How to Calculate Retrenchment Compensation for a Worker with Gaps in Service?

Dear Sir/Seniors,

I have a problem regarding the continuous service of workmen. Suppose a laborer worked for 3 years of service, and out of his service period, he was absent for about 4 months. What will be the retrenchment compensation?

Work Period Analysis

Jan-10 to Dec-10: Total number of days worked = 260
Jan-11 to Dec-11: Total number of days worked = 250
Jan-12 to Dec-12: Total number of days worked = 200 (during this period, he only worked from Jan-12 to April-12 (100 days) & Sep-12 to Dec-12 (100 days). He was absent from May-12 to Aug-12.

Please suggest whether we will take 45 days of retrenchment compensation or 30 days of retrenchment compensation.

This matter is most urgent.

Understanding Retrenchment and Compensation

Retrenchment means the termination by the employer of the service of a workman for any reason whatsoever, other than as a punishment inflicted by way of disciplinary action.

In the case you mentioned, there is no termination of service. The employee remained absent on a loss of pay. The employee was liable for disciplinary action if this absence was unauthorized. The employee is not liable to receive retrenchment compensation.

If you are giving retrenchment compensation in the case of unauthorized leave on a loss of pay, I would like to join you, sir.

Regards,

As per your query, there is no point about retrenchment compensation. Management did not terminate the employee; the employee was absent without authorization. Therefore, you do not need to pay any retrenchment compensation to the employee.

Regards,
Srini

You are all correct that if the employer does not terminate his service, there is no question of retrenchment benefits at all.

Regards,
Ramesh

Continuous Service and Retrenchment Compensation

If the period of his absence is due to sickness, authorized leave, or cessation of work not due to his fault, then that period is also deemed as continuous service. If it is so, he may be paid 45 days' salary. Otherwise, 30 days' wages. In addition, he shall be given one month's notice or pay in lieu thereof. If he is on unauthorized absence, take disciplinary action and terminate him. If he is so terminated or he resigns, retrenchment compensation need not be given.

Regards,
Varghese Mathew

[Phone Number Removed For Privacy Reasons]

Clarification on Retrenchment Compensation Rule

Please clarify the 15-day retrenchment compensation rule. As we are in a construction company and have retrenched the workmen with full benefits, our client has rejected our calculation method.

Suppose a workman worked 300 days in 1 year and 3 months. According to the Industrial Dispute Act, we have to pay one month's notice pay and 15 days of retrenchment compensation. However, our client insists that we must pay 15 days of retrenchment compensation plus an additional 3.75 days, which means (300/240 = 1.25).

Please also clarify the concept of continuous service when giving retrenchment benefits.

Thank you.

Your calculation, as stated above, is correct. Please refer to section 25-F(b) of the Industrial Disputes Act. Service in excess of six months should only be counted as one year, while service up to and less than six months should be ignored. If your client is willing to pay more, let them do so.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]