Need Help Understanding Layoff Rules in India for My MBA Case Study on Pharma Shutdown

I am studying MBA in Germany and urgently need inside information about the layoff rules and regulations in India. The fictive topic of my current case study is a German pharmaceutical company that wants to shut down its subsidiary in India with over 500 employees.

Understanding Layoff Procedures in India

I already know that you have to get permission from the government for layoffs through the Industrial Disputes Act, 1947. But what is the procedure? What are the requirements, bans, and rules? Are there time frames to consider? Anything about compensatory payments? Maybe someone knows about a similar but actual case?

I appreciate your help! XX to impressing India!

Since your establishment has more than 100 employees, Chapter V B of the Industrial Disputes Act, 1947, will apply to you. As such, prior permission to lay off employees is required to be obtained from the Government. For this, you have to apply to the appropriate government in the prescribed form (Form Q-3). Once you get permission to lay off, only then can you proceed with the layoff. Remember that a layoff is permitted only for certain specific reasons.

As defined in Section 2(kkk) of the ID Act, a layoff means the failure, refusal, or inability of an employer, on account of a shortage of coal, power, or raw materials, or the accumulation of stocks, or the breakdown of machinery, or a natural calamity, or for any other connected reason, to give employment to a workman. In this situation, the government will have to determine whether the layoff applied for is indeed a layoff or the first step towards retrenchment or the closing of the establishment.

Regards,
Madhu.T.K

My company informed us there is a financial crisis. Salaries are being paid after 2-3 months. Now they have started layoffs. My concern is if they do lay off, then how much salary do they have to pay us? Is it pending salary and one month's salary extra in advance? Please suggest if they are paying us only pending salary.

Layoff and Retrenchment Compensation in India

If you mean to say that there is a layoff due to reasons mentioned by me in my earlier post, then all those who are laid off will receive layoff compensation at the rate of 50% of their salary for 45 days.

If you mean to say that there is a permanent closure and thereby all are asked to leave the company, then it is not a layoff but retrenchment. In such a scenario, those who have worked for at least one year will get compensation. The retrenchment compensation will be equal to 15 days' salary for every completed year of service. A fraction of a year more than 6 months shall be taken as one year. In addition to the above, one month's notice is also required to be given to each employee. In case no notice is given, the employees should be paid one month's salary in lieu of notice. This will be two months in case there is a closure of an establishment. Again, in the case of an establishment employing more than 100 employees, the notice pay is three months.

In addition to the above, each employee who has worked for 5 years or is otherwise eligible for gratuity should get gratuity at the prescribed rate of 15 days' salary for every completed year of service.

Regards, Madhu.T.K

How to process the lay-off application?

What is the period between notice display and application? What supportive documents should be attached with the application?

Hi Everyone,

Please guide me through the steps for layoffs and compliance that need to be kept in mind while deciding to lay off employees. Important links, documents, and reports about this "Layoff in India" topic are highly required and would be a great help for me.