Navigating Retrenchment: What Happens to Compensation When Employees Find New Jobs?

Dear all,

I have a query regarding retrenchment compensation payable to employees who are shown an exit on account of downsizing due to cost escalation (ITES Company).

The Management has already served the notice to the employees and asked them to look for another job. Additionally, it provided an option to some employees to continue working until the end of the notice period, with the assurance of receiving the notice pay. Meanwhile, some employees found jobs elsewhere and immediately joined those new positions.

Now, the questions are:

1) Is notice pay and retrenchment compensation payable to employees who have joined other companies?
2) If necessary, is it possible to revoke the served notice and request the employees to return?
3) Should salary be paid to employees who were served notice but were asked to continue working?
4) What reason for separation should be mentioned in their service certificates?

If I have missed anything, please include your comments regarding the same along with your query.

Thanks & Regards,

M.T.K.S. Vasan

Dear Vasan,

Greetings.

You have raised a good question at the right time.

1. The notice pay has to be paid to the person even if he has obtained employment in another company. How do you prove that he is employed in another company?

2. You are already downsizing the company, so why are you calling him to rejoin for the sake of the notice period? It would be better to suggest that they employ him in the new company instead.

3. Certainly, the salary has to be paid for the notice period if the employee works for the company.

4. You can mention it as a retrenchment of service due to adverse market conditions.

Hope these clarifications are sufficient for you.

Cheers,
Trisha
HR Professional

Dear Vasan,

What is the content of the "served notice"? If the employee has resigned and moved on, then no retrenchment compensation has to be paid. Regarding notice pay, your company has already promised to pay the notice pay. Therefore, you need to pay this. Nonetheless, since you have asked them to separate, then you need to pay the notice pay. Whether this is a case of retrenchment or not will be determined by the content of the "Notice" served. If it says that the service of the employee is being terminated for reasons stated in the definition of retrenchment in the ID Act, then you will have to pay the retrenchment compensation. For a more specific answer, please put specific questions with relevant details.

Regards,
Nilendra

Severance pay

In case of retrenchments, employees with more than one year's service, and other than temporary or casual employees, are entitled to compensation equivalent to 15 days' pay for each completed year of service (sec. 25F(b), IDA).
However, a distinction is made for cessation of business for reasons beyond the control of the employer. This might include force majeure, frustration of contract, etc., but does not include financial difficulties or loss of stock. In such circumstances, the employee is still entitled to a redundancy payment, but the amount is less than that given for termination of employment due to other reasons, being a sum equivalent to no more than the average of three months' pay (sec. 25FFF, IDA).
Under the Payment of Gratuity Act, 1972, a worker continuously employed for five years or more is entitled to a gratuity payment upon termination of service, except where such termination has been as a result of his or her wilful omission or negligence resulting in damage or loss of the employer's property, in which case the gratuity is forfeited to the extent of the damage caused. Where the employee has been dismissed on account of his or her riotous, violent or disorderly conduct or for an offence involving moral turpitude committed in the course of employment, the gratuity shall be wholly or partly forfeited. The sum is calculated at 15 days' average pay for every completed year of service.
Avenues for redress

Since the 1965 amendments to the IDA (sec. 2A), the dismissal or retrenchment of an individual is deemed to be an industrial dispute, hence the ability of a worker to take his or her claim to the Labour Courts. Under sec. 2(a) of the IESA, a worker dissatisfied with his or her termination of employment is entitled, in the first instance, to raise the matter as a labour dispute with an officer from the conciliation department of the Ministry of Labour. The officer will attempt to conciliate the matter and must submit a report to the Government if conciliation fails, pending a decision from the governmental authority on whether the matter merits adjudication before the Labour Court or Tribunal.
Challenges to dismissal can be made to the Labour Court under sec. 11A of the Industrial Relations (Amendment) Disputes Act, 1971. The Labour Court may review a termination of employment and set aside a dismissal if it decides that the dismissal was not justified.
No time limit is prescribed within which an aggrieved worker may raise a labour dispute. However, excessive delay may prejudice a worker's case. The burden of proving that dismissal was for a valid reason rests with the employer.
The Labour Court, Industrial Tribunal and National Tribunal have wide discretion to review disputes relating to termination of employment, including the examination of the evidence, and to award relief as they see fit including compensation in the form of damages and reinstatement (sec. 11A, IDA). Before reinstating an employee, the judicial body will inquire into the feasibility of reinstatement; for example, whether the employee has lost confidence in the employer and whether industrial peace and harmony will be threatened.

Hi Prem,

I was recently retrenched from my company along with a number of other people. The company is offering a compensation package of two months' salary plus an additional 15 days of salary for each completed year of service. However, according to the law, the compensation should actually be three months' salary.

In light of this discrepancy, I am unsure about the correct course of action. Could you please advise me on how to proceed in this situation?

Thank you,
Prem

Hello,

I have completed 4 years, 8 months, and 18 days in my office. Now, for the purpose of cost-cutting, they want me to resign. The company is ready to pay one month's salary. My question is, can I resign or ask the company to terminate me? Which option would provide me with the maximum benefit and be good for me in the future?

Please answer ASAP.

Regards,
Manny

If a person has been working in an organization for the last 5 years and the company now wants to terminate his services by harassing him and forcing him to resign, in that case, what compensation should be given to that employee and for what is he eligible?

Please let me know if you need further assistance or clarification on this matter.

In this case, the employee should not resign on his own. Let the employer terminate him. If so, he will be entitled to receive a termination benefit of 120 days' salary and a termination benefit of 30 days' salary for every completed year of service.

Maybe the answer is clear.

Regards,
Shahabuddin

Hi,

Please tell me, what is the eligibility for retrenchment benefits for workmen and how is it calculated?

In this case, the employee should not resign on his own. Let the employer terminate him. If so, he will be entitled to receive termination benefits of 120 days' salary and termination benefits of 30 days' salary for every completed year of service. Maybe the answer is clear.

Regards, Shahabuddin

Please can you revert with the section you mentioned above regarding the termination clause? Also, is the company liable to pay CTC or basic salary to the employee if they terminate the employee? Please revert.

If any employee's service is less than 6 months and the company doesn't want to continue employing that individual without providing a reason, how much retrenchment pay should be given to them and how is it calculated.