Retrenching a Long-term Manager: Are We Obligated to Pay Retrenchment Benefits?

We need to retrench a DGM-level employee who has been working with us for the last 6 years at a monthly salary of 26K.

Whether there is any retrenchment payment the company needs to pay? From my understanding, the Industrial Disputes Act 1947 does not apply, and no retrenchment payment is required to be paid. We only have to give proper notice according to the employment contract or payment in lieu of notice to the employee, right?

Hence, we are obliged to pay the gratuity payment and payment in lieu of notice. Is my opinion correct?

Thanks

Hi,

It's basically termination, not retrenchment. Retrenchment means mass termination where you are supposed to pay a retrenchment amount to them. But in this case, you have to give him proper notice. It's up to him whether he wants to continue working for that notice period or not. You have to pay him a full salary anyhow. Yes, his PF and gratuity are to be taken care of by you. Follow whatever contract you have with him.

Regards,
Poonam

Termination of a Permanent Employee

The services of a permanent employee cannot be so abruptly terminated. First of all, you are to hold a Departmental Inquiry against him by issuing a proper show-cause notice, followed by a Charge-Sheet. Thereafter, based on the Inquiry Report, if found guilty of any gross misconduct in the discharge of his duties, then and only then can you terminate him, and not before that. However, you shall have to settle all his outstanding retirement dues comprising Gratuity, P.F., Notice-Pay, etc., after termination of the contract.

Subject to the above, you can only terminate him and not retrench him. Retrenchment can be made only under the specific circumstances laid down in the Industrial Disputes Act and not otherwise.

Generally, courts are sympathetic towards the employees unless they are found guilty of any gross misconduct in the discharge of their duties. So, please take all precautions before making the final decision in the matter. In case the termination is not done legally, then the court may direct reinstatement with full back-wages. You may also go through relevant case laws on the subject.

If he is a permanent employee and company rules provide for superannuation upon reaching a particular age, you cannot terminate him except for misconduct after holding an inquiry. If he is appointed on a contract, then you can terminate him as per the terms in the contract. He needs to receive all his terminal benefits like notice pay, gratuity, leave encashment, and bonus.

Regards, Rajan & Associates

In your employment agreement, you have mentioned the situation in which you may terminate the service of any employee. For any type of termination, you have to document related to departmental inquiry, show cause notice, hearing on the basis of natural justice, charge sheet, and after this full process, if that person is found guilty of misconduct, then you will be liable to terminate his service.

This full information is mentioned in your standing orders or code of conduct of the factory. Please read your standing orders & code of conduct, then take appropriate action as per the law.

Regards,
Rajbir
HR Sr. Executive (Welfare Officer)

The option you have chosen is correct. The ID Act is not applicable; therefore, there is no question of retrenchment. (Although this will not be retrenchment but it will be termination), enquiry, etc. However, as a goodwill gesture, until and unless the termination is being made for very extreme reasons, it is suggested that some additional amount be paid to the person, and a golden farewell is given to the person.

Regards,
Preetam Deshpande