How Can HR Handle Employee Resignations During Financial Struggles and Downsizing?

Hi, our company is downsizing due to financial issues. We have asked the employees to resign; however, a few employees are not ready to do so. Is there any provision that the company may ask them to leave? The offer letter says that either party can terminate employment by giving two months' notice.

An important thing to note here is that the company has not been able to pay salaries for the last two months. The company does not deny payment; however, it is waiting for some funds. All dues, including salaries, notice period, PF, and TDS, will be paid then. The company is ready to mention this on the FnF statement.

As an HR person, what solution do I have to ask employees to leave? Can it be mentioned in the termination letter that this is due to financial implications? Is it necessary to give a reason? Simply mentioning that we revoke the agreement by abiding by the notice period isn't sufficient?

Thank you.

Dear ssavi,

Firstly, as an employer, you cannot immediately seek refuge in the termination clause of a two-month notice due to downsizing necessitated by the current financial crisis.

Secondly, your establishment is governed by the Industrial Disputes Act, 1947. Therefore, you must strictly adhere to the procedures outlined therein regarding the retrenchment of surplus labor. This includes obtaining prior permission from the government if the number of your employees is 100 or more, issuing a notice or providing notice pay in lieu, and promptly paying retrenchment compensation along with other terminal benefits such as gratuity, leave salary, unpaid salary, unpaid proportionate bonus, etc.

Thirdly, if you prefer not to resort to retrenchment at your initiative but rather expect employees to resign voluntarily, it automatically becomes a resignation through voluntary separation. However, this may not be feasible without offering additional compensation based on the years of service already completed or yet to be rendered.

Therefore, under the aforementioned circumstances, refrain from delving into complicated situations solely based on the termination clause in the employment contract. It would be advisable to invite the individual employees earmarked for separation or their union to negotiate and reach an amicable settlement for voluntary separation, ensuring the protection of both management and labor interests.

Kind regards,
[Your Name]