In times of a pandemic (COVID-19), with a tumbling economy and a menial number of businesses and services functioning, many employers are struggling to manage the employee cost. Lots of deliberations are going on in the discussion rooms on how to identify and manage the optimum workforce, to keep the company functioning. Some companies are having no options but to resort to employee lay-offs and reduction of monthly payments, in spite of the recent MHA advisories against these measures.
Why not have a look on some of the laws related to termination of employment that you must be aware of as an employer. Knowledge of these will help you to be on top of the legal, employment, and labour jurisprudence in India.
This Act specifies certain responsibilities of employers towards their workers who receive wages at the workplace. The recent MHA directive regarding employee terminations during the COVID-19 outbreak were based on this Act and its definition of ‘wage’. The PoW Act defines wages and regulates wage payments to certain groups of employed persons. As per the Act, employers are required to pay wages only to the following groups of employees -
This is a federal law that spreads to all of the country's mainland and deals with industrial disputes between employer and employee and checks over rights infringement.
Key features include:
Payment of gratuity is obligatory for employees being terminated who have been in service of the establishment continuously for more than 5 years.
Annual bonuses are a mandatory part of industry guidelines and have to be settled during the termination of an employee.
This law has a wide clasp on guidelines regarding employer-employee relationships including, recruitment, wages, working hours, holidays, termination, etc.
The establishment is answerable to authorities regarding the circumstances under which an employee was terminated.
Industrial employers must be vigilant as, unlike the western countries the concept of ‘Hire and Fire’ is completely obsolete in India. An employee in India cannot be terminated without appropriate elucidations. The reasons may include a frequent absence from labour, misdemeanour, disablement, or fraud.
In case of retrenchment, the industries are permitted to avail the 'last in - first out' notion.
The company is liable to produce evidence for bankruptcy, insolvency, or any other binding reason in case of a mass termination.
The establishment must be thoroughly aware of the terms and conditions that were signed on the employment agreement during the recruitment and must abide by the given assurances to avoid any legal hindrance.
Consulting a legal advisor is a good decision to make sure the meeting meets all the demands of the labour laws about termination.
The company is liable to follow the HR policies established by them in the company’s memorandum.
The constitutional structure does not mention a standard procedure for termination; therefore the companies are advised to follow the guidelines on the signed labour contract and be cautious of not causing any infringement to the labour laws. Conventional procedures in accordance with the laws are as follows:
Before going ahead with employee termination, an employer should consider taking the below-mentioned safeguards-
Mass termination and Unemployment has been a part of the world economy since the depression in 1929. Modern Era is not immune to such situations as in instances such as the Wall Street market crash in 2009 and sometimes even due to pandemics as of in 2020.
However, the industries must make sure of the justification of all labour laws and in case of termination to keep their morale alive.
Vakilsearch is India’s largest professional platform of lawyers, chartered accountants, and company secretaries-with years of experience behind. We execute legal work for over 1000 companies and LLPs every month, by leveraging our tech capabilities, and the expertise of our team of legal professionals.
We make your interaction with the government as smooth as possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.
With a team of over 300 experienced business advisors and legal professionals, you are just a phone call away from the best in legal services.
We provide access to reliable professionals and coordinate with them to fulfil all your legal requirements. You can also track the progress on our online platform, at all times.
By handling all the paperwork, we ensure a seamless interactive process with the government. We provide clarity on the incorporation process to set realistic expectations.