Dear Fraternity,
We are a mid-sized IT company that was facing financial challenges and was planning for downsizing. Now the Coronavirus situation has further created a dent in revenues. Although it is not humane to go for layoffs in the current situation, I would like to understand the laws, litigations, and compliance around it. Request your expertise.
From India, Mumbai
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2We are a mid-sized IT company that was facing financial challenges and was planning for downsizing. Now the Coronavirus situation has further created a dent in revenues. Although it is not humane to go for layoffs in the current situation, I would like to understand the laws, litigations, and compliance around it. Request your expertise.
From India, Mumbai
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Dear Ruchis, it is too early to assess the extent of the damage likely to be caused by the outbreak and spread of the unprecedented Coronavirus on the Indian population and economy. The fear psychosis created by the epidemic resulting in self-imposed curfews, skeletal means for commuting, absence of adequate preventive and curative health care facilities, the slowing down of the already struggling economy, and the possibility of the global domino effect on the Indian manufacturing and service sectors certainly pose a gloomy near future.
In this murky scenario, of course, survival becomes the need of the hour for every industry. At the same time, every employer resorting to right-sizing of their employee force out of insurmountable odds should not lose sight of the human side of the problem that the overall rate of unemployment is also to rise correspondingly. Though the Industrial Disputes Act, 1947 provides a remedy in the form of "retrenchment" as defined under section 2(oo), it has certain restrictions such as exit by the order of seniority, i.e., last come, first go principle, notice and payment of compensation under section 25F, and obtaining prior permission of the appropriate Government under section 25N when the employee strength is 100 or more in the preceding 12 months period. As right-sizing of the labor force does not mean mere reduction in the number, statutory retrenchment will not enable the employer to have the choice of keeping the resourceful people retained.
Therefore, it is better to conduct a dispassionate study of manpower requirements over the next one or two years with the help of your functional heads and decide the excess number. Draw out a voluntary separation scheme with the help of your financial experts by making a comparative cost analysis of retention and exit of the excess people over the said period and decide the excess number department-wise. Start a consultative process with the trade union, if any, or the workmen directly and enter into bilateral settlements under section 18 of the IDA, 1947. That will make the exit of excess people peaceful and avoid unnecessary litigation.
From India, Salem
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In this murky scenario, of course, survival becomes the need of the hour for every industry. At the same time, every employer resorting to right-sizing of their employee force out of insurmountable odds should not lose sight of the human side of the problem that the overall rate of unemployment is also to rise correspondingly. Though the Industrial Disputes Act, 1947 provides a remedy in the form of "retrenchment" as defined under section 2(oo), it has certain restrictions such as exit by the order of seniority, i.e., last come, first go principle, notice and payment of compensation under section 25F, and obtaining prior permission of the appropriate Government under section 25N when the employee strength is 100 or more in the preceding 12 months period. As right-sizing of the labor force does not mean mere reduction in the number, statutory retrenchment will not enable the employer to have the choice of keeping the resourceful people retained.
Therefore, it is better to conduct a dispassionate study of manpower requirements over the next one or two years with the help of your functional heads and decide the excess number. Draw out a voluntary separation scheme with the help of your financial experts by making a comparative cost analysis of retention and exit of the excess people over the said period and decide the excess number department-wise. Start a consultative process with the trade union, if any, or the workmen directly and enter into bilateral settlements under section 18 of the IDA, 1947. That will make the exit of excess people peaceful and avoid unnecessary litigation.
From India, Salem
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