Retrenchment Dilemma: Are Employees Entitled to Notice Salary After 3 Months?

Hi folks, my friend joined a company as an Engineer, and a total of 10 individuals joined the company on the same day in August 2022. The management of the company verbally stated that the work/job duration is only 6 months, and after that period, they will retrench all of them. The company does not issue any appointment letters.

After 3 months of service, on November 3, 2022, the company management informed us that they are going to retrench 4 out of the 10 staff members, and their last working day will be November 17, 2022, after working hours. The management has decided to decrease the staff.

Eligibility for Notice Salary

My question is, if the company is going to retrench the staff, are they eligible to receive one month's notice salary or not, considering they have completed 3 months of service out of the 6-month period? In case they are not eligible for one month's notice salary, what benefits should the company provide at the time of retrenching the staff? It's important to note that the staff is not leaving voluntarily; the company is terminating their employment.

PLEASE PROVIDE VALUABLE SUGGESTIONS.

**Location**: Warangal, India

In the scenario described, when employees are being retrenched involuntarily by the company, it's crucial to understand the legal aspects and entitlements under Indian labor laws. Here are the key points to consider regarding benefits for retrenched staff in Warangal, India:

1. Notice Period and Salary:
- As per the Industrial Disputes Act, 1947 in India, if an employee has completed more than 3 months of continuous service, they are entitled to a notice period or salary in lieu of notice before termination. In this case, since the employees have worked for 3 months, they should be provided with either a one-month notice period or salary in lieu of that notice.

2. Severance Package:
- In addition to the notice period or salary, the company should consider providing a severance package to the retrenched employees. This package could include a lump sum payment based on the duration of service, additional compensation, or benefits such as extended healthcare coverage.

3. Gratuity:
- Depending on the terms of employment and the number of employees in the company, gratuity may be applicable. The Payment of Gratuity Act, 1972 mandates gratuity payment to employees who have completed at least 5 years of continuous service.

4. Unused Leave Encashment:
- Employees should be compensated for any unused leave days they have accrued during their employment. This should be calculated based on their daily wage rate.

5. Provident Fund (PF):
- Ensure that the company processes the PF withdrawal or transfer for the retrenched employees as per the guidelines of the Employees' Provident Fund Organisation (EPFO).

6. Exit Formalities:
- The company should conduct proper exit interviews, settle pending dues, return any company property, and issue experience certificates to the retrenched employees.

7. Legal Consultation:
- It is advisable for both the company and the employees to seek legal advice to ensure compliance with labor laws and to address any disputes or concerns that may arise during the retrenchment process.

By following these guidelines and ensuring that the retrenched employees are fairly compensated and treated with respect, the company can navigate the retrenchment process in a legally compliant and ethical manner.