You cannot sack an employee if you don't like his/her face. There has to be a concrete reason for termination, and it has to be documented. The employee has a right to know the reason for termination.

In the case of redundancy, the position held by the defunct employee will not be 'filled,' and in many cases, the department will be restructured to show this. Labour laws in most countries will enforce this.

Regards, PVQ

Hi,

If you make an allegation against an employee, you have to establish the same through a domestic enquiry, by observing the principles of natural justice. If the procedure is not followed, the employee may claim relief alleging wrongful dismissal. The safest course is to terminate the employee by giving the required notice and without making any allegations.

Cyril

Under the standing orders, a person is legally on probation for 3 months only. A probationer is a person appointed for a position likely to be made permanent subject to performance. Hence, after 3 months, one needs to give natural justice to the employee, and the punishment must be in proportion to the misconduct and not more. I would understand making some remarks may call for at most an oral/written warning, but not repeating the misconduct again in the future.

During the first 3 months, notice is not required. However, if the appointment letter says two months' notice, that needs to be honored. One must be given justice, and the punishment must be in proportion to the crime.

In this case, it may perhaps be settled by being fair to him and giving him the stipulated two months' notice as an out-of-court settlement. The dismissal occurred due to the loss of confidence in the employee owing to his behavior spoiling the discipline of the organization.

Hope the above sheds more light on the theme, to the best of my knowledge and belief.

Regards,
Kshantaram

In Indian Labor Laws, though you have Apprentices Act but nothing has been specified about probation period. It varies from 3 months to 12 months (and now you have mentioned about two years, I am not sure if you are talking about probation period of two years or a contract of two years), based on the level of appointment. For example, if you are hiring a fresher or someone through campus recruitment then the probation will be higher compare to if you are hiring someone experienced.
Probation is like an engagement where employer and employee both are free to terminate a relation without much hassle. This the time to check the performance of an individual and the employee in turns evaluate the policies and benefits of the company. During the probation, an employee can be terminated for indiscipline, misbehavior and non-performance. Interesting thing is that if you are terminating someone during probation, you are not obliged to conduct any enquiry.
Regarding two month salary, it all depends up on the notice period as mentioned in the letter of appointment. If it is mentioned in the letter that, “in case of separation during the probation period, either party needs to give a two months notice period” and the company has not given notice to him, in that case…under law, he is entitled for salary in lieu of his notice period.
I hope this will give you some clarity.

Thanks and Regards
Sanjeev

Hi,

I have read your post, and my observations are as follows:

1. It appears that you are still under construction and have not started the manufacturing operations. If so, then you are not a "factory" or "industry."
2. The State ID Act or Central ID Act, as the case may be depending upon your location or type of industry, will be applicable when you commence your manufacturing operations. The same will be true with the application of model standing orders/provision of having Certified Standing Orders.
3. Check with the applicable model standing orders about the probation period. Do they prescribe the maximum probation period and also about the extension of the probation period.
4. Generally, probation periods range from 6 months to 1 year, and unless confirmed by a written order from the competent authority, a probationer is deemed to be on probation. In other words, there is no automatic confirmation by the flux of time.
5. Removal of a probationer must be done at the end of his probation period only. There is no need for any inquiry for it as an inquiry is required only when any misconduct is alleged against someone/probationer.
6. A simple order stating that "the Management is constrained to discharge you from service w.e.f. (mention date) as your performance was not found satisfactory during the probation period" is enough.
7. I am not commenting on the specific case mentioned by you as the complete facts have not been stated. Need to examine the appointment letter also.

Best of Luck,
Mohan.

Dear Vijay,

As per the P.F. Act, when the number of persons is 20 (including contractors), the P.F. is applicable to the establishment. It may be a factory, shop, or other commercial unit. Therefore, there is no relation of production to P.F., so you have to apply from the first day when the strength is a total of 20.

Secondly, for the Factories Act, the first building plans should be approved by the Chief Inspector of Factories of the particular state. After that, at the time of trial production, you can apply for the Factories Act. This is because when the factory inspector comes for the inspection, your unit will be in operations.

I hope this explanation satisfies your query. If you have any further questions related to it, please feel free to email me for a discussion.

Thanks,
Ram Naresh

Hi,

I have gone through the query. I think if on the appointment letter there is a clause of giving notice, then it must be adhered to. The management must pay him 2 months' notice pay; otherwise, they will have to face the music from G.L.O., which is a very embarrassing situation.

Secondly, whether the factory has started production or not is a different question. It must get a license from the Factory Inspector to construct the factory. When production starts, it should then get a license to operate from the Factory Inspector.

The EPF Act will come into effect since 140 employees are working.

I hope this will satisfy your query.

With regards,
Avinash K.

Dear Seniors,

My management wants to adopt the following strategy to retain people. Please suggest whether it will be a legal thing to do or not:

1. Two years bond from all the employees, which means on one side they cannot leave before completing two years. In case they leave, they will have to deposit 6 months' salary. However, the management can ask anyone to leave without assigning any reason in case of any act of indiscipline or insubordination.

2. Also, there is a clause mentioned in the appointment letter that on completion of the probation period, they can leave with one month's notice or salary (not mentioned on either side).

Please suggest whether this is a legal thing to do or not.

Regards,