New to HR: How Do We Handle a Retrenchment Complaint and Compensation Issue?

Dear All, I am new to this community and to my job as well. Can anyone suggest to me regarding our former employee who filed a complaint against his retrenchment from the company? How much compensation do we need to pay for retrenchment, or how can we defend ourselves in this regard? Is there any law requiring us to give him notice before retrenchment, and what could happen if we don't do the same? There is no agreement between us regarding his employment with us for more than a year. Your early response will be highly appreciated.

Thanks and regards,
Sarvesh

Dear Sarvesh, please provide full details about the ex-employee. What was his date of joining and when did he leave the company? What were the terms of his employment, especially regarding the retrenchment clause? Did he resign from his position, or was he retrenched by the company? How was his work performance during his employment? Was any disciplinary action taken against the retrenched employee? If so, please provide those details so that our knowledgeable members can offer you a suitable response to your query.

Employers are required to pay retrenchment compensation if an employee works more than 240 days in a year under Sec. 25F of the ID Act. The calculation is as follows:

Last drawn salary / 30 * 15 * Number of Years

Regards,
Naresh Gadde
Hyderabad

Thank you for replying to my query. Please find the details required to come to any conclusion.

1. Joining date was January 2010, and he left the organization in February 2012.
2. He joined the organization on a temporary basis and continued until February 2012 as a temporary employee.
3. The company has retrenched him from service.
4. Work performance was poor, but we have given only verbal warnings to him for his performance.
5. No disciplinary action taken as such.

Please give your valuable suggestions.

Thanks and regards,
Sarvesh

In your posts, you have stated that there was no obligation to continue the employee in your employment after one year. What do you mean precisely by this statement? What was the basis for the continuance of the employee beyond one year?

Regards

Thank you for replying to my query. Please find the details required to come to any conclusion:

1. The joining date was January 2010, and he left the organization in February 2012.
2. He joined the organization on a temporary basis and continued until February 2012 as a temporary employee.
3. The company has retrenched him from service.
4. Work performance was poor, but we have only given him a verbal warning for his performance.
5. No disciplinary action has been taken.

Please provide your valuable suggestions.

Thanks and regards,
Sarvesh

Dear Mr. Sarvesh, In your post, you have specifically stated that you have retrenched the employee. Therefore, before retrenching the employee, you should have followed the procedure prescribed under Chapter V A of the Industrial Disputes Act. The details contained in your post make me presume that your company has not followed the procedure prescribed under Chapter V A of the Industrial Disputes Act. If you had not followed the procedure prescribed under Chapter V A of the Industrial Disputes Act, then the retrenchment becomes illegal, and the employee can claim reinstatement. You have not given the reason for retrenchment. You have stated that his work performance was poor. If this is the reason for his retrenchment, then it amounts to punishing him for his work performance, and therefore, if you have not followed the proper disciplinary procedure, then also the retrenchment becomes illegal. My views are based on the information furnished by you in your posts. In case Chapter V B is applicable to your industrial establishment, then you should also have obtained prior permission in writing from the appropriate Government.

With regards,

Dear Sarvesh, In addition to the advice given by Mr. V Harikrishnan, please follow the procedure as given below:

1. You must pay one month's salary as his notice pay, as you have retrenched him from the services.
2. Even though he is on a temporary cadre, he must be paid 30 days of Retrenchment Compensation (15 days' pay to be given for every completed year of service).
3. You must pay the leave pay, whatever is in his credit, or one day for every completed 20 days worked.
4. Hope you might have served with a notice for retrenchment, and in that notice, you might have mentioned his unsatisfactory work performance and the verbal warning as well.
5. If you do so, then you need not worry about any action.

Regards

Respected V. Harikrishnan, I would like to get clarity on the following: Does BPO fall under retrenchment? As per the retrenchment act, we have to pay one month's salary and 15 days' average pay for every completed year. What if an employee has completed 1 year and 5 months? In such cases, do we still have to pay one month and 15 days' salary?

Awaiting your response.

Regards, Shweta

The need to pay retrenchment compensation to an employee is provided for in the Industrial Disputes Act of 1947. Section 2(oo) of the Industrial Disputes Act defines the term "retrenchment" and also specifies what is not covered by the definition of the term "retrenchment." Please go through this section of the Industrial Disputes Act.

For the Industrial Disputes Act to be applicable, firstly, the employee should be a "workman" as defined under section 2(s) of this Act. Secondly, the organization that employs the "workman" should be an industry as defined under section 2(j) of the Act. Thirdly, the issue involved should be an industrial dispute as defined under section 2(k) of the Industrial Disputes Act. If any one of the above-mentioned conditions is not satisfied, then the Industrial Disputes Act is not applicable.

In the case of a BPO, the activity carried on in the BPOs is considered "industry" as defined in the Industrial Disputes Act. I cannot elaborate on the basis on which I am making this statement due to paucity of space and time, and I aim to be brief.

If the individual who is retrenched is a "workman" as defined under the Industrial Disputes Act, then the retrenched "workman" is entitled to the protection of the Industrial Disputes Act. In other words, the BPO must follow the provisions of the Industrial Disputes Act while retrenching the workman.

As "retrenchment" is an industrial dispute, the Industrial Disputes Act is applicable to the case referred to in your post.

In the case of the employee mentioned in your post, if during the last six months of his service he worked for 120 days, he is deemed to have put in continuous service for six months, making the total continuous service one and a half years. He will be entitled to retrenchment compensation at the rate of 15 days of average pay for every completed year of service, with the period exceeding six months of continuous service treated as one year of continuous service. In this case, as the employee has only one and a half years of continuous service, he will be eligible for retrenchment compensation for one year of continuous service only. Additionally, he is entitled to one month's notice or one month's wages in lieu of notice.

Regards,

Thank you, sir, for your response. Much appreciated. Have one more query:

Options for Employees During Relocation

If the retrenchment is taking place due to the relocation of the process to a different facility and location, the company offers the following choices in the interest of the employee:

- **Option A:** Subject to meeting the skill requirements of voice processing, and further, subject to successfully clearing the necessary interviews and training as required by the job specification (offers this in the same facility at the same location).

- **Option B:** Accept an option of transfer to our different facility to a process of a parallel nature, subject to clearing the requisite training. As a humane gesture, if any employee accepts this option, the company will offer such employee compensation higher than the one presently being paid.

Legal Implications of Employee Decisions

If the employee doesn't choose either of the options and opts for separation of services, can the employee challenge it in the labor court?

Secondly, what if the employee refuses to choose either of the options and also chooses not to resign? Can the company post the Pay Order through registered AD at his residence?

Awaiting your response.

Regards,
Shweta

Employee Retrenchment and Relocation Queries

1. What if the employee does not satisfy your requirements specified in item A? Will you continue to keep him in the same location or send him out of your employment?

2. In the case of option B, what happens if the employee chooses to move to the new location but does not successfully complete the training?

3. If the separation is voluntary, then he cannot challenge it successfully afterwards.

4. If the employee does not accept any of the options, then he can be retrenched after following the procedure outlined in the Industrial Disputes Act.

With regards,