Retrenchment
Topic: Employment, Unemployment and Informalisation · NCERT: Beyond NCERT
Meaning
Retrenchment is when an employer ends a worker's service for any reason other than punishment, retirement or ill-health. It usually requires notice and compensation. Under the Industrial Relations Code, a firm needs prior government permission to retrench only if it has at least 300 workers, up from 100 earlier. The employer must also pay 15 days' wages for each retrenched worker into a worker re-skilling fund.
Example
A factory with 250 workers cuts 40 jobs because demand for its product has fallen. It must give notice and pay compensation, but it does not need government permission.
Don't confuse with
- Lay-off: this is temporary, and workers stay on the rolls.
- End of a fixed-term contract: when a fixed-term contract ends, this is not retrenchment.
Related concepts
- Labour laws
- Tripartism
- Floor wage
- Fair wage
- Living wage
- Need-based minimum wage
- Lay-off
- Hire and fire
- Standing orders
- Fixed-term employment