How Do You Navigate Termination for Cost-Cutting or Poor Performance Under Labor Laws?

Dear All,

Please let me know the process of termination due to lack of business/cost-cutting or poor employee performance under the labor act. It would be helpful for me to receive a reply at the earliest.

Thank you

In order to correctly reply to your query, it is necessary to know the total number of employees you have as of today.

Dear JiJiD,

To provide you with appropriate advice, the following inputs are required:

1. Are you a factory or commercial establishment?
2. How many employees are currently employed in your organization?
3. Please provide details of employees categorized by their roles.
4. How many employees do you intend to reduce in each category for cost-cutting purposes, and how many based on performance?
5. What type of establishment is it?
6. What type of business are you engaged in? If it is a factory, what is the product being produced?

I look forward to receiving the necessary information to assist you further.

Best regards

Factors to Consider for Retrenching Employees

You have to take into consideration a few factors for retrenching employees, first of all, whether it is a manufacturing company or a services company. What is the strength of the company? If it is a manufacturing company and the strength of workers exceeds 100, you need to seek government permission prior to retrenchment. If not, then you need to put up a seniority list of all the workers for at least 8 days. After that, you can resort to retrenchment based on the principle of 'last come, first go,' meaning the employee who joined last will be let go first and so on.

Then, you need to compute the retrenchment compensation, which is 15 days' salary per completed year of service and one month's notice pay at the time of retrenchment, i.e., simultaneously. These are the provisions of the Industrial Disputes Act, 1947.

Handling Poor Employee Performance

Regarding poor performance of employees, you have to take disciplinary action. If proven in the inquiry, then only can you terminate them after considering their past record and depending on the gravity of misconducts.