Can We Let Go of Good Performers Due to Business Decline? Seeking HR Advice

I have a doubt regarding terminating an employee citing business reasons. They have been good performers, but since the business is declining, we want to remove a few employees. Can this be done? Kindly note that I am an HR professional with a small company that is into Recruitment Services and IT in Hyderabad. Can you please clarify?

Company Compliance

*PS: The company is governed by the AP Shops & Est Act and has over 25 employees as of today.

Regards,
Roopa

Termination Guidelines Under AP Shops and Establishment Act, 1988

As per Section 47 of the AP Shops and Establishment Act, 1988, termination of an employee shall not be done without reasonable cause. The bona fide of the termination may have to be proved if challenged. However, for employees who have put in more than six months, they shall be given one month's notice or wages in lieu thereof. Those who have put in not less than one year have to be given, in addition, 15 days' average wages for every year's service. For those governed by the ID Act, the retrenchment process has to be adhered to. If the appointment letter provides better conditions than those, then follow that.

Thanks,
Sushil

Clarification on Termination and Retrenchment

What you are saying is not termination; it's called retrenchment as per the Industrial Disputes Act. I hope termination/retrenchment/layoff will not come under the Shops and Establishments Act; it will come under the ID Act.

For doing retrenchment, you are liable to settle their dues like gratuity, their notice period salary, and leave salaries if any. Put an 18(1) settlement between the employer and that employee and settle it to avoid all legal issues in the future.

Thanks

Understanding Section 47 of the AP Shops and Establishments Act

When Section 47 of the AP Shops and Establishments Act specifically provides for compliance with those conditions, the word "retrenchment" under the AP Shops and Establishments Act does not come into play for employees other than workmen who are covered under the ID Act.

Thanks,
Sushil