Facing Layoffs in a Recession: How Should HR Handle Staff Reductions and Employee Concerns?

My name is Prakash, and I work in HR as the Head. The management is considering staff reductions due to the recession and decreasing sales with no growth prospects for two years. As the HR Head, the management has provided me with a list of staff members to be let go. Can we terminate these staff members by giving them notice citing the reasons mentioned above? I am facing difficulties when interacting with the staff. According to the management's decision, actions need to be taken while considering the staff's needs, thereby maintaining flexibility during discussions. However, some staff members are requesting more compensation and additional time due to the challenges of finding new employment. In light of these circumstances, we are willing to allow more time, but some employees are facing threats from local individuals, and others are refusing to resign. There is suspicion regarding potential fraud by one employee in the purchasing department, although no evidence has been found. Please advise on how to proceed in this situation.

Yes, you can retrench your employees.

If your organization employs more than 50 but less than 100, you have to give one month's notice (stating the reason for retrenchment) to employees who have been in continuous employment for not less than one year, or you have to pay them in lieu of the notice period.

In the case where your organization employs more than 100 workers, you must give a 3-month notice and obtain proper permission from the government.

When retrenching your employees, you must follow the principle of "last come, first go," which means you can terminate employees who joined last first.

If the organization is under economic stress, you can terminate employees by following the above-mentioned rule and principle and compensate them according to the law. If any employees do not accept the legally served notice and threaten you, you can take this matter to the Assistant Commissioner of Labour who has jurisdiction over your company.

Regarding your doubt about questioning the integrity of the purchase department staff, I apologize as I do not have sufficient knowledge and exposure to provide an answer to that.

With Regards,
Mr. Thumbs UP

Retrenchment Guidelines and Considerations

Legally, retrenchment of workers is on a first-come, first-served basis. However, this does not apply to management staff or anyone excluded from the Industrial Dispute Act.

For your part, you need to negotiate with your staff to convince them to resign and leave. Your management needs to decide on a fair policy and implement it uniformly across the company. Giving someone more time holds no significance. Having uninterested staff on the premises is also not advisable. Instead, decide on the notice pay you are willing to provide.

Make it clear to the staff who are resisting that if they do not resign, you will be forced to terminate them. Termination will make it more difficult for them to find another job.

Retrenchment Guidelines and Legal Compliance

While resorting to retrenchment, you cannot pick and choose; you have to follow the policy of "last in, first out," meaning the employee who joined last is the first to go, and in succession thereafter. If you are employing more than 100 people in manufacturing, then government permission is necessary. Otherwise, you can display a seniority list categorized as per the Industrial Disputes Act. Display a general notice providing reasons for the retrenchment and issue individual letters to the employees whom you are going to retrench, along with retrenchment compensation at 15 days' salary per completed year of service and one month's notice pay.

Whenever your sales increase and you need to re-employ workmen, you have to give preference to the retrenched staff by issuing a public notice in accordance with Section 25H.

Regards

If you frame your query in the most generalized way, the response would just be presumptive based on the general legal provisions only and may not serve your purpose as expected. You ought to have mentioned the nature of your industry, its constitution, the total number of employees with a breakdown of workmen and staff, the details of any study conducted by the management to determine the right size of the workforce in the backdrop of the continuing recession, the number of people to be sent out, the rationale behind the pick-and-choose method of identifying the persons to be sent out like habitual absentees, inefficient workers, workers facing disciplinary actions on the ground of serious misconducts, the ratio of engagement of contract labor in the works, details on the number of trade unions, if any functioning, wage revision, if any due in the current year, gratuity insurance scheme, if any in vogue, the average age of the workmen, age of the industrial establishment, the duration of the recessionary trend, details of the scheme of voluntary separation, if any proposed by the management and the response thereof, and the austerity measures introduced by the management so far like reduction in the managerial strength, salary, etc. Better try to respond accordingly.