Navigating Employee Termination for Non-Performance: What Legal Steps Should We Follow?

Hi all, I need your inputs on the legal formalities to be considered for terminating an employee on the basis of non-performance. We are basically an IT product company based in Hyderabad, but the office is registered in Chandigarh.

Termination of Employment Due to Non-Performance

In our employment contract for permanent employees, we mentioned that for termination of employment (on a performance basis), the minimum notice period will be given as per Indian Labour law, but we did not mention the duration. I recently joined here and am not sure about the minimum duration for termination as per Indian Labour Law.

We followed the process of intimating the employee about his non-performance and gave enough time for improvement. However, we have not seen any improvement; therefore, we have no other option but to proceed with the termination process.

I request you to provide your inputs on the laws to be considered in this case.

Thank you in advance for all your inputs.

Thanks,
Anil

Handling Non-Performance Termination

Law does not compel an employer to keep feeding a non-performer. You can send him out. However, it is essential to document his performance or rather non-performance. For that, you have to conduct a face-to-face performance appraisal and inform him of the consequences. If the employee still does not perform, you can terminate his service. If you can provide him with one month's notice or pay in lieu of notice, that would be proper, so he cannot claim that he was denied justice.

Regards,
Madhu.T.K

As rightly mentioned by Mr. Madhu, building the file is more important. If you have already communicated with the employee on various occasions and recorded accordingly, then you can initiate action. To avoid any further implications and in the interest of the employee, it is better to obtain the resignation letter from him and relieve him by paying one month's notice pay and closing because he has to work somewhere, and the termination will have a lot of impact on his future. Hence, it is better to explain properly and complete the process. If he refuses to submit his resignation, then terminate.

Regards,
Kamesh

Service Agreement Clauses in Employee Contracts

What if, in this case, we had entered into a service agreement for, say, 5 years with that employee? Could you please elaborate on the affecting clauses of the service agreement, if possible?

Regards,
Saras Kumar

Employer's Rights in Termination Bonds

No bond will state that the employer is obligated to retain a non-performer. Typically, the bond will also favor the employer.

Regards,
Madhu.T.K

If you wish to terminate someone on a non-performance basis, then you have to document each and every step of his performance/non-performance. Give him an opportunity to improve the situation. His non-performance should not be above the level of other employees.

Please check www.labourlawhub.com for more information.

Under the provisions of labor law, an employee can be removed for poor performance when such poor performance is proved through a domestic inquiry. In your case, no such inquiry was held, and you were terminated directly, which makes the entire process invalid. However, since you have completed 1-2 months in the service, there won't be much monetary benefit compared to the time and legal expenses you have to pay if you decide to go legal.

Probation Period and Termination

Normally, there will be a probation period, which could be 6 months. If you are on probation, you can be removed without further detailed inquiry. If the appointment order states that during the probation period your services can be terminated "without assigning any reason," then there is no need to conduct any inquiry. A communication following the termination clause of your appointment order can suffice, informing you that you are hereby terminated from service. An explanation is only required if you contest the cause of termination. If the appointment order specifies that your services shall be terminated for poor performance during the probation period, again, no inquiry is necessary. A communication stating that you are terminated for poor performance will be sufficient.

Termination of a Confirmed Employee

Terminating a confirmed employee will take a different turn because it involves considering various factors, including performance, that led to the confirmation in service. Therefore, you cannot suddenly deem a confirmed employee as a non-performer. Performance is assessed over time, and every evaluation should be communicated to the employee to facilitate improvement. Denying this communication would be considered a denial of natural justice. However, during probation, this level of communication is not required.

Regards, Madhu.T.K

And there was no clause regarding termination during the trainee period.

Handling Non-Performance in Employees

Your query regarding a non-performer: What type of work is he doing? Is it manual, clerical, technical, etc.? What are your Service Manual conditions? If the Standing Orders Act applies, and if he is in the category of a workman performing the aforementioned duties, you need to conduct a domestic enquiry first to prove his non-performance. We had conducted one such enquiry where, besides non-performance, an employee of a software firm was very arrogant. Therefore, an enquiry was conducted, and then a dismissal letter was given.

Regards