Compensation to Employess in case of factory layoff or closer

Hi All,

Our factory is planning to go for a layoff/closure in the near future. It is a manufacturing unit situated in U.P. and has been a profitable unit up to now. The factory employs over 150 direct employees and 85 indirect employees (approximately 40 of the indirect employees hold managerial positions).

The decision for the layoff/closure has been made by the Top Management due to strategic reasons. In such a scenario, I am seeking information on how all employees can be compensated, especially considering that many have been with the company for over 10 years. I am interested in understanding how the laws can provide us with benefits.

I am looking forward to your valuable suggestions and answers.

Thanks & Regards,
Vikram Bhagat

Hi All,

Our factory is planning to go for a layoff/closure in the near future. It is a manufacturing unit situated in U.P. It has been a profitable unit until now, with over 150 direct employees and 85 indirect employees (out of which around 40 are in managerial positions).

The decision for the layoff/closure has been made by the top management due to strategic reasons. In such cases, I am curious about how all employees can be compensated, especially considering that many have been working here for over 10 years. I am also interested in understanding how the law can provide benefits in this situation.

I look forward to your valuable suggestions and answers.

Thanks & Regards,
Vikram Bhagat

Dear Vikram,

From your post, I infer that there are more than 100 workmen on the rolls of your manufacturing unit during the past 12 months' period. As such, Chapter V-B of the ID Act, 1947 is applicable to your establishment. Therefore, it is mandatory to get prior permission from the appropriate Government for lay-off, retrenchment of the workmen, and closure of the undertaking.

It's a very cumbersome process as no popular government would accord permission due to the fear of criticism. Moreover, just because of certain losses in a particular year, it would not be justifiable to accord permission for lay-off or closure to a going concern.

Therefore, my suggestion would be to go in for some VRS on mutually agreed norms and terms.