Is Our Termination Policy Legal in India? Seeking Advice on Local Employment Laws

Hi all, I need your help. We are setting up our Indian office and are learning something about the working rules there. I wonder if someone could share my termination policy in Indian. In offer letter in other countries, we will normally write the following terms “Your employment may be terminated by either party without assigning any cause by giving one month's notice or payment of one month base salary in lieu of notice.” We are not sure if this is in accordance with the Indian law. Is this illegal? Appreciate your advice. Best regards, Shirley

Dear Friend,

The clause should be applicable for both parties, i.e., the employee can also leave the organization by either paying one month's basic salary or giving one month's notice; then this will be okay. You should also remove the phrase "without assigning any cause."

Thanks and regards,
Kameswarao.

The terms of the appointment order shall not circumvent the provisions of the Industrial Disputes Act and the Standing Orders of your company, if any. Therefore, whatever safe game you play about the appointment order will not be maintainable if it is contrary to the rules of basic Acts.

An employer is certainly free to terminate the services of employee(s) provided there are valid reasons. It should not be fabricated but a real one. It should be taken as the last resort also. The termination policy should be diluted so that if the employer wants to terminate the services of employees, let the provisions relating to informing the government of the intention to retrench employees be followed, and retrenchment compensation as prescribed under the ID Act paid to the respective employee.

The law does not say that the employer should retain a non-performing employee, but the employer has the right to fire him. But before doing so, give him an opportunity to improve his performance or try to relocate him by assigning some other tasks so that he could improve. If not found satisfactory, retrench him after giving prior notice and paying retrenchment compensation. It shall also be remembered that for an employee one year is more than sufficient to evaluate or appraise an employee and if you want to terminate him on the ground of non-performance, do it immediately after you assess his performance. On the other hand, if you terminate the services of an employee who has been with you for the last three or five years on the ground of non-performance, it will be highly prejudicial and will be viewed as victimization.

Regards,

Madhu.T.K

Dear Board Moderator,

The law is simply understood like this: Special laws for workmen are guided by the Industrial Disputes Act or the Shops & Establishments Act. Termination is regulated by the law. For officers, i.e., non-workmen, it is regulated by agreement/contract. This is where your clause will come in.

With Regards,
E-mail: rajanassociates@eth.net

Thank you for your inputs. One clarification from Rajan, isn't all establishments covered either by an ID or the Shops and Establishment Act.

For example, how do you differentiate employees of a company registered under the Shops and Establishment Act.

Dear
Yes this is very much at par with the Indian legal system. The term mentioned in ur mail is very much applicable as per labour compliance rules in India.
Regds...Singh