Facing Layoffs in Manufacturing: How to Navigate Terminations Legally and Fairly?

I am from the manufacturing sector located in Chennai. I require urgent help from experts/seniors as my company is planning to remove 40 employees from the company rolls due to low production. The company is certain that we can't retain these individuals any longer, across all levels - operators, executives, etc. The company is prepared to provide two months' salary as notice period payments.

Process and Acceptability

Please let me know what the process is and if this is acceptable. If not, what are the potential issues that may arise when terminating these employees, and what is the correct process according to labor law? We have approved standing orders.

Please assist me in this regard.

Thank you.

Regards,
HRD
Chennai.

If your company doesn't have orders from your customer and is facing losses because of it, and if your company cannot bear the liability of current workers, then you need to consider retrenchment.

Retrenchment Guidelines

If you have more than 100 workers, you must seek prior permission from the appropriate authority before proceeding with retrenchment. Notice must be served in the prescribed manner.

Before initiating retrenchment for workers who have been in continuous service for not less than one year in your industry, you must adhere to the following guidelines:

- The worker must receive one month's written notice stating the reasons for retrenchment, and the notice period must expire, or the worker should be paid in lieu of notice.

- The worker must be compensated at the time of retrenchment with an amount equivalent to fifteen days' average pay for each completed year of continuous service or any part thereof exceeding six months.

By ensuring compliance with the above conditions, your retrenchment will not be deemed illegal, and workers will not be able to challenge it in court. Even if they file a case, you will be protected as you have followed all necessary procedures.

Regards,
Arun J.

Thank you very much for your quick response. Yes, we have more than 100 employees who have completed 1 year with us. In your inputs, you mentioned that we have to take prior permission from authorities, whether it is the Labour officer or a higher authority.

We will provide notice to them in the prescribed format by specifying the notice period and reason. Is this sufficient, or are there rules regarding providing proper documents to the authorities? If there are rules, how should we proceed?

We will compensate them with two months' gross salary. How many days may be required to follow the above steps?

Regards,
HRD.

Retrenchment Application Process

Your first question is, to whom should I submit the application for permission for retrenchment?

Answer: Every state has specified in their gazette who can give permission for retrenchment. You can submit your application for granting permission for retrenchment to the Assistant Commissioner of Labor. He will verify the facts and figures and, after being satisfied with his remarks, send your application to the appropriate government for granting permission. If he is not specified as authorized to sanction in the government gazette, every state has specified the Assistant Commissioner of Labor as the specifying authority.

If he is not satisfied with the facts and figures, he may refuse your application for permission. The copy of the application made for permission should be served simultaneously to the workmen.

Procedure Duration

Your second question is, how many days will the procedure take?

Answer: The act says you need to give at least one month's notice to workmen. In practice, no company does so because it causes unrest in the industry. So, they opt for the second option, giving notice pay.

When you file an application for granting permission for retrenchment, normally, you receive a reply within sixty days stating whether your application is granted or refused. If you don't receive any communication within 60 days, you can assume that permission has been granted, and accordingly, you can proceed with the proper procedure for retrenchment. This whole process takes almost 2 to 3 months.

Regards,
Arun J.