How Does The Termination Policy Work In India? Will You Be Able To Get Severance Pay?

Most of the working folk started sharpening their knowledge about the termination policy in India only after the global recession in 2008. This economic recession has not disturbed the growth rate of the Indian economy, thanks to the public sector for maintaining positive figures. However, there is a dip in the growth rate of the service sector. During this recession, a few companies in India pinned the pink slips, a notice of termination from employment.


The termination of employees in India does not have any standard process and it depends on the contract signed between employer and employee. Explore all about the termination policy and laws that protect you in the process.

About The Termination Policy In India

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How Termination Takes Place?

The termination of the employees is based on the three main reasons, namely misconduct, discharge and retrenchment.

Misconduct: An employer chooses termination due to misconduct based on the employee's discipline. The company will decide whether or not the employee has to serve a notice period under specific circumstances. And this procedure is applied to all the employees that include both workers and non-workers.

Discharge: This usually comes to the limelight after the end of the contract between an employee and an employer. The employee is protected more when discharged. Under the Shops and Establishments Act, if an employer wants to discharge an employee, at least one month notice of termination or pay is required. Along with this, the employer even has to mention the cause for termination.

Retrenchment: This type of termination can be because of any reason other than disciplinary ones. The Industrial Dispute Act provides clear guidelines for the retrenchment process. If an employer wants to retrench an employee who is associated with them for more than a year, they have to give the employee one month notice period or pay as well as a reason for the termination. The employer even has to inform the local labour authorities about the retrenchment.

What Protect Employees?

The Industrial Disputes Act, 1947: This applies to both workers and non-workers. Permission from the concerned government office is required for an employer to terminate an employee who has been working with them for more than a year. The employer should also provide a valid reason for the termination besides paying a severance amount of 15 days wage.

Maternity Benefit Act, 1961: It protects the female employees from being dismissed during their pregnancy period.

Payment of Gratuity Act, 1972: A retirement benefit scheme, which has to be paid to a terminated employee.

State Labour Departments: The government always stands for workers, specifically during employment-termination disputes. Employees who face misconduct or dismissal without a reason can challenge the employers at the respective state labour departments.

What An Employee Should Get After Termination?

After the termination, an employer have to clear all dues of a respective employee. One has to get the notice pay when the termination notice has not been issued. Salary for the working days, compensation of retrenchment and leave encashment. Under the Payment of Gratuity Act, 1972, an employer has to pay gratuity to an employee who has worked with them for more than five years.

Under the Payment of Bonus Act, 1965, a statutory bonus should be paid if an employee is eligible. Above all, an employer has to assist the terminated employee with the withdrawal of the provident funds and other such procedures.

Also Read: How To Optimally Benefit From The Advantages Of Work From Home

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