MEANING OF RETRENCHMENT

According to section 2 (oo) of the Industrial DisputesAct,1947,retrenchment means: the termination by the employer of the services 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 the workman; or 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 C) termination of the service of the workman as a result of the non-renewal of the contract of employment between, the employer and the workman concerned, on its expiry, or such contract being terminated under a stipulation in that behalf contained therein: or D) Termination of the service of a workman on the ground of continued ill-health. PROCEDURE FOR RETRENCHMENT Section 25-G provides:-Where 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, in the absence of any agreement between the employer and the workman in this behalf, the employers hall 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.

CONDITIONS PRECEDENT TO RETRENCHMENT OF WORKMEN According to Section 25-N: 1. No workman employed in any industrial establishment to which this chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until: a) the workman has been given 3 months' notice in writing indicating the reason for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice wages for the notice, and b) The prior permission of the appropriate Government or such authority as may be specified by the Government by the notification in the Official Gazette has been obtained or an application made in this behalf. 2. An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner. 3.Where an application for permission under sub section (1) has been made the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.

4. Where an application for permission has been made under sub-section (1) and appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which application is made the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days. 5. An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to provisions of sub-section(6), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.

6. The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (4) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication.

7. Where no application for permission under sub-section(1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him. 8.Not with standing anything contained in the foregoing provisions of thi ssection the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-

section(1) shall not apply in relation to such establishment for such period as may be specified in the order. 9.where permission for retrenchment has been granted under sub-section(3)or where permission for retrenchment is deemed to be granted under sub-section(4),every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, at the time of retrenchment, compensation which shall be equivalent to fifteen days average pay for every completed year of continuous service or any part thereof in excess of six months.

ISSUES OF RETRENCHMENT Changing market conditions Growth beyond an entrepreneur's vision Merging of two or more firms Economic crisis Change in management Outsourcing practice Increase in efficient work flow and computerized services Owners ill health

CONSEQUENCES OF RETRENCHMENT Positive effects on the organization: Reduction in the labour cost Enhanced corporate image Negative effects on the organization:

 Decrease in the employee morale Excessive pressure to perform An organization in such cases requires stimulus in the following form: Offer workplace challenges Build team spirit Bring process innovation

CONSEQUENCES ON EMPLOYEES Existing employees will feel insecure about their job Terminated employees might spread wrong information about company in market. WHAT HAPPENS AFTER RETRENCHMENT? Loss of dignity Entrepreneurial skills Poverty

MEASURES TAKEN BY EMPLOYERS TO AVOIDTERMINATION OF EMPLOYEES To stop recruitment of new workers except for critical areas. To limit overtime work. To limit work on weekly rest days and public holidays.

To reduce weekly working days or reduce the number of shifts. To reduce daily working hours. To conduct retraining programmes for workers. To identify alternative jobs and to transfer workers to other divisions/other jobs in the same company. To implement temporary lay-off i.e. temporary shut down by offering fair salary and to assist the employees affected in obtaining temporary employment elsewhere until normal operation resumes. To introduce pay-cut in a fair manner at all levels and to be implemented as a last resort after other cost cutting measures have been carried out. MEASURES TAKEN BY EMPLOYERS IF REDUCTION OF THE WORKFOCRE NEED TO BE IMPLEMENTED To immediately inform and discuss with the workers or the trade unions which represent them regarding any impending retrenchment. To offer retrenchment/voluntary retirement scheme with the best possible compensation. To terminate workers who have attained normal retirement age. To assist workers in seeking alternative employment elsewhere before retrenchment with the cooperation of Labour Department and Manpower Department under the Ministry of Human Resources. To implement retrenchment in stages over a long period.

To terminate the foreign workers first before terminating the local workers in the same category. When the retrenchment involves local workers, the LIFO principle (last-in-first-out) must be practiced for the same category of work. However, employers may carry out retrenchments in accordance with certain criteria's after consultation and the approval of the workers and trade unions representing them.