Retrenchment and Employee Benefits
In case you have retrenched an employee and they have not rendered 240 days of service in the last twelve months, there is no requirement to pay retrenchment compensation. However, other factors need consideration, such as whether Section V B of the Act is applicable. For example, in Delhi, if a factory has more than 100 employees on average in the preceding twelve months, permission for retrenchment is required.
In any case, the "last come, first go" formula under Section 25 G will apply. Additionally, Section 25 H states that whenever there is a requirement for the same job, the retrenched employee must be called upon first. The Industrial Disputes Act outlines the retrenchment process, including displaying a seniority list and sending Form P.
It is advisable to have a probation clause in the appointment letter and terminate services during probation, which will not be covered under retrenchment. This approach will also bypass all the above conditions.
Regards,
Anurag Lakhotia
Industrial cum Labour Law Consultant
Advocate
Delhi High Court