An Overview of the Legal Requirements to Terminating Employment in India
There could be several reasons for the terminating or retrenching of employees in India. It is the employer’s responsibility to understand the roles and legal requirements involved in the process.
Employees in India fall into two categories called “workman” and “non-workman.” The former is generally entitled to greater protection by law. Employees can be terminated or retrenched based on the agreement stated in the employment contract. However, the termination would also be subject to the country’s labour laws.
Why Termination Happens
The terminating or retrenching of an employee in India could happen for the following reasons:
- Their contract has expired
- Layoffs or termination from the business transfer, closure, or organisational restructuring
- Termination with “cause” by the employer due to serious misconduct by the employee (breaching contracts, criminal activity, misconduct, inefficiency etc.).
Under the Indian labour law, collective dismissal is permitted in certain circumstances. Collective dismissal can only take place if it has satisfied specific conditions.
Required Notice Period
The required notice period when you intend to terminate an employee is going to vary. It would depend on whether the employee in question is a workman or a non-workman. It would also depend on why the employee is being dismissed. Have they been dismissed for misconduct or some other reason?
For workmen, the required notice period is one month or payment in lieu of such notice. If the workman is employed within a mine, factory, or plantation with more than 100 workmen, they require three months’ notice or payment in lieu of such notice.
For non-workmen, the notice period will depend on what has been agreed on in the employment contract. It would also need to factor in any laws that apply.
Employees can be dismissed for misconduct with no notice. This applies to both workmen and non-workmen.
When an employee is retrenched or terminated in India, severance payments are required. The amount to be paid would depend on several factors. For example, in the case of voluntary resignation by the employee, only part of the severance pay is required.
For the termination due to misconduct, the employer will be required to pay all the accrued and unpaid wages.