Retrenchment refers to the termination of employees due to economic reasons or closure, and it is governed by the Industrial Disputes Act, 1947, along with the Industrial Relations Code, 2020.
Retrenchment Procedure:
- Notice Period: Provide one month’s notice or equivalent compensation before retrenchment.
- Government Approval: For establishments with more than 300 employees (under the new codes), prior approval from the appropriate government authority is necessary.
- Compensation: Retrenchment compensation equals 15 days’ wages for every year of completed service.
- Priority for Re-employment: Retrenched workers should be given preference in case the employer rehires within one year of retrenchment.
Impact on Businesses:
- Smoother Layoffs for Small Businesses: Smaller firms with less than 300 employees now have more flexibility, making it easier to manage workforce reductions.
- Financial Burden: Retrenchment compensation and re-employment obligations require careful financial planning.
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It is important to note that labour laws can be complex and subject to change. Please consult with lawyer to ensure that you are complying with all applicable laws and regulations.