Facing Role Redundancy: Am I Eligible for Severance and How Should I Handle My Exit?

Hello, I have been serving with the IT company for more than 8 years. Two months ago, I received an email from HR stating that my role is redundant, and I will have 2 months to search for roles within the organization or externally. If I do not secure a role within the organization within this time frame, I will need to resign. Unfortunately, I have not been able to find a suitable role either internally or externally.

Severance Package Eligibility

Am I eligible for any severance package (excluding my gratuity)? Can you please advise?

Exit Process Initiation

Additionally, after the initial 2 months, should I initiate the exit process by resigning through the tool, or should I leave it to the employer to handle?

Thank you.

Eligibility for Gratuity and Severance Pay

You will receive gratuity as you have worked for 8 years, along with leave surrender benefits. If the employer is terminating you due to redundancy, they are supposed to pay you severance at the rate of 15 days' salary for each completed year of service, which will amount to roughly 4 months' salary. However, if you have been working as a manager with managerial functions such as approving leaves of subordinates, initiating disciplinary actions, or appraising subordinates' performance, you will not receive any severance or retrenchment compensation.

Termination and Retrenchment Procedures

Since HR has informed you via email that your role is redundant, the chances of management terminating you may be remote. This is because termination/retrenchment involves certain principles that must be followed, including notifying labor authorities and selecting employees for retrenchment based on specific criteria. Typically, the last employee who joined a particular role is the first to be retrenched. As you have been with the company for 8 years, you are unlikely to be the last employee who joined in the role. Therefore, there is a very remote chance that the employer would initiate your termination, but you may still need to resign. For further clarification, you can speak to the HR person who sent you the email regarding the redundancy of your role.

Thank you for the response, Madhu. Yes, I have been working as a manager with managerial functions of approving leaves of subordinates and appraising the performance of the subordinates. So, does that mean I will not receive any severance pay? Is that correct? Is there any guideline or policy related to this? And what is the reasoning behind it, please?

Severance Pay Eligibility

Yes, you are not entitled to receive any severance pay. Severance pay or retrenchment compensation, as described in law, is available only to workers covered by the Industrial Disputes Act. The "workman" is defined in the Act to exclude employees with managerial functions. Various courts have clarified that individuals with managerial powers, determined by their functions rather than designations, are not considered workmen under the ID Act. Therefore, they will not receive protection under this Act, and their conditions of service will be governed by the employment contract with their employers.

Notice Period and Redundancy

The conditions for termination of employment typically involve a two-month notice period from either side. Since your employer has already informed you via email that your position is redundant, this communication may be considered as the notice from the employer's side. While it may be challenged as a violation of contract in civil court, engaging in legal action could lead to unpleasant situations, especially if you have other job opportunities or your career is not ending with this organization. Thus, it might be best to prepare for your departure in two months.

Proactive Resignation and Gratuity

Submitting your resignation citing the redundancy of your position as communicated by HR can be a proactive step. It may seem unfair to ask a manager with eight years of service to leave, but you will still be entitled to gratuity, which amounts to 15 days' salary for each completed year of service. The calculation of gratuity based only on basic pay may be contested, as the total emolument should qualify for gratuity.

Gratuity Calculation and Leave Encashment

Regarding gratuity calculation, you can refer to the following link for more information: http://madhu-t-k.blogspot.com/2024/0...lary-some.html

Additionally, apart from gratuity, you may also be entitled to leave encashment benefits if you have a balance of earned leave remaining.

Thank you, Madhu, very much for the great insight and detail. For your information, I have a total of 20 years of experience, with 12 years from my previous company. Additionally, I work for a captive company, not a service-based company. Will this make any change to the severance package?

Furthermore, the role in my Business Line has been closed, but I have noticed similar roles existing in other Business Lines within the organization, albeit with potential name changes.

Moreover, there are a few employees who have been in the organization without billability for many months, whereas I am currently billable. It seems to me that this could be a case-by-case situation rather than following generic rules.

Severance-related matters

For severance-related matters, your service with previous companies or your service with other companies in parallel will not make any difference. Whether severance pay is to be paid or not is decided with reference to the length of service and the role that you have with your present organization only.

Role closure and reemployment

Whether the role is closed or not is also purely an internal matter. In the case of an employee not having any managerial roles, if a role is closed, then no person shall be recruited to that role in the future. At the same time, if the work of the same role comes in the future, the employer is under an obligation to hire the person who was retrenched before an opportunity could be given to others. However, in the case of managers, these protocols will not apply. Therefore, even if the role is recreated, it is not mandatory that you should be given preference over others in hiring.

Challenging retention and termination

If there are employees on the bench whose services are retained, the same can be challenged, but it will not be maintainable in any courts of law. In a system like government services where you can see a series of service rules, this kind of antagonism could be challenged, but not in private establishments. In a private establishment where certified Standing Orders regulate the different conditions of service, you can challenge the act of selective termination. However, the Standing Orders also come to the rescue of workers only!

In general, it should be seen as a biased act of the management.