Downsizing Staff Strength - Precautions To Be Followed

Dear Seniors,

Many of us, at some point in our careers, come across situations where we need to reduce the staff strength of the organization due to various factors. Can someone please brief me generally on the points that need to be taken care of from an employer's point of view so that the entire downsizing process is smooth? There may be various factors that need to be addressed regarding the labor laws that are applicable.

Thank you,
MK

Hi member,

Retrenchment procedure is there; it can be followed as per the Factory Act. Last come, first serve basis - you can downsize the manpower. Retrenchment benefits should be given as per the appointment order or as practiced in the organization.

Dear friend,

Downsizing, right-sizing, retrenchment - these are all commonly used terms to indicate the jettisoning of excess or surplus labor from employment unilaterally by the employer before the normal termination of the contract of service agreed upon.

The inevitable presence of monetary, emotional, and/or legal constraints always makes the process painful and cumbersome, however genuine the reasons are from the employer's perspective. The age and employability of the workers likely to be affected, opportunities for alternative employment in the region, and the compensation package are the factors capable of creating a bona fide understanding in the minds of the workmen.

If the honest intention behind the move is reorganization in the long-term interests, meticulous attention should be paid to the funding of the exercise, phased retrieval of the entire cost by raising the productivity of the remaining workforce, diversification of the business operations of the establishment in tune with market changes, and the like.

If it is a distress move necessitated by recurring losses and salvaging the industry from abrupt extinction, frugal cost of separation and its means of mobilization should be planned and arranged well. Legal constraints come in the forms of the total number of workmen on rolls, the length of service of the labor to be sent out, the extent of unionization, the attitude of the union towards the move, etc.

Hi, the general practice, as I know it, is that the company that is downsizing or retrenching will have to first and foremost counsel the outgoing staff and arrange for an HR recruitment firm to outplace those who are being retrenched, especially if they have served the company for more than 2 years.

First of all, a distinction is required to be made as to whether an employee is a workman under the Industrial Disputes Act, which solely depends upon the actual working of the employee.

The answer to the above is the groundwork for all applicability of labor laws on the severance of an employee.

Thank you all for your valuable inputs.

So, as I understand from the inputs that I have received from you all, first, it is important to identify whether the employee being retrenched is a "workman" as defined by IDA. I would appreciate if anyone could give me feedback on the following queries:

1. In case the employee is a workman, then what kind of compensations are to be given to him at the time of retrenchment?
2. In case the employee is NOT a workman, what kind of compensation is to be paid?

The size of the establishment (PAN India) is about 150. There are approximately 9 branch offices with various employee strengths. The length of service would be a maximum of 9 years. The type of industry is Shipping Agency Business.

Thank you