Notice and Severance
Notice Requirement
The Industrial Dispute Act uses the term "retrenchment" instead of "termination". Retrenchment is defined as termination for any reason except as punishment inflicted by way of disciplinary action, retirement/superannuation, termination for continued ill-health, or expiry and non-renewal of the term of an employment contract.
Reasons for retrenchment could be redundancy, non-performance, or loss of confidence in the worker for various reasons. The Industrial Disputes Act also delineates the manner of retrenchment of workmen and provides a mechanism for the computation of their severance compensation. Workmen may be retrenched only for just cause and after complying with various statutory requirements, failing which the aggrieved workman or representatives of the workman can raise an industrial dispute in connection with the termination.
An employer is required to give at least one month's advance notice or payment in lieu thereof to a worker who has completed at least one year of continuous service before termination. The notice must be given in writing indicating the reason of retrenchment. While terminating a large number of employees in factories, mines or plantations employing more than 100 workmen, the employer must give at least three months of notice or wages in lieu thereof to the workmen proposed to be terminated.
The services of workmen as well as non-workmen can be terminated without any notice in situations, such as proven misconduct, fraud, etc. Termination proceeds with an internal enquiry in accordance with the principles of natural justice - where the employee is given a free and fair hearing.
Appeals could be made against wrongful termination. A workman can challenge his/her termination (retrenchment) before appropriate labour authorities and seek reinstatement and/or compensation under the ID Act. A non-workman can take recourse only by instituting a civil suit against his/her employer for damages for wrongful termination.
In case, it is proved that the termination/retrenchment is not proper, then based on various other criteria, the worker can be re-instated to his/her job with back wages.
Courts in India have held that a worker is entitled to exercise his right to resign from employment. An employer may be justified in refusing to accept the worker's resignation in limited cases, such as, when a worker wants to leave in the middle of work which is urgent or important and for the completion of which his presence and participation are necessary. An employer can also refuse to accept the resignation when there is a disciplinary inquiry pending against the employee.
Source: § 2, 25(F-N) of Industrial Disputes Act 1947; § 15 of the Model Standing Orders
Non-Standard Workers' Rights on Termination Notice - Platform workers
Contract termination is regulated under the Indian Contract Act 1872 for independent contractors.
Contracts can be terminated depending on the clauses in the contract. In general, service contracts for platforms can be terminated directly by the worker, either by sending an email or filling out a contact form mentioning the discontinuation of their services or by deleting the account that is being used by the worker. Platforms themselves are allowed, in most cases, to suspend workers or their accounts based on the platform workers' ratings.
Notice Requirement Under State Laws
Notice Requirement in Andhra Pradesh
For Employees at Establishments:
No employer can, without a reasonable cause, terminate the service of an employee who has been in his employment continuously for a period of 6 months or more. The termination cannot be without giving such an employee at least one month's notice in writing or wages instead.
The service of an employee cannot be terminated by the employer if the employee has a pending application to the Inspector regarding the denial of any benefit. The services of an employee cannot also be terminated for misconduct except specified. Employees who have been in an organization for more than 6 months should receive notice and service compensation if their organization’s ownership is transferred to another employer.
This does not apply to the following conditions of transfers:
(a) the employment of the employee has been interrupted by such transfer.
(b) the terms and conditions of employment under the new employer are more favourable than before.
(c) if the new employer is contractually liable to pay service compensation to an employee on their termination of employment in the future. This presumes that there has been no interruption to the employment by transfer of ownership.
Source: Section 47, 49, Andhra Pradesh Shops and Establishments Act, 1988
Notice Requirement in Maharashtra
Even during probation period, all terminations should be conducted with prior notice of a month or at the wage payment of an extra month. In case a person continues at another branch of the same school, before the expiry of a year, they should be only required to be on probation for the remaining time of the total. In case of a permanent employee, a notice period of 3 months must be served prior to termination. The same notice period will also apply when a school is about to close.
Source: Section 5 of the Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981
For all workers in Beedi Establishments:
Workers in beedi establishments, cannot be dismissed before a service period of less than 6 months, with a notice period of 1 month. However, this is exempted upon provision of reasonable cause. All employees dismissed on notice of less than a month may choose to appeal against the same before an appellate authority.
Source: Maharashtra Beedi and Cigar Workers (Conditions of Employment) Rules, 1968
Probation Period in Karnataka
For workers in Shops and Commercial Establishments:
No employer will remove or dismiss an employee who has put in service under him continuously for a period of not less than six months, except for a reasonable cause and unless and until one month's previous notice or pay (in lieu of notice) has been given to him. Provided that where misconduct of an employee is brought on record with proof, such a worker is not entitled to the notice or pay.
Source: Section 39 Karnataka Shops and Commercial Establishments Act, 1961
Notice Requirement in Uttar Pradesh
For employees at Establishments: -
Notices specifying (a) the days on which the industrial establishment will be closed, and (b) the day on which wages will be paid, should be posted in accordance with the provisions of the Payment of Wages Act, 1936 for the time being in force, by the employer.
Following the provisions of the Payment of Wages Act, 1936 and the Sections made there for the time being in force, a notice, in the specified form in English, Hindi or Urdu should be displayed at a clearly visible place. The notice must be at or near the entrance to each department or group of departments specifying the rates of wages payable to each category or class of workmen.
The periods and hours of work for all categories or classes of workmen in each shift should be exhibited in Hindi on the Notice Board and at time keeper's office, if any.
For termination of the services of a workman, notice in writing of at least 30 days should be necessary. If the notice falls short of that period, wages in the direction of such period should have to be paid.
But termination amounting to retrenchment under any law, for the time being in force, other legal requirements should have to be complied with:
- An employee employed for a fixed term employment basis due to non-renewable contract or employment, or with a non-renewed expired contract will not be entitled to any notice or wages at the termination of his services.
- Under provisions of the Uttar Pradesh Industrial Disputes Act, 1947, any notice of termination of employment is not necessary for probationers, temporary and badli workmen.
A "Probationer", "Substitute", "Temporary'' or "Apprentice" workman may leave the employment without notice.
The wages due to a "Probationer", "Substitute", "Temporary" or "Apprentice" workman who has left the employment of the industrial establishment should be paid within two days of a demand being made.
All notices required to be posted under the standing orders of the Act should be in Hindi, and if demanded by a recognised trade union, these notices need to be supplied to them as early as possible.
Source: Section 5,6,7,8, U.P. Industrial Employment Model Standing Orders, 1991
Notice Requirement in Rajasthan
For workers in Shops and Commercial Establishments:
Every employee working in an establishment continuously for at least 6 months can be dismissed or discharged from their employment only after giving a month’s prior notice or paying them the month’s wages in lieu of such notice.
No employee who has been in continuous employment of an employer for a period of not less than 6 months will leave the service of such employer without serving one month's notice in writing
Source: Section 28 of the Rajasthan Shops and Commercial Establishments Act, 1958
Notice Requirement in Tamil Nadu
For workers in Handloom, Catering, and Beedi establishments:
Employers in building and construction establishments, catering establishments, and handloom establishments are obliged to display notices entailing wage date, period of wages, working hours, and information about relevant labour authorities. The notice is supposed to be placed in areas accessible to all workers. No employee will be expected to work for a time more and for wages lesser than specified in the notices.
Source: Tamil Nadu Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Rules, 2006; Tamil Nadu Handloom Workers (Conditions of Employment and Miscellaneous Provisions) Act, 1981;
Tamil Nadu Catering Establishments Act, 1958
For workers in Handloom, Shops and Commercial, Catering, and Beedi Establishments:
Workers in beedi, catering, handloom, and establishments (under the TN Shops and Establishments Act) who have been working for at least six months cannot be dismissed unless a written notice of one month has been served. The notice can be exempted upon provision of a reasonable cause. All employees dismissed on notice of less than a month, even with provision of reasonable cause, may choose to appeal against the same before the appellate authority.
Source: The Tamil Nadu Beedi Industrial Premises (Regulation of Conditions of Work) Act, 1958;
Tamil Nadu Handloom Workers (Conditions of Employment and Miscellaneous Provisions) Act, 1981;
Tamil Nadu Catering Establishments Act, 1958;
Tamil Nadu Shops and Establishments Act, 1947
Notice Requirement in Gujarat
No employer should terminate the employment of a worker who has been in continuous employment for more than a year, without giving such person at least thirty days’ notice in writing, or wages in lieu of such notice. For an employee working for less than a year but more than three months, no employer should terminate an employee’s services without giving such person at least fourteen days' notice in writing, or wages in lieu of such notice.
Source: Section 66, Bombay Shops and Establishments Act, 1948
Notice Requirements in West Bengal
No State laws and provisions under this topic.
Severance Pay
In accordance with the Payment of Gratuity Act 1972, a worker is entitled to a gratuity payment upon termination of his service after five years of continuous employment.
Amount of severance pay is equal to 15 days' wages for each completed year of service. Under the Industrial Disputes Act, retrenched workers are entitled to 15 days' wages for each completed year of service.
Source: §25(F) of the Industrial Disputes Act 1947; §4 of the Payment of Gratuity Act 1972
Non-Standard Workers' Rights on Gratuity - Platform workers
The currently applicable law to severance payment is Payment of Gratuity Act, 1972. The law is generally applicable only to the employees however the law defines employees as "any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied". While currently, the Payment of Gratuity Act, 1972 is not applicable to the independent contractors of platform economy however it allows courts to interpret the term expansively and favourably to benefit platform workers. Similar provisions are found in the Code on Social Security 2019.
Severance Pay Under State Laws
Severance Pay in Andhra Pradesh
Every employee who has put in continuous service for at least one year is eligible for service compensation or severance pay amounting to 15 days average wages for each year of continuous employment. They are eligible for the same (i) on voluntary cessation of their work after completion of 60 years of age, (ii) on their resignation, or (iii) on physical or mental infirmity duly certified by a Registered Medical Practitioner or (iv) on their death or disablement due to accident or disease. Completion of continuous service of one year is not necessary where the termination of the employment of an employee is due to death or disablement. In case of death of an employee, service compensation that is payable to them is paid to his nominee or, if no nomination has been made, to his legal heir. Where a service compensation is payable under this section to an employee, they are entitled to receive his wages from the date of termination or cessation of their services until the date on which the service compensation so payable, is actually paid. The service compensation does not stand valid when gratuity is paid under the Payment of Gratuity Act, 1972.
Every employer other than those of the Central and State Undertakings needs to insure their liability to pay gratuity amount to their workers. Workers are entitled to the amount of insurance at the relevant times. A controlling authority appointed under the Act authorized to recover the amount of the Gratuity payable to an employee. All employees having established Gratuity Funds for their employees, or employees with more than 500 or more workers may choose to establish the same. In such a case, the authorized body may choose to recover the same from the Trustees of the Gratuity Fund.
Source: Section 47, Andhra Pradesh Shops and Establishments Act, 1988; Section 2, 3,5, Andhra Pradesh Compulsory Gratuity Insurance Rules, 2011
Severance Pay in Maharashtra
For all employees of Private Schools:
On retirement, the employer must provide cash benefit for credit leave, maximum up to 180 days. Employees are also entitled to pension or pension equivalent of death-cum-retirement gratuity in addition to the cash payment of leave salary.
Source: Section 13 of the Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981
Severance Pay in Karnataka
No State laws and provisions under this topic.
Severance Pay in Uttar Pradesh
For contract labourers and migrant workmen:
If the employment of any worker is terminated by, or on behalf of the contractor the wages earned by the employee should be paid to him before the expiry of the second working day from the day on which his employment is terminated.
Source: 1. Section 66, U.P. Contract Labour (Regulation Abolition) Rules, 1975
2. Section 49, U.P. Building And Other Construction Workers (Regulation Of Employment And Conditions Of Service) Rules, 2009
3. Section 29, U.P. Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Rules, 1983
For safety officer at a factory:
A safety officer at a factory and all officers of corresponding status would be granted a gratuity.
Source: Section 4, U.P. Factories (Safety Officers) Rules, 1984
For teachers:
For teachers of Government aided (i) Primary Schools; (ii) Junior High Schools; (iii) Higher Secondary Schools; (iv) Degree Colleges. A gratuity equal to six times of pay any last drawn by a teacher at the time of his death while in service provided, he has put in not less than three years continuous service before his death.
Source: Section 5, Rules of the U.P. School and College Teachers Gratuity Fund
For teachers and employees of state aided higher and higher secondary schools in UP, a claim will arise when the insured member dies while in service, reaches normal retirement age of 60 years or when the services of the member ceases otherwise, on resignation or termination.
In the event of death of a member while in service, the sum assured under One Year Renewable Group Term Assurance Plan along with the accumulated amount under the Deposit Administration Plan will become payable.
In the event of retirement from service, or cessation of service only the benefit under the Deposit Administration Plan will be payable and no benefit is available under One Year Renewable Group Term Assurance Plan
Source: Section 1, Savings-Cum-Insurance Scheme for the Teachers and Employees of State of Aided High and Higher Secondary Schools in Uttar Pradesh
For lawyers:
Lawyers that are members of the Scheme, on ceasing to be such member, be entitled to receive from the Fund -
(a) an amount equal to the aggregate of annual subscriptions paid by him, if he has been a member for a period of less than five years;
(b) an amount calculated at the rate of Rs. 1,000 for every completed year of his membership, if he has been a member for a period of five years or more subject to a maximum of Rs. 50,000.
In the event of death of a member the amount payable should be paid to his nominee, or where there is no nominee, to his legal heirs.
Source: Section 13, U.P Advocates Welfare Fund Act, 1974
For usual workmen:
If an establishment has its units out of the State, no workman should be transferred out of the State without his prior consent.
In the event of closure of a unit or Section and department thereof, the workmen so affected will be discharged with such benefits as are admissible to them under law for the time being in force.
Such displaced workmen should have a right to be taken back in service in the order of seniority by the employer in case the unit, Section or department as the case may be, starts functioning, either under old name or ownership or otherwise.
Source: Section 13, U.P. Industrial Employment Model Standing Orders, 1991
Whenever a workman (other than a substitute or a casual workman) whose name is borne on the muster-rolls of an industrial establishment and who has completed more than one year of continuous service under an employer is laid-off, he should be paid compensation by the employer.
The amount of compensation must be equal to fifty per cent of the total of the basic wages and dearness allowance that would have been payable to him had he not been laid-off.
The compensation needs to be made for all days during which he is laid-off except the weekly holidays in between.
The compensation payable to a workman during any period of twelve months should not be for more than forty-five days despite the above provision.
Under any circumstance in the above Section, if a workman is laid-off for more than forty-five days, whether continuously or intermittently, during any period of twelve months, the workman would be paid compensation at the underlined rate specified above.
If the lay-off comprises continuous periods of one week or more post expiry of the first forty-five days, the workman should be paid compensation for all subsequent days and week(s) at the underlined rate above, unless there is any agreement to the contrary between him and the employer.
No workman employed in any industry who has been in continuous service for more than one year under an employer should be retrenched by that employer until:
(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 wages instead of the notice for the period of the notice;
The above is subject to the condition that no such notice should be necessary if the retrenchment is under an agreement which specifies a date for the termination of service.
(b) the workman has been paid, at the time of retrenchment, compensation which should be equivalent to fifteen days' average pay for every completed year of service or any part thereof in excess of six months; and
(c) Notice in the prescribed manner is served on the State Government.
Source: Section 6K, 6N, U.P. Industrial Disputes Act, 1947
Severance Pay in Rajasthan
No State laws and provisions under this topic.
Severance Pay in Tamil Nadu
For Advocates and Advocates’ Clerks:
Advocates’ clerks and Advocates upon cessation of service and practice, respectively, are entitled to receive an amount specified in the respective Acts establishing the welfare funds.
Source: The Tamil Nadu Advocates' Clerks Welfare Fund Act, 1999;
The Tamil Nadu Advocates Clerks Welfare Fund Act, 1987
Severance Pay in Gujarat
No State laws and provisions under this topic.
Severance Pay in West Bengal
No State laws and provisions under this topic.
