Labour Codes#3 : Retrenchment in IT Industry under the Industrial Relations Code, 2020

Retrenchment is the termination of employment by the employer of the service of a worker for any reason whatsoever other than for reasons of voluntary retirement, superannuation, illness, expiry of fixed term contract or as a punishment inflicted by way of disciplinary action. Compensation equivalent to 15 days of average pay for every completed year of continuous serviceThe following procedure is required to be followed to terminate employees who fall under the category of “workmen” and who have completed one year of service with the Company:

• Providing one month written notice indicating the reasons for retrenchment or wages in lieu of the notice
• Compensation equivalent to 15 days of average pay for every completed year of continuous service
• Notice in Form IX to the appropriate government

Under the Industrial Relation Code, the notice (as mentioned in c) can be sent through email providing ease with respect to compliance. The Central Government has also considered creation of re-skilling fund thereby requiring industrial establishments to electronically transfer an amount equivalent to fifteen days of the last drawn wages for each retrenched worker to a designated account maintained by the Central Government within ten days of the retrenchment. The Central Government would then transfer these funds to the workers’
accounts within forty-five days, to be used for re-skilling. Additionally, the industrial establishments would also be required to provide a list of retrenched workers, the corresponding wage amounts, and their bank account details to facilitate this transfer.