Lay-Off and Retrenchment of workers

September 15

2011
By Srikanth .V

Lay-Off and Retrenchment of workers: An Analysis in the Light Of Industrial Dispute Act 1947 Lay-Off :
Section 2 (kkk): Lay-off means the failure, refusal or inability of an employer on account of shortage of coal, power, or raw materials or the accumulation of stock or the breakdown of machinery (or natural calamity or for any other connected reason) to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched. It is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons, such as when certain positions are no longer necessary or when a business slow-down occurs. Originally the term layoff referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. The term however nowadays usually means the permanent elimination of a position, requiring the addition of temporary to specify the original meaning. It is Suspension or termination of employment (with or without notice) by the employer or management.

Layoff are not caused by any fault of the employees but by reasons such as lack of work, cash, or material and it is the period of temporary inactivity or rest and Permanent layoff is called redundancy.

Essentials of lay-off
There must be the (i) Failure, (ii) Refusal or (iii) Inability of the employer to give employment to a workman. The names of the workman laid off must be in the muster rolls on the date they have been laid off. His failure, refusal or inability must be on account of one or more of the following Shortage of coal Shortage of power Shortage of raw materials Accumulation of stocks Breakdown of machinery

 Natural calamity or for any connected reason the workman in question must not have been retrenched.

Classification of lay-off
On the basis of duration (i) Lay-off for a day occurring when work is denied within two hours of his presenting himself for work. (ii) Lay-off for one half of day occurring when work is denied in the first half of the shift but the workman is called in the second half of the shift for doing work. (iii) Lay-off for more than a day but not amounting to retrenchment.

What is a Company Layoff?

During periods in which a company experiences a drop in sales or revenue generation, it is not unusual for company layoffs to occur. Essentially, a company layoff is a temporary period in which employees that occupy specific positions within the corporate structure are not required to report to work. The layoff occurs due to a lack of demand for the labors normally exerted by the employees in the production of the goods or services offered by the business. While a layoff can range from a period of a week to an indefinite amount of time, the company layoff is not the same as termination. Companies choose to implement layoffs because there is a reasonable expectation of needing to reactivate the laid off employees at a future date.

Penalty for lay-off

Any employer who contravenes the provisions of lay-off is punishable with imprisonment for one month and fine up to 1000 or both.

RETRENCHMENT:
Retrenchment means discharge of surplus labor or staff in a continuing industry. It means the removal of the dead weight of uneconomic surplus. It is not necessary that removal of surplus must only be when the establishment runs in losses. It may operate at any level of profits.

Retrenchment Definition
Section 2 (oo) deals with the definition of the term Retrenchment. Retrenchment means the termination by the employer of the service of a workman for any reason whatsoever, Otherwise than as a punishment inflicted by way of disciplinary action, but does not include (a) Voluntary retirement of workman (b)Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or (bb)Termination of the service of the workman as the result of the non-renewal of the contract of employment; between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or (c) Termination on the ground of continued ill-health.

Essentials of Retrenchment
Termination of service on the ground of surplus labor The terminated service must have been capable of being continued for any reason but should not be actuated by any motive of victimization or unfair labor practice Termination must be of surplus labor in a continuing industry; thus closure is not retrenchment The termination must be for proper reason such as economy, rationalization, installation of labor saving machinery, or any other industrial or trade reasons Termination should not fall within the exclusion clause of the definition.

Issues of retrenchment
i. Changing market conditions ii. Growth beyond an entrepreneurs iii. Merging of two or more firms. iv. Economic crisis. v. Change in Management. vi. Owners ill-health.

CONSEQUENCES OF RETRENCHMENT
Positive effects on the organization: I. Reduction in the labor cost ii. Enhanced corporate image iii. Negative effects on the organization: iv. Decrease in the employee morale v. Excessive pressure to perform An organization in such cases requires stimulus in the following form: I. Offer workplace challenges ii. Build team spirit iii. Bring process innovation

CONSEQUENCES ON EMPLOYEES
I. Existing employees will feel insecure about their job ii. Terminated employees might spread wrong information about company in Market.

WHAT HAPPENS AFTER RETRENCHMENT? I. Loss of dignity ii. Entrepreneurial skills iii. Poverty

CONCLUSION:
Closing the office door, looking straight into an employees face, and telling him that he no longer has a job is not an easy task. Flexibility in hiring and firing is not the only problem. India complex web of legislations, leads to a system of dispute resolution that is incredibly slow. Data from the ministry of labor reveal that in year 2000 there were 533,038 disputes pending in the Indias labor courts and these 28,864 had been pending for over 10 years, if India is to be vibrant global economy then this has to be changed. In, brief we need to move to a system that I. Makes room for flexible contracts in the labor market II. Has a minimal welfare net for workers who are out of work III. Resolves labor market disputes more quickly. It would not be far stretched to allege that the laws on retrenchment are rigid and cumbersome on the employers; some latest data compiled by the World Bank collate the level of rigidity of hiring and firing rules in different nations-100 being the score of the highest conceivable rigidity. India is amongst the most rigid countries with the score of 48, china 30 etc.

Source: BBC South Asia