Termination Process

Employee termination marks the conclusion of an employee's working relationship with a company. Terminated employees are no longer associated with the organization and are relieved of their work responsibilities. Termination can occur voluntarily, when an employee resigns by submitting a letter of resignation of their own accord. Alternatively, it can be involuntary, involving employees being fired against their will. Terminated employees might be eligible for pension and/or unemployment benefits.

In India, there is no standardized method for employee termination; each organization has its own established termination policy and procedure. These policies must comply with the state and central laws governing the country where the organization is based. The termination process typically involves issuing a formal letter of termination. It's important to note that employees who are temporarily absent, on leave, on holidays, or temporarily laid off are not considered terminated during those periods.

Types of termination of under which an employee is let go from a company

Voluntary termination

Voluntary termination transpires when an employee chooses to leave a company of their own accord. This decision can be driven by personal reasons, such as finding a better job, retiring, or starting their own business. Alternatively, it might be due to professional factors, such as constructive dismissal, which occurs when an employee is dissatisfied with their workplace due to issues like harassment, low wages, long work hours, or a lengthy commute.

Constructive dismissal also encompasses situations where employees are discharged involuntarily from an organization. Employees facing forced dismissal might be eligible for unemployment benefits. In cases of voluntary resignation, employees are typically required to submit a written letter of resignation to their employer. The standard notice period is 30 days; however, this duration might vary depending on the organization's policies.

Involuntary termination

Where an employee is forced to quit an organization against their will, this is known as involuntary termination. During layoffs, downsizing, or being fired, a firm may choose involuntary termination.

• Layoffs and downsizing: Layoffs and downsizing both involve a company reducing its workforce. Employees who are laid off or downsized are often let go through no fault of their own. Companies resort to downsizing to save money or restructure their staff, and this situation commonly arises when a company faces financial challenges, goes bankrupt, or merges with another organization. Layoffs can also happen when an employee's skill set is no longer relevant or beneficial to the company's current needs, prompting the company to make staffing adjustments accordingly.
• Getting fired: Employees may be fired because of poor work performance, or because their actions and attitudes cause problems at work. In many countries, including India, an employee who is fired for misconduct is not required to be given a 30-day notice. Employees who are fired for violating corporate policies must be given the opportunity to justify their actions before being fired.
• Illegal dismissals: Employers have the authority to make hiring and firing decisions within their organizations. However, there are limitations to this authority. In many countries, including India, employers cannot terminate an employee without sufficient cause or valid reasons. It is considered illegal to terminate an employee based on factors such as caste, race, color, gender, or other forms of discrimination.

Furthermore, employees who have taken maternity leave, a leave of absence, or those who have reported misconduct within the organization are typically protected by employment laws. Firing an employee solely based on these reasons is prohibited and can lead to legal consequences for the employer. These protections ensure that employees are not unfairly dismissed for reasons unrelated to their job performance or conduct.

If an organization is found to have unfairly terminated employees, it is generally obligated to compensate the affected individuals and either reinstate their previous positions or provide similar ones. Companies that are determined to have engaged in wrongful termination may also face penalties, legal consequences, or fines, depending on the severity and circumstances of the case. Wrongful termination cases often involve legal proceedings where the affected employees seek redress and compensation for unfair dismissal.

Termination under contract

Termination under a contract occurs based on specific and predetermined terms that are outlined when an employee is initially offered the contract. For instance, positions like private firm advisors and internships often have a finite duration. Unless the employee is provided with another contract or the existing contract is renewed, their employment is considered terminated at the end of this specified period.

The salary and other benefits are determined by the terms and conditions stipulated in the contract. In the case of contractual employees, they are typically entitled to one month's notice and one month's pay in the event of termination, as per the terms outlined in their contract.

Termination rules for employees in India

Whatever the reason for firing employees, every organization must obey certain central and state labour laws. Here are the six most crucial rules to follow before firing an employee:

1. A 30-to-90-day notice period is common in every organization for firing the employees. Under the Industrial Disputes Act of 1947, firms require government consent when firing more than 100 employees in a manufacturing plant, mine or plantation unit. Other Industries, require merely a government notification to terminate personnel.
2. According to Indian Labour Laws, an employee may be lawfully terminated from an organisation for any of the following reasons:
   • Disobedience or will full insubordination
   • Fraud, dishonesty, or theft
   • Loss or Damage to the employer's goods will-fully
   • Taking bribes or illegal gratifications
   • Absence without applying for leave for more than 10 days
   • Late attendance
   • Disorderly behaviour during work
   • Negligence of work
3. When organizations terminate their staff for convenience, the policy requires that the employee who was last to join the organization be the first to go. Additionally, when rehiring for the same or similar employment roles, the terminated workforce should be prioritized.
4. When an organization fires an employee who is pregnant or seeking maternity leave for convenience, they risk violating the rules of Maternity Benefit Act of 2017 in the Indian constitution.
5. Non-solicitation clauses can be utilized in restricted circumstances, however, non-compete agreements are not enforceable under Indian law.
6. Most Indian states have legislation that allow for up to 10-15 days of paid leave per year. Employees are entitled to 10 days of sick leave, and additional 10 days of unpaid leave. Employees who request leave under these conditions are not deemed terminated.

Employee termination checklist

Here's a simple checklist outlining some of the steps that must be followed when firing the employees.

1. Consult the company's HR policies

Before terminating an employee, it is necessary to review the company's HR rules and policies. Every organization has its own set of processes for dealing with various events.

2. Refer to the employee agreement

The employee agreement will include requirements for the notice period, severance pay, remuneration and other benefits that must be provided to the employee upon termination. This agreement is frequently signed at the beginning, and it acts as a significant reference that can be used in Indian courts.

3. Notice period

Most employment contracts require either side to serve a notice period before terminating the employment. The length of the notice period is normally specified in the employment contract, and might vary depending on the role and tenure of the employee, although it commonly ranges between 30-days to 90-days. The notice period is intended to allow both the employer and the employee to make required termination arrangements.

4. Settle the severance pay

Employees who retire, get laid off, or reach the end of the contractual obligations are eligible for severance pay.

• Employees who have worked for a year or more shall be paid one month's salary.
• Employees must be granted three months' wages if they are laid off in a protected sector.
• Employees are entitled to gratuity payments after five years of continuous employment under the Payment of Gratuity Act.
• According to the Industrial Disputes Act of 1972, retrenched (involuntarily fired) workers must be granted 15 days of severance pay for each year of service completed..

5. Conduct an exit interview

Exit interviews assist organizations in gathering feedback and evaluating their work culture, environment, ethics and so on. It also assists organizations in narrowing down areas for development when it comes to improving employee experience in the workplace.

Employee protection and court jurisdiction in case of disputes

An employee who has been fired has a legal right to appeal to their jurisdictional authority. The employee may file an appeal in court for any of the following reasons:

• The employer has terminated an employee without stating a specific reason.
• The employee has not been proven to be guilty of misconduct and pleads innocence.
• The employee feels that their dismissal was based on unfair grounds.

When an employee seeks resolution for a grievance, they must first file a case and seek the approval of their local labour authority. Following approval, the matter may be monitored by jurisdictional conciliation officers, industrial tribunals, or labour courts.

Most labour disputes in India take between six months to two years to resolve.

Summary

When terminating employees, an organization must always ensure that they have the proper documentation in place, as well as a valid reason for terminating staff. All communication must go through formal channels in order to be produced in case of a dispute.

Some organizations also outsource their termination process to third-party suppliers, particularly when significant layoffs are involved. Terminating employees in a systematic manner that adheres to local norms and regulations can save a company a lot of trouble.