• Termination of my employee

Dear Sir/Madam,

We are a partnership firm having business of Rice milling . Since rice milling business has become seasonal due to lack of raw material , we want to terminate the jobs of our three employee as there is no work/business left till next season starts i.e November 2018. The said employees are working for more than 7 years with us. The said employee are asking for salary for 6 months .On denial they are threatening us to go Labour court.
What is the correct way of terminating employees if there is no work in a company for 6 months ? What is the right course of action as per law .
Please guide .
Asked 4 years ago in Labour

3 answers received in 1 hour.

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14 Answers

Dear Client,

Such retrenchment will govern by sec 25F of Industrial Dispute act - Conditions precedent to retrenchment of workmen -

a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Section 25F(b) of industrial disputes act provides for payment for retrenchment compensation which shall be equivalent to 15 day’s average pay for every completed year of continuous service or any part thereof in excess of 6 months.

You have to pay them 15 days salary for every completedyear of service

3) since they have worked with you for more than 7 years they would be entitled for around 4 months salary

4) since only 3 workers are employed in your rice milking factory they would not be eligible for gratuity

5) where 10 or more persons are employed or were employed on any day of the preceding 12 months.then workers would be entitled to gratuity

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

Amicable settlement with employees on best option

Litigation is long drawn and expensive proposition

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

For terminating the employees, you will be governed by Section 25F(b) of Industrial Disputes Act. As per this section, the employer must pay 15 days salary for every completed year of service. in your fact situation, pick up the exact number of years which in your case is around 7 years so roughly u will have to pay for approximate 4.5 months of salary.

in case there is no work in the company for 6 months, it would be wise to get to amicable settlement to resolve any discomfort.

Shaveta Sanghi
Advocate, Chandigarh
914 Answers
111 Consultations

5.0 on 5.0

Gratuity is payable to an employee at the rate of 15 days wages which the employee has last drawn, for every completed year of service. Fifteen days are calculated by dividing monthly wage by twenty-six and multiplying the same by fifteen

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

gratuity will calculate -

Last drawn salary (basic salary plus dearness allowance) X number of completed years of service X 15/26,

I D Act is sufficient,

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Industrial dispute act is itself a procedural law for labour court.

As you don’t have any agreement then you are also saved as you can take the plea of non performing of objectives of the firm due to less work demand.

There is a well settled procedure to calculate the same.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

Hi,

There may be other laws applicable as factory act, payment of wages act, etc. If possible, try to give some suitable alternative employment to the employees.

Ganesh Singh
Advocate, New Delhi
6646 Answers
16 Consultations

4.5 on 5.0

In your case the labour Court cannot pass order to give salary to the employee for non functional period of rice mill. However the labour Court can pass order to give sustenance amount to the labourers but only when there is more than 30 labourers employed in the rice mill. 

Shivendra Pratap Singh
Advocate, Lucknow
5127 Answers
78 Consultations

4.9 on 5.0

What are the conditions offered in the employment offer letter course of action on such situations?

This can be treated as retrenchment.

Any employee working in a firm for 240 days or more in the previous 12 months can in principle claim retrenchment compensation.

In layman’s idea, the term retrenchment shows the incapacity of the employers to carry on their work due to some economic grounds resulting in permanent termination of the workers which is in character of downsizing to regain stability. In retrenchment proceedings, the last to be employed will be retrenched first, and if the employer decides to recruit at a later stage, the retrenched employees have to be given preference.

Retrenchment refers to discharge of surplus labour by the employer. It may be due to inevitable reasons including rationalisation.

An employer has a right to organise his business in any lawful manner he considers best and courts cannot question its proprietary. If reorganisation results in surplus employees, no employer is expected to carry their burden. There is a consensus of judicial opinion in deciding retrenchment on the facts and circumstances of each case. Courts have decided that termination of services is due to loss.

Industrial disputes act - IDA

Chapter V-A of the IDA requires an establishment employing 50 or more workers, in case of valid retrenchment to provide the workers with 30 days’ notice and 15 days’ pay for every year of continuous work by the workmen at the firm. In case of closure or sale, it must fulfil the same conditions unless the successor takes on these obligations. For an establishment employing 100 or more workers, the IDA, under Chapter V-B, requires prior permission from the Government before the firm’s closure or retrenchment.

Penalty for contravening the aforesaid provisions on retrenchment is imprisonment up to one month or fine which may extend to Rs 1,000, or with both. Assuming that the State Government’s approval is obtained, the services of the employees can be terminated upon provision of three months’ prior notice and payment of 15 days’ average pay for each completed year of service in excess of six months.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

Also ,there is no job agreement /contract signed between firm and employee. and this is for the first time/year we are trying to terminate employee due to lack of business.

If you have taken the employees on your roll of employees and they have been given regular salary with statutory deductions, they can be deemed to be confirmed employees.

The procedure of retrenchment has been given under Section 25G. It is when any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, than in the absence of any such agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. Section 25F of the IDA provides mandatory conditions for retrenchment of workers. I

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

So apart from Industrial dispute act, is there any other law like Labour law applicable in our case and if yes what can be outcomes .

Since we have more than 10 employee so how much is the gratuity liability?

Pls advice

The Industrial disputes act is the appropriate act in this situation.

If you would like to retrench the employees, then you may have to pay to provide the workers with 30 days’ notice and 15 days’ pay for every year of continuous work by the workmen at the firm.

Payment of gratuity. 4. (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, — (a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease .

Thus,

1. Retrenchment is specified in Industrial Disputes Act 1947. As per Retrenchment clause Employer has to pay Retrenchment compensation to workman @ 15 days wages for per completed year of service

2. Gratuity is specified in Payment of Gratuity Act 1972. As per gratuity act employee who has completed continuous 5 years service is eligible to receive gratuity @ 15 days wages for per completed year of service. In case of Resignation of your friend, retrenchment compensation is not payable. Gratuity is payable @ 15 days salary for per completed year of service, provided he has completed 5 years or more service.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

Dear Sir,

The amount of Gratuity is equal to 15 days salary for every completed year of service.

Gratuity calculation is (Last drawn Basic+DA)/26 X 15 X No of completed years of service Here, we need to consider service above 6 months in the last year as next complete year. However this adjustment is subject to completion of 5 years of service. It is purely the employers contributions for the employees Gratitous service. So it can be enacted/ordered to given by the competent authority. He should also requires to work for more than 240 days in every year and should have continuous service for 5 years. In such a case, the employee is entitle for gratuity.

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Section 4 in The Payment of Gratuity Act, 1972

4 Payment of gratuity. —

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease:

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement: 13 [Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.] Explanation .— For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Provided further that in the case of 14 [an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season. 15 [ Explanation. —In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]

(3) The amount of gratuity payable to an employee shall not exceed 16 [ten lakh rupees].

(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

(6) Notwithstanding anything contained in sub-section (1),—

(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss so caused;

(b) the gratuity payable to an employee 17 [may be wholly or partially forfeited]—

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

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Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

Have you given them any appointment or offer letter with terms of termination in it. Any notice period mentioned in the same. You can pay them one month's salary in advance and give termination notice. If your rmill comes under PF or gratuity benefits then you need to comply that also

Prashant Nayak
Advocate, Mumbai
27275 Answers
88 Consultations

4.4 on 5.0

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