How Can IT Managers Claim Retrenchment Compensation Amid Frequent Downsizing?

Hello Experts, unlike other industries, in the IT industry, many employees' designations are managers, whether they actually perform managerial/supervisory work or not. Just as retrenchment occurs among workers, it also happens among managerial employees. We have the retrenchment compensation defined for workers in the ID Act. However, we are unclear about the retrenchment compensation for IT employees who perform only managerial work. We understand that these employees do not fall under the ID Act workmen category.

Kindly advise on how to claim compensation for the managers who work in the IT industry and are affected due to workforce downsizing, which occurs frequently in the IT sector.

Retrenchment Compensation for Managerial Employees

There is no similar formula for managerial employees for retrenchment compensation. It primarily depends on two factors: the capacity to pay and the willingness to do so. If both factors are present, many industries are known to have paid very liberally, often offering one month's current salary for every completed year of service or the remaining salary, whichever is lower. It could go up to even 45 days' salary per year of service. Some even pay a lump sum amount as a gratitude payment without much calculation.

Dear Ms. Parimala,

Understanding the Definition of a Workman

Designation cannot be the deciding factor for determining the nature of the job position held by an employed person or the amount of salary paid to him. It is always the nature of duties predominantly discharged by him that ultimately decides whether one is a workman under the IDA, 1947 or not. If we analyze the definition of the term "workman" under section 2(s) of the ID Act, 1947, it is evident that a person employed to do (1) Manual work, (2) Unskilled work, (3) Skilled work, (4) Technical work, (5) Operational work, (6) Clerical work, or (7) Supervisory work as per the terms of the contract of employment would be a workman. If he is mainly employed in a managerial or administrative capacity, he is not a workman. Additionally, if employed in a supervisory capacity and draws wages exceeding Rs. 10,000 per month or performs functions mainly of a managerial or administrative nature, he is not considered a workman. By strictly applying these parameters to each employee facing premature discharge in the IT or ITES establishments for obvious reasons, a conclusion can be drawn on whether he is a workman eligible to claim retrenchment compensation under section 25-F of the Act.

Compensation for Managers

Regarding managers, only the terms of exit fixed in case of unilateral termination of the contract of employment by the employer need to be adopted to determine the amount of compensation. However, a higher rate of compensation may be negotiated out of mutual agreement, as is the practice in some IT companies, as noted by Mr. KK!HR.

Dear Parimala, the Manager under the ID Act of 1947 is different from present-day managers. As you are considering retrenchment, please take into account individuals who hold the title of manager but do not have authority in administrative matters within your company.