Lay-off and Retrenchment –difference between lay-off and Retrenchment their application, necessary preconditions for their application, lay-off and retrenchment compensation, special provisions relating to lay-off, retrenchment, and closure in certain establishments, penalty, and punishment for illegal lay-off or retrenchment, the consequences of illegal lay-off or retrenchment.

2. Layoff ജ ോലിക്കുറവോയതുക ോണ്ട്‌്‌തല്‍ക്ക്കോലം്‌പിരിച്ചയയ്‌ക്കു
Suspension or termination of employment (with or without notice) by
the employer or management.
Layoffs are not caused by any fault of the employees but by reasons
such as lack of work, cash, or material.
Permanent layoff is called redundancy.

3. Essentials of lay-off:
(i) There must be failure, refusal or inability on the part of the
employer to give employment to a workman.
(ii) The failure, refusal or inability should be on account of shortage of
coal, power or raw materials or accumulation of stocks or breakdown
of machinery, or natural calamity, or any other connected reason.
(iii) The workman’s name should be on the muster rolls of the
industrial establishment.
(iv) The workman should not have been retrenched.

4. Compensation for Lay-Off (Rights of Workmen):
According to Section 25 C of the Industrial Disputes Act, a workman
who is laid-off is entitled to compensation equivalent to 50 per cent of
the total basic wages and dearness allowance for the period of lay-off.
This right of compensation is, however, subject to the following
conditions:
(i) He is not a badli (a person who is employed as a casual workman who is
working in place of another), or a casual workman.
(ii) His name should be borne on the muster rolls of the establishment.
(iii) He should have completed not less than one year of continuous
service under the employer.

5. A workman is entitled to lay-off compensation at the rate equal to fifty
per cent of the total of the basic wage and dearness allowance for the
period of his lay off except for weekly holidays which may intervene.
Compensation can normally be claimed for not more than forty-five
days during any period of twelve months.

6. Even if lay-off exceeds forty five days during any period
of twelve months no compensation is required to be paid
for the excess period if there is an agreement to that
effect between the workman and the employer.

7. Cases in which a Workman is not Entitled to Lay-Off
Compensation:
Refusal to Accept Alternative Employment:
If a laid off workman refuses to accept alternative employment
provided that such alternative employment is:
(a) In the same establishment from which he has been laid-off or
(b) In any other establishment belonging to the same employer situated
in the town or village within a radius of five miles from the
establishment to which he belongs,

8. (c) In the opinion of the employer the alternative employment does not
call for any special skill or previous experience and can be done by the
workman and
(d) It carries the same wages which would normally have been paid to
the workman in his original employment.

9. Absence From the Establishment:
If the workman does not present himself at the appointed time during
normal working hours at least once a day.
Strike or Go Slow:
If such laying-off is due to a strike or slowing down of production on
the part of workmen in another part of the establishment.

10. Penalty for lay-off and retrenchment without previous
permission
Any employer who contravenes the provisions of section 25M or
section 25N shall be punishable with imprisonment for a term
which may extend to one month, or with fine which may extend to
one thousand rupees, or with both.

12. What is retrenchment? കെലവു്‌കവട്ടിക്കുറയ്‌ക്കല്‍ക്
Retrenchment is a form of dismissal due to no fault of the employee,
it is a process whereby the employer reviews its business needs in
order to increase profits or limit losses, which leads to reducing its
employees.
The employer must give fair reasons for making the decision to
retrench and follow a fair procedure when making such a decision or
the retrenchment may be considered unfair.

13. Retrenchment Compensation
Retrenchment is the termination of an employee by an employer for
reasons other than a punishment meted out by disciplinary action.
Employees terminated in such a manner are financially compensated
by the employer. This kind of compensation is known as retrenchment
compensation.

14. Eligibility for the Compensation
An employee will be considered eligible for retrenchment
compensation on the satisfaction of the following conditions:
The employee must be a workman.
The employee must have offered continuous service for a period of
240 days in the previous 12 months, which will be calculated as a
year of continuous service.

15. Continuous Service
Continuous service means performance of service without any
interruptions. It may be noted that sickness, authorized leave, legal
strikes, lock-outs and work-stoppages (where the worker is not at
fault) cannot be considered as interruption of service. The retrenched
employee must be provided with 15 days of average pay for a year of
continuous service or any part thereof in excess of six months.

16. Average Pay
As already observed, an employee must be provided with 15 days of
average pay for a year of continuous service or any part thereof. He
must be compensated in the manner as described below:
If the workman is being paid on a monthly basis – on the basis of
three calendar months.
If the workman is being paid on a weekly basis – on the basis of
four completed weeks.
If the workman is being paid on a daily basis – On the basis of the
last 12 working days.

17. Retrenchment doesn’t cover the following:
Voluntary retirement of the employee.
Employee’s retirement at the age of superannuation കപന്‍ഷന്‍്‌
ക ോടുത്തുപിരിക്കു
Termination due to non-renewal of the contract.
Termination owing to continued illness.

18. Compliance Requirements
The employer must comply with the following regulations in the
event of a retrenchment:
The workman must be informed of the decision of retrenchment
through a notice. The notice must be issued a month before the
decision is implemented.
The notice must state the reason for infringement.
The workman must be compensated at the time of retrenchment
and not after it.

19. Retrenchment Process and Procedures
Process should be divided into 3 phase
Pre- Retrenchment
Retrenchment and
Post Retrenchment.

20. During Pre- Retrenchment phase, the following steps must be undertaken.
Notification in writing to all employees on company’s planned retrenchment
exercise detailing the reasons, selection process and procedures
Notify the Labour Department pertaining to the retrenchment exercise and file
Form
Prepare retrenchment package in accordance to the required regulations
Conduct individual meeting session with selected employees and explain clearly
every detailed information on terms and lay off package offered and possible other
assistance if required
Issue a comprehensive offer letter with details of the lay-off package, job hand-
over process, checklist of documents and other relevant information

21. During Retrenchment phase, the HR department should:-
Assist employees in job counseling and job re-placement
Provide the employees the necessary advice and information on job
openings within the industry
Provide testimonial letters in support for job application
Post employees profile to the HR networking group within the
industry circle

22. During the post –retrenchment phase, the HR department must at
least get in touch with the employees and find out if they have
secured any jobs. This is to show concern and value their
contributions to the company. Let them know that the company is
willing is ready to give feedback if their potential employers are
seeking for reference check.

23. PENALTY S.25-Q
an employer who contravenes the provisions of s. 25 –N shall be
penalised as follows: • (1) imprisonment up to one month or (2)
fine up to Rs. 1000 (3)with both.

24. Lay-Off
Lay-off is defined in Section 2 (kkk) of the Industrial Disputes Act, 1947
It is temporary
In lay-off, the employer is compelled to refuse employment under certain
circumstances, viz. shortage of raw materials, power, finance, etc., which arise
temporarily in the industry.
When the employer declares lay-off, the industry stops its function.
In lay-off, all the employees or a group of employees are refused to employment.
The laid-off employees are paid laid-off compensation. The payment of gratuity
does not arise in a lay-off.
All of the laid-off employees should be taken back in their usual posts, as soon as
the lay-off lifted out.

25. Retrenchment
Retrenchment is defined in Section 2 (oo) of the Industrial Disputes Act, 1947
Retrenchment is permanent. They may again be appointed in appropriate cases.
In retrenchment, the employer lessens over-burdened employees under
circumstances, viz. Government policies, loss in some departments, etc.
While the process of retrenchment is going on, the industry does not stop its
function. It continues to function.
In retrenchment, the last come first goes. i.e. last employed person is retrenched
first.
The Conditions Precedent are to be followed in case of retrenchment, viz. notice
to the concerned employee, notice to Government in the prescribed manner, etc.
(Sec. 25-F).
The retrenched employees are paid retrenchment compensation - payment of
gratuity
Re-employment of retrenched workmen also takes place in certain circumstances.
But it is, not mandatory that all the retrenched workers should be re-employed.
(Sec 25-H)

26. Closure Section 2 (cc) defines 'Closure'.
Closure means the permanent closing down of a place of employment or part
thereof. A closure is not a weapon in the hands of the employer. It equally effects
on both the employer and employees
A bona fide closure can never be illegal.
Closure signifies the final and irrevocable termination of the business itself.
In the Closure, the relationship between them comes to an end.
The causes for the Closure of industry are permanent or lasting and cannot be
cured.
Generally, the cause of closure is economical, poor quality of maintenance, poor
management, non availability of raw material, Government policies, etc.
Closure cannot be turned into a lockout.