Laying-off Employees – Governance Under The Indian Law


Lay-off under Indian law can be understood as a temporary suspension of an employee whose name has been registered in the muster roll of his industrial establishment and who has not been retrenched due to lack of coal, power, or raw materials, the accumulation of stocks, the breakdown of machinery, a natural disaster, or any other related reason. This paper identifies the essential aspects of lay-off as per the law of the land. Further, the paper with the help of a case study discusses the current problems pertaining to mass layoffs executed by companies in the contemporary era. The paper concludes the study with suggestions to the employees and the employers to smoothen the process of lay-off. 


Indian law is a comprehensive text that considers all aspects of employee-employer disputes. It is pretty uncommon for industries to encounter problems such as a lack of raw materials, a pandemic, a conflict, a corporation operating at a loss and being unable to pay salaries, lockouts, etc. The Industrial Dispute Act (IDA) gives remedies for all these concerns. IDA has parts that address both employer and employee issues.

IDA permits firms to lay off employees temporarily or permanently in accordance with criteria that balance the interests of employees and employers. Employers can very well dismiss or retrench employees by obeying the law of the land.

In recent times, multiple companies have laid off a total of more than a million employees and there arises a need to understand how India governs layoffs and to understand whether such layoffs are done in accordance with the law of the land or not. 


The Industrial Disputes Act of 1947 defines the term “layoff” under section 2 (kkk). A layoff is the failure, refusal, or inability of an employer to employ a worker whose name is on the muster rolls of his industrial establishment and who has not been retrenched due to a lack of coal, power, or raw materials, the accumulation of stocks, the breakdown of machinery, a natural disaster, or any other related reason. In this case, the workers are not terminated but do not get their full pay. A layoff is a method of coping with an employer’s temporary incapacity to offer employment to a worker to keep the business operational. It causes instant unemployment, although of a transient sort. It neither terminates the employer-employee relationship nor affects the terms of employment.

Moreover, layoffs only occur in ongoing businesses. When the industrial facility is permanently closed or the employer declares a lockout, the topic of layoff becomes irrelevant. Only by the definition established in Section 2 (kkk) of the Industrial Disputes Act is layoff permitted.

In the case of Priya Laxmi Mills Ltd v. Mazdoor Mahajan Mandal, the word was construed according to the dictionary “in its etymological sense” as a time during which a worker is temporarily discharged’.  Later, the Supreme Court ruled in Workmen of Firestone Tyre and Rubber Co of India Ltd v Mgmt, that neither the dismissal of a worker nor the temporary suspension of his employment contract constituted temporary unemployment for the workers. The learned court further ruled that “layoff” refers to the failure, unwillingness, or incapacity of an employer to employ his employees due to the circumstances listed in the definition. As the meaning under the ID Act is unambiguous and distinct from the western understanding of layoff, there is no need to resort to other definitions.

Lastly, an employer-employee connection must exist, which must be further established at the time of layoff. According to the definition, employer financial distress does not qualify as a justification for a layoff. Similarly, layoffs caused by malicious activities of the employer or worker victimization would not fall within the criteria. 


  1. The employer must have failed, refused, or been unable to employ the worker.
  2. The failure, refusal, or incapacity must be due to a lack of coal, electricity, or raw materials, a buildup of stocks, a breakdown of machinery, a natural disaster, or any other related cause.
  3. The worker’s name should appear on the industrial establishment’s muster rolls.
  4. The worker should not have been retrenched

If a worker whose name appears on the muster roll of the industrial establishment presents himself for work within normal hours on any given day and is not employed within two hours of doing so, he is considered laid off for the day.

But if he is requested to report for work during the second half of the shift and gets hired, he is considered laid off for half the day. However, if the worker is not hired after presenting himself at the start of the second half of the shift, he is considered to have been laid off for the whole day.

In addition, Section 25A of the Act specifies that the requirements of the IDA about layoff and retrenchment compensation do not apply to the three categories of industrial facilities listed below:

  1. An industrial firm with an average of fewer than fifty workers each working day in the prior calendar month.
  2. facilities of a seasonal nature or where work is undertaken intermittently
  3. in industrial establishments to which the Industrial Disputes Amendment Act of 1976 applies chapter V-B.


When implementing a method to lay off employees, the firm frequently considers seniority, aptitude, and specific worker assessments as criteria.

Seniority: Many large corporations use impersonal, universalistic criteria, such as seniority, to lay off employees because personal control of the workforce is impossible, and labour unions are compelled to advocate seniority-based personnel administration procedures, including layoff procedures.

Ability: According to the United States Bureau of Labor Statistics (1972), management favours ability-based criteria because it prefers to minimise retraining and dispense with those individuals least prepared to execute the remaining task.

Specific Worker Assessments: Personal compatibility and subjective assessments of competence,  are more likely to be utilised to choose employees for layoff for two reasons. 


A worker is only entitled to compensation under the Act if he has completed at least “one year of continuous service.” Section 25B outlines what continuous service entails. A worker is considered to be in continuous service if he or she has been in uninterrupted service for that duration. To compute the length of continuous service, interruptions due to illness, authorized leave, an accident, a non-illegal strike, a lockout, or a halt of work not attributable to the employee should not be included.

Even though a worker has not been employed continuously for a year, he will be considered to have been employed continuously for a year if he meets the following conditions:

He worked for a minimum of (a) one hundred and ninety days in the event of employment in a mine and (b) two hundred and forty days in all other cases during the twelve months before the date used for computation.

According to the explanation of this clause, the following days must be considered when determining the number of days a worker has worked for an employer:

  1. The number of days he was laid off under an agreement, standing orders, this Act, or any other law relevant to the industrial establishment.
  2. The number of days he has been on earned leave
  3. The number of days he has been absent owing to a temporary disability caused by an accident that occurred in the course and scope of his job.
  4. In the event of a female employee, the days she has spent on maternity leave, are up to a maximum of twelve weeks.


Section 25 C of the Act states that a laid-off worker is entitled to compensation equal to fifty percent of the total basic earnings and dearness allowance for the duration of the layoff.

However, this compensation right is subject to the following conditions:

  1. He is neither a badli nor a casual worker. A badli worker is hired in place of another worker whose name appears on the establishment’s muster rolls. However, such a worker is no longer considered a badli worker after one year of continuous employment in the organisation.
  2. His name should appear on the establishment’s muster rolls.
  3. He must have completed a minimum of one year of continuous employment with the employer.

A worker is entitled to layoff compensation equivalent to fifty percent of the sum of his basic pay and dearness allowance for the duration of his layoff, excluding any intervening weekly holidays. Normal compensation claims are limited to a maximum of forty-five days every twelve months.

Even if a worker is laid off for more than 45 days during 12 months, he or she is not entitled to pay if the employee and employer have reached an agreement to this effect.

If the time of layoff exceeds 45 days, the employer has two options: to continue providing layoff compensation for such additional periods or to terminate the employee.

If the employer chooses the second option, he must comply with the rules of section 25F. In this situation, the employer is permitted to deduct the amount of lay-off compensation paid over the previous 12 months from the amount of retrenchment compensation payable under section 25-F.

The entitlement of workers to unemployment compensation is intended to alleviate the misery caused by unavoidable unemployment. The provision for the payment of layoff compensation does not imply that an employer can pay layoff compensation and announce a layoff. The payment of compensation is not a prerequisite for a layoff. When a layoff is justified and meets the conditions of Section 2(kkk)’s the sole relief to which laid-off workers are entitled is the statutory remedies specified in Section 25-C. If the layoff is declared to victimise the workers, it is not a layoff justified under Section 2(kkk), and the relief offered to the laid-off workers under Section 25-C is not the sole remedy to which they are entitled.

In the case of Workmen Of Dewan Tea Estate Vs Their Management, the Supreme Court responded negatively to the question of management’s right to compensation and added that when a case is not covered by the standing orders and falls under section 2(kkk) and section 25 (C), compensation is to be awarded under section 25- C.

In India, the Payment of Gratuity Act of 1972 and the Industrial Disputes Act of 1947 oversee social assistance programmes in the event of termination. Under Section 6, a workman must be given 15 days’ salary for every completed year of service or fraction thereof above six months upon cessation of employment. The 15 days’ pay must be based on the worker’s most recent drawn wage. This entitlement is only granted to employees who have completed at least five years of continuous employment with the business. In addition, section 25F of the IDA gives workers with at least one year of service the right to a redundancy payout. This privilege is only applicable if the employer has terminated the employee. A worker is thus helpless in the event of a protracted layoff because he or she is not entitled to a redundancy payout. Although the employer has the authority to terminate an employee after 45 days of layoff, this power is discretionary and not required, as discussed above. This effectively allows the employer, under the guise of layoff, to put the employee or worker in a condition of perpetual suspension, depriving the worker of the full compensation he or she is entitled to receive in another company.

In the case of P. Virudhachalam and Ors vs. Management of Lotus Mills and Ors, the appellants were denied layoff compensation after forty-five days, even though their union opposed the agreed-upon settlement, which stipulated no pay. The appellants were the minority in the settlement, so they were denied the right to compensation. The Supreme Court, unfortunately, sided with the majority in this case as the legislation does not provide relief to the minority, leaving the laid-off workers in a dire situation due to lack of exit opportunities or lack of additional rights within the labour law scope of India. This demonstrates conclusively that there exists a gap in the terms of layoff, which allows the employer additional authority in times of layoff, thereby contradicting one of the main goals of giving relief to the worker. Therefore, the legislature must take note and pass rules that provide workers with the ability to protect their rights in the event of a layoff. The agency problem of majority versus minority has been one of the central issues in corporate law in India in recent years, and as a result, there have been numerous amendments to the corporate regime that provide an exit opportunity or additional rights to the minority. Consequently, it is asserted that some reference can be drawn from the corporate mechanism in the labour law regime by enacting provisions that aid workers in protecting their rights in the event of a layoff. In addition to this difficulty, there is another component of Indian labour law that is problematic, namely the absence of a specific term during which a worker might be laid off.

In Veiyre vs. Fernandes, the Bombay High Court ruled that the law only grants employees the right to compensation and that employers have no right to lay off workers. The Court determined that the legislature meant that employers have the discretion to lay off employees and are not required to maintain employment and pay a full year’s compensation. Therefore, the dismissal of employees following the payment of layoff and retrenchment compensation was deemed legitimate.


Section 25-E provides exceptions to the general norm on the payment of layoff compensation. In other words, even if the worker is laid off, he will not be eligible for compensation if any of the three provisions of this section apply. In the instances below, a laid-off worker will not be eligible for unemployment benefits.

  1. Refusal to Accept Alternative Employment: If a laid-off worker refuses to accept alternative employment that is:
  2. In the same establishment from which he was laid off, or
  3. In any other establishment belonging to the same employer located within a five-mile radius of the establishment from which he was laid off,
  4. In the opinion of the employer, the alternative employment does not call for special skills, the laid-off worker may be subject to a fine.
  5. Absence From the Establishment: If the employee fails to report to work at the designated time during normal working hours at least once each day.
  6. Strike or Go slow: If the layoff is the result of a strike or a slowdown in production by workers in another section of the establishment.


The following responsibilities are assigned to the employer concerning a layoff:

  1. The employer is required to keep a muster roster of workers and to allow for the entry of workers who present themselves for work at the company at the designated time during normal working hours, regardless of whether or not they have been laid off.
  2. The cause for the layoff must be indicated in Section 2 (kkk).
  3. If a halt occurs during working hours, the time of detention of workers shall not exceed two hours following the start of the stoppage.
  4. The severance pay shall be paid at the rate and for the duration stated in Section 25-C of the Industrial Disputes Act.


  1. Predictability of the layoff: If the concerned layoff is incompatible with the previous management style or organizational structure, The reason for such layoff is most likely to remain unclear to the survivors. Layoffs viewed as unexpected go against survivors’ assumptions of how the company will operate.
  2. Avoidability of the layoff:The legitimacy of the layoff may be questioned by survivors to the extent that it is thought to be preventable. The idea that the layoff might have been prevented indicates that it was not necessary for the particular time, to begin with, which may leave survivors wondering why it happened.
  3. Unclear reasoning for decisions to selectively lay off certain employees:  While implementing layoffs, a company has a variety of factors for deciding 0 which employees would stay  (e.g., seniority, merit). In such circumstances, the employees’ lack of clarity regarding the decisional basis may suggest that they are uncertain about whether the organization will act legitimately in the ways it handles its future affairs.
  4. Inconsistency in the choice to maintain certain employees and fire others: Being fair concerning the layoffs is significantly different from having a transparent decision-making process (although the two certainly can be related). If the decisional basis should hence, be apparent to affirm the legitimacy of the layoffs. The decisional cause should hence, be obvious to affirm the legitimacy of the layoffs.  
  5. Perception of the organization’s ability to handle future layoffs:   The level of care that organizations offer laid-off employees varies greatly. Some organizations provide hefty severance compensation and/or significant provisions to facilitate people laid off in finding new work. Thus, if employees feel that the layoff victims aren’t treated fairly during the process, they consequently would not be treated fairly either. 


According to Section 25Q of the IDA, any employer who contravenes the terms of Section 25M will be punished with imprisonment for a term of up to one month, a fine of up to one thousand rupees, or both.


Section 25 M (Chapter V B introduced to the Industrial Disputes Act, 1947 by the Industrial Disputes Amendment Act, 1976) restricts the employer’s power to lay off employees. For this chapter to apply, however, the industrial facility cannot be seasonal, nor can work be conducted sporadically, and the number of employees must not be fewer than 100.

Section 25 M stipulates that no worker, other than a badli or a casual worker, whose name appears on the muster rolls of an industrial establishment to which this chapter applies shall be laid off by his employer unless such layoff is due to power shortage or natural disaster, and in the case of a mine, such a layoff is also due to fire, Hood, excess inflammable gas, or explosion.

As revised by the Industrial Disputes Amendment Act of 1984, he may only lay off the employee with the previous consent of the appropriate government or such authority as may be indicated by that government in response to an application submitted in this regard.

The employer must submit a request for approval appropriately, including the grounds for the proposed layoff. A copy of the application must also be immediately served to the affected workers.

Where workmen other than badli workmen or casual workmen of mine have been laid off due to fire, flood, excess of inflammable gas, or explosion, the employer must apply to the appropriate government or specified authority for permission to continue the layoff within thirty days of the date the layoff began.

When an authorization request has been made, the competent government or designated authority should conduct whatever investigations are deemed necessary. It should provide a reasonable chance to be heard by the employer, affected employees, and those affected by the layoff.

The competent government, taking into account the veracity and sufficiency of the reasons for such a layoff, the interest of the affected workers, and all other pertinent circumstances, by order and for reasons to be documented in writing, grants or denies such authorization. A copy of the order issued by the competent government or specified authority must be sent to both the employer and the employees.

If an application for permission is made and the appropriate government or specified authority does not communicate the order granting or refusing to grant permission to the employer within sixty days of the date of the application, the permission applied for shall be deemed to have been granted at the end of the sixty days.

An order of the competent government or the designated authority granting or denying authorization shall be final and binding on all parties and shall stay in effect for one year from the date of such order.

The competent government or designated authority may review its order granting or rejecting authorization or send the case to a tribunal on its initiative or in response to a request from the employer or any worker. If a tribunal has been referred to a case, it must render a decision within thirty days after the date of the referral. If no application for authorization has been filed or if permission for a layoff has been denied, the layoff will be ruled unlawful as of the day the workers were laid off. As if they had not been laid off, the lay-off workers shall be eligible for all benefits under any legislation currently in effect.

The appropriate government may if satisfied that exceptional circumstances, such as an accident in the establishment or the death of the employer, necessitate it, direct by the order that the provisions of subsections (1) and (3) do not apply to a particular establishment for a specified period.

A worker is not considered to be laid off by an employer under this clause if the firm offers the worker other employment. According to the employer, the alternative occupation should not require any specific skills or prior experience and should be able to be performed by the workers.

The offer of alternative employment must be in the same establishment from which he was laid off, in any other business belonging to the same employer located in the same town or village, or within a reasonable distance so that the transfer would not impose an excessive burden on the employee.

In addition, the salaries that would have been given to the workers are provided for alternative employment.

In the case of Papanasam Labour Union v. Madura Coats Ltd, the Supreme Court was asked to determine the constitutionality of section 25-M. The Court, while maintaining the constitutionality of the clause in question, ruled that the purpose of the regulation is to prevent hardship for workers and promote industrial amity. In addition, there is no requirement for previous consent in exceptional situations, as specified in subsection (3). Such a rule was deemed not to be arbitrary and unconstitutional due to the need of avoiding unemployment and maintaining industrial harmony. In Ashok Kumar Jain v. State of Bihar, it was also held that the Supreme Court had previously decided on the validity of the case. 


International Labour organisation standards

Convention 158 of the International Labour Organisation establishes specific ‘termination of employment’ standards or rules that member nations must include in their labour law regimes. Article 12 of Convention 158 specifies the element of compensation to be granted to the worker in instances when the employer terminates the worker’s employment due to exceptional circumstances. The aforementioned law grants national governments or the competent authority discretion in determining termination compensation or severance pay. Nonetheless, it stipulates that the reimbursement must be fair and reasonable. This standard of reasonableness varies from jurisdiction to jurisdiction, and as a result, each state has its social security requirements that employers must meet for their employees.

United Kingdom & Ireland

In the event of a layoff, workers are entitled to £ 30 a day for a maximum of five days, with compensation continuing for up to three months; this is a statutory entitlement that every worker is given. In circumstances where the company engages in protracted layoffs, the worker may also be entitled to a redundancy payout. To be eligible for this redundancy payment, an employee must have been laid off for 4 or more consecutive weeks, or 6 or more weeks in a 13-week period when no more than 3 weeks are consecutive. This extra ability to claim redundancy mitigates the danger of an employer’s extended suspension. In addition, it gives a way out for employees who choose to join other organisations and get their entire salary. In Ireland, the circumstances of layoff are handled by the Redundancy Act of 1967, which also entitles laid-off workers to compensation. In addition to the compensation, a worker is entitled to a redundancy payment if the layoff lasts for at least four consecutive weeks or six weeks within 13 weeks. The provision is comparable to that of the United Kingdom.

Other Countries

Denmark, cover 75% of labour costs, while Canada, Australia, Ireland, and Malaysia have enacted varying pay subsidies.

To avoid layoffs, Denmark pays 75% of an employee’s income for three months, but Norway provides partial to full wage compensation for the laid-off. In Argentina, businesses are prohibited from terminating any employee for 60 days, after which a minimum proportion of compensation must be paid, although Spain has a total ban on termination and a provision for temporary employees.


The Industrial Disputes Act, of 1947 addresses both  layoffs and retrenchment, but establishes a distinction between the two.

As per the act,   a layoff  is the temporary termination of an employee by their employer for reasons generally unrelated to the person’s performance. On the other hand,  retrenchment refers to a situation in which an employer permanently fires workers to enhance profits and reduce losses. It is therefore important to ascertain that both terms are not used interchangeably.

Retrenchment is defined in section 2(oo) of  the Industrial Disputes Act, 1947. As opined by the Supreme Court in State Bank of India v/s N Sundaramony , it refers to the dismissal of an employee, for reasons other than in furtherance of imposing disciplinary action. The definition does not encompass the voluntary retirement of a worker, the retirement of a worker upon reaching the age of superannuation as specified in the employment contract, the removal of a worker because of persistent ill health, or the removal of a worker whose employment contract has been terminated or not renewed after its expiration.


Several large companies around the world frequently partake in mass layoffs since downsizing through layoffs and corporate restructuring are a part of management’s or firms’ routine response to unfavourable economic situations.

According to a growing corpus of studies, layoffs attribute non-trivial changes in surviving employees’ attitudes, performance, and well-being.

Workers who have encountered more layoffs, both direct (such as being directly targeted) and indirect (such as coworkers being laid off), are reported to have significantly poorer job security, higher degrees of employment uncertainty, intention to resign, despair, and health issues.

Additionally, a sizable proportion of workers who have been laid off risk losing their employment in the foreseeable future. This is because workers perceive their employment in such cases as being constantly precarious. 


The recent years were riddled with a slew of layoff announcements in the Western and Indian corporate world. As of 2023, the phenomenon has been  predominantly observed  in tech giants and multinational companies at large.  The layoffs executed by Facebook parent company Meta cutting off 13% of its staff amounting 11,000 workers, Twitter CEO, Elon Musk slashing almost half of the company’s employees, or Shopify and Coinbase laying off employees comprising close to 10 % of its workforce, represent a few of the problematic statistics in this regard.

WIth reference to the prevailing course of events, it is important to analyze the requisite reasons responsible and conditions in which lay-offs are actually implemented. This would aid both employers and employees in planning and  taking preventive measures to avoid  unprecedented events in future.

The following case study attempts to analyse and scrutinize the layoffs that took place within  Tata Technologies and Wipro, whilst touching upon the importance of employee’s vigilance with respect to their legal rights.

At Tata Technologies, the company’s leave requests are communicated internally. The corporation mailed furlough notices to certain employees. In the case of Wipro Technologies, the President and Chief Human Resource Officer of Wipro, Mr Saurabh Govil, hints at layoff intentions while releasing the company’s fourth-quarter results to the public. He stated that Company might consider many methods for cost reduction. They will examine the possibility of furloughs and leaves. Both Wipro and Tata Technologies employ more than one hundred individuals. Following Section 25C of the IDA, a firm conducting layoffs must acquire approval from the labour officer in each location where its office is situated. The employer may only exercise the option with the labour officer’s approval.

If clearance cannot be obtained from the labour office, why is Mr Govil saying publicly that the firm is exploring furlough options? This is the indirect message sent to Wipro employees by Wipro management. As the statement was made public in the media, Wipro employees would think that the firm reserves the right to do layoffs and that the layoff decision is legitimate.

The issue at hand is that the labour authorities would not take action against the firms until impacted employees come forward and file a complaint. If you take Tata Technologies as an example, it only became a problem until the IT union NITES brought it up with the Pune labour department. If impacted employees do not seek legal redress, it is impossible to pursue legal action against the employer. This is why all firms, including Wipro, CTS, and Tech Mahindra, announce retrenchments and layoffs in the media rather than requesting authorization from the labour office.

People who support businesses may still believe that the legal system is antiquated and that IT is a new industry for which many regulations are inapplicable. The great aspect of our legislation is that the Indian legal system gives a remedy for this issue.

Standing orders are the regulations that all employers must follow. If an industry or employer believes that some regulations within the common framework do not apply to their industry or firm, they may speak with the labour ministry and request that the standing orders relevant to their industry or company be modified. If the labour ministry gives its approval, enterprises can adhere to the rules outlined in their standing orders. This procedure is known as getting a certified standing order for a particular corporation.

By seeing how layoffs occur in IT organisations, one may comprehend what IT companies are doing. The HR official calls each employee and gives them just two options: accept unpaid leave or be terminated. In this situation, the employee has no choice but to take the alternative of going without compensation.

What it implies for the company if an employee opts for pay reduction alternatives:

  • Employee requested vacation on his/her own will, such as for marriage, personal concerns, or medical reasons. As the employee has requested leave, his salary is not paid.
  • Employees have no right to file a complaint with the labour office because they are taking such breaks.
  • Employers eliminate any legal difficulties using this procedure.
  • Employers implement layoffs without authorisation from the labour administration. In reality, the employer refuses to acknowledge that any layoffs are occurring since they refer to them as furlough, a novel phrase that the Industrial dispute legislation does not comprehend.
  • Employers save money while honouring their agreement with the Indian government not to terminate any employees during the outbreak.

When developing their own rules, businesses disregard the law of the nation fully. They take advantage of the gaps in the legal system. They are fully aware that employees will not oppose the company’s choice. The only answer to this problem is for a large number of employees to come up and oppose such firm rules, which requires that employees grasp the law first. If only a few employees reject the offer, the employer may dismiss only those individuals, since they may perceive them to be troublemakers. 

Forced ‘Voluntary’ Resignations – A loophole firms exploit to evade legal processes during lay-offs

Both layoffs and retrenchments are legal operations that require approval from the Labor Department; this applies to all businesses with more than 100 workers and all employees with at least one year of service. They also impose a cost on the business in the form of paying for the personnel through these processes.

Now that we are aware of the legal complexities of following proper procedures, the majority of incidents of mass layoffs in the name of the business being struck (a criterion for layoff) are illegal. To circumvent these rules, the corporation uses a legal loophole and a persuasive argument.

The firms compel the staff to “voluntarily” retire. They would offer, “If you quit, there will not be a black mark on your record, and we can part ways amicably.” In addition to threatening employees with termination if they do not voluntarily quit, firms engage in this unlawful practice. If an employee ultimately resigns under pressure, it would be exceedingly difficult to contest in court that the resignation was coerced.

The optimal reaction for employees in these circumstances is to simply refuse. Especially in circumstances of mass layoffs, if employees refuse to resign, the firm will have no choice but to continue employing them because there is no legal mechanism for mass terminations!

Even for individual terminations, an employee might simply decline, in which case the firm must pursue the formal method of PIP (Performance Improvement Plan), failing which the employee can be terminated in accordance with all applicable laws. In the event of a dispute, the official PIP report forms the basis for a subpar performance report.

In cases of “voluntary forced resignations,” employees should stay firm and either request a formal written request or record the interaction. It is recommended that employees of software businesses suffering downsizing abuses refuse to resign under coercion, as this is unlawful under Indian law. The only way IT employees can combat the tyrannical misrule of giant businesses is to first become aware of their own legal rights and then to unionise and fight together. 


Lack of preparation for anticipated layoffs: In most organized and unorganized sectors, downsizing or reduction in force policies are unpredictable, due to the foresight required to balance the duties of deselected personnel, current employees, consumers, and other stakeholders. Inefficiency in this regard is attributable to inadequate planning for unforeseen circumstances.

Lack of planning: The employers may attempt to conceal the situation, and the uncertainty brought on by the lack of preparation could be construed as a deliberate communication delay.

To avoid panic amongst employees: Employers are typically reluctant to create rules that specify processes because they worry about illogical and emotional reactions.

Employer’s tendency to minimize decline: According to Leana and Ivancevich (1987), many managers opt to rule out the possibility of layoffs and have historically opposed issuing layoff letters. It is observed that businesses often avoid delivering negative information, and this approach of denial could make planning less vital.

To avoid losing control and associated organizational sabotage: In the past, managers have been reluctant to create layoff policies out of concern that doing so would result in work slowdowns, sabotage, and increased turnover.

To reduce the impact of policies: Some employees believe that organisations heavily influence bureaucracy and less humane treatment within the organization


A company, enterprise or organisation engages in business  banks upon various factors to operate efficiently for  maximising  profits and reducing losses. Alongside this,  it assumes the responsibility of caring for its employees to ensure their efficiency in the long run. To survive in the market, it is imperative to take accurate, unexpected  and expeditious decisions.

Assuming a  broader perspective, dismissing employees or workers by way of layoffs or retrenchment may be beneficial to the company, as both approaches adhere to specific standards to ensure that employees or workers are not subjected to unjust conditions.

In light of the above-described case scenarios, it is evident that though employers may be compelled to deprive their employees, the Industrial Dispute Act of 1947,  successfully  establishes standards of mutual respect and solidifies the need for valid grounds as prerequisites for implementing these into effect. These measures within the act  strive to preserve the worker’s rights while also recognising the employer’s perspective. Hence employers and employees need to exercise legal awareness pertaining to their rights and duties.

An organisation could undertake a few suggestions to ensure systematic functioning and reduce the probability of ill-executed lay-offs, if necessary. :

Issuing notices in advance: Advance notice positively aids laid-off employees by shortening or eliminating the period without work following job termination. This, in turn, aids in lessening the length of disgruntlement within the organization. It may also cut back current spending and defer major purchases, decreasing the likelihood of financial disaster and thus limiting the actual number of layoffs that will be necessary.

Drafting a clear organizational policy:  a seven-step guideline provided for ethical and humane treatment in downsizing, the first feature listed was the establishment of a layoff policy. It’s the responsibility of an employer to communicate concerns to its employees through the delineation of policies and procedures. The act of writing a policy does not render it either bureaucratic or obstructive. It merely clarifies and solidifies an organization’s position.

Outplacement opportunities : It is essential to provide the workers, the capacity of  to obtain new employment without the stigma of unemployment

Outplacement counselling can establish a lead for laid-off employees  in their job search. As outplacement advice is provided as a severance package, the individuals secure new employment 6 to 8 weeks earlier than if they had to execute their own job search . Outplacement services are  typically advisable for laid-off employees of large firms and help in assisting the displaced individuals in finding a suitable position quickly and with minimal emotional distress.


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  6. Smith, P.C.(P).and Walker, J.W. (2000), “LAYOFF POLICIES AS A COMPETITIVE EDGE”, Competitiveness Review, Vol. 10 No. 2, pp. 132-145.
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  8. Kristien Coucke, Enrico Pennings, Leo Sleuwaegen, Employee layoff under different modes of restructuring: exit, downsizing or relocation, Industrial and Corporate Change, Volume 16, Issue 2, April 2007, Pages 161–182

Layoff Legal Rules – How IT companies ignore Land of Law with their corporate power? |. (2020, August 26). Retrieved January 29, 2023, from 


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