Compliance with provisions in relation to retrenchment and change of service conditions

  • Act/Rule/Legislation

  • Online Link to Act/Rule/Legislation

  • Initial Setup or Ongoing Maintenance

    Ongoing compliance requirement

  • Filing and Maintenance Requirements

    Workmen once taken on the permanent/ regular rolls in an establishment/ industry enjoy several protections, benefits and amenities . Security of service is provided to these workmen under the Industrial Disputes Act. A workman has been defined to mean any person employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work, however does not include, amongst others, any person employed mainly in a managerial or administrative capacity or who, being employed in a supervisory capacity, draws wages exceeding Rs. 10,000 (Rupees Ten Thousand only) per month or exercises functions mainly of a managerial nature.

    The Industrial Disputes Act contains, amongst other things, provisions and procedures relating to strikes, lock-outs, lay-offs, retrenchments and closure of establishments.

    As per the provisions of the Industrial Disputes Act, an employer is required to comply with the following conditions prior to retrenchment (i.e. termination of services of a workman for any reason other than as a punishment inflicted by way of disciplinary action) of workmen who has been in continuous service of more than 1 (one) year: (a) the workman should have been given 1 (one) months’ notice in writing or has been paid wages in lieu of such notice; (b) the workmen should have been paid compensation equivalent to 15 (fifteen) days’ average pay for every completed year of continuous service or any part thereof in excess of 6 (six) months; and (c) the employer should have given a notice of retrenchment to the Central Government, the concerned commissioner and the concerned employment exchange in the prescribed format (Form P). Some actions which will not qualify as ‘retrenchment’ are: (i) voluntary retirement; (ii) retirement on reaching the age of superannuation (if covered by the contract); (iii) termination due to non-renewal of the contract; and (iv) termination on the ground of continued ill-health.



    •An employer is required to give notice to the concerned commissioner in Form E, of any change in the conditions of service applicable to any workman in respect of, amongst other things, the wages paid and the hours of work.

    •An employer is required to give notice of commencement and termination of any lay-off to the regional labour commissioner (central) in Forms O1 and O2, respectively, within 7 (seven) days of such commencement or termination.

    •An employer is also required to give notice to the Central Government, the concerned commissioner and the concerned employment exchange in Form Q, if it intends to close down an undertaking.

  • Penalty

    Any employer who contravenes the provisions of the Industrial Disputes Act in relation of lock-outs, lay-off and retrenchment of workmen, is punishable with (i) imprisonment for a term extending up to 1 (one) month; or (ii) fine extending up to Rs. 1,000 (Rupees One Thousand only); or (iii) both. Any employer who contravenes the provisions of the Industrial Disputes Act in relation of notice requirements for closure of establishments, is punishable with (i) imprisonment for a term extending up to 6 (six) months; or (ii) fine extending up to Rs. 5,000 (Rupees Five Thousand only); or (iii) both.

    Any workman who contravenes the provisions of the Industrial Disputes Act in relation to strikes, is punishable with (i) imprisonment for a term extending up to 1 (one) month; or (ii) fine extending up to Rs. 50 (Rupees Fifty only); or (iii) both.

  • Application Guidelines / Responsible Persons / Comments

    The Industrial Disputes Act applies to every establishment or undertaking in which any industry is carried on. An industry means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workman.

    In addition to the Industrial Disputes Act, it may be noted that the Shops and Establishments Acts also provides certain legal protections to the employees with respect to termination of employment by the employers.