Employee Attrition and Retrenchment
Employee Attrition
Attrition in business means a slow but planned drop in staff numbers that happens when people leave or retire and aren’t replaced. This word is also sometimes used to talk about losing customers or clients who are no longer in the target market for a product or company and aren’t replaced by younger people.
How Does Attrition Work?
A hiring freeze is another name for this kind of staff cut. It’s one way for a business to cut down on labour costs without having to lay off workers.
Losing employees naturally is less bad for company morale than firing them. However, it can still be bad for the employees who are still working there if it means they have to do more work. It can also make it harder to move up or get promoted within the company, which can make people unhappy at work or cause more people to leave than was intended.
About Loss of Customers
Loss of customers is another word for attrition. This is not done on purpose, of course. This word fits best when talking about a product whose customer base is shrinking because its loyal customers are getting older and younger people aren’t buying it.
When a business doesn’t change its products to keep up with new trends, customers leave. A few examples of brands that didn’t do well with younger customers are the Sears department store chain and the Oldsmobile car brand. Attrition is seen as a less disruptive way for a company to cut costs on labour than layoffs because people choose to leave.
Layoffs vs. Attrition
A higher attrition rate means that more employees are leaving on their own because of changes in management, company structure, or other parts of how the business runs.
When a company fires workers, they lose them, as long as they don’t immediately hire as many new workers as they fired. For example, a company might cut six people from its administrative staff to make room for six more people on its internet team.
There are many reasons why people leave their jobs. It’s only called attrition if the company doesn’t hire someone to fill the open position.
In times of financial trouble, a business needs to make tough decisions and cut back on its staff in order to stay in business. In these situations, the company might lay off workers because they have no plans to hire anyone else to fill those positions.
Some departments are trimmed or gotten rid of when the company’s structure or business model changes or when it merges with another company. This usually means letting people go instead of firing them.
Attrition is a type of staff reduction that is not forced, unlike layoffs. The worker has chosen to move to a different city, get a new job, or retire. This inevitable changeover can be used to cut down on staff through an attrition policy.
Layoffs of Employees
When an employer reevaluates its business needs in order to make more money or keep losses to a minimum, it may decide to lay off workers. This is a form of firing someone for no reason.
If an employer wants to lay off workers, they need to give fair reasons and follow a fair process. If they don’t, the laying off could be seen as unfair.
How do the Indian laws on layoffs work?
The original law from 1947 doesn’t define the word “retrenchment.” This definition was added in 1953 with an amendment act. It’s also interesting to know that until 1983, courts thought that firing someone because their contract wasn’t renewed was the same thing as retrenchment. This was ruled in cases like Hindustan Aluminium Corporation v. State of Orissa. Later, the court said the decision was wrong, and with Amendment 49 of 1984, the word “bb” was added to the definition of “retrenchment” to say that this type of firing did not fall under the definition.
When an employer fires extra workers, this is called retrenchment. It could be because of unavoidable factors like streamlining or putting in new machines that save workers’ time. It’s also possible to say that laying off workers is an employer’s right. An employer can set up his business in any legal way he thinks is best, and courts can’t question these choices. If a reorganisation leaves some employees without jobs, the other employers shouldn’t have to take on their work. There is agreement among judges that retrenchment should be decided based on the facts and circumstances of each case. The courts have said that ending services is because of loss.
In the important case of State Bank of India v. Sundara Money, the Supreme Court took the word “retrenchment” to mean “for any reason whatsoever,” which means “completely and completely.” They also said that the phrase was very broad and didn’t allow for many exceptions. In this case, “retrenchment” means firing a worker for any reason other than those listed in section 2(oo) of the Industrial Dispute Act (IDA), 1947. Chapter V-A of the IDA says that if a company with 50 or more employees has to lay off workers, it has to give those workers 30 days’ notice and 15 days’ pay for every year they worked for the company. If it closes or is sold, it still has to meet the same conditions unless the new owner takes over these duties. Chapter V-B of the IDA says that a business with 100 or more employees needs permission from the government before it can close or lay off workers.
In Section 25G, it says how to go about losing your job. In the event that an Indian citizen working in an industrial establishment is to be fired and belongs to a certain category of workers in that establishment, and there is no agreement between the employer and the worker in this matter, the employer must normally fire the worker who was the most recent employee in that category, unless there are specific reasons why the employer fires another worker. Section 25F of the IDA spells out the rules that must be followed when workers are laid off. It lists the rules that must be followed in order to end services, but it doesn’t give the worker any rights to be permanently absorbed. Anyone who worked for a company for 240 days or more in the past 12 months can generally get retrenchment pay.
There are a lot of ways that Indian employers have dealt with their strict retrenchment laws. Some of these are hiring more contract, temporary, and/or casual workers, using “golden handshakes,” and moving production to states where workers are not organised. The government wants to privatise and pull money out of the economy. Any problem with retrenchment laws, which affect how businesses work, needs to be looked at right away by lawmakers.
When a company has more than 100 employees, the legal requirements for ending employment become more onerous. As per the IDA, if a business has more than 100 employees, it can’t retrench—that is, fire—any employee who has been with the company for at least one year without I giving the employee three months’ notice that explains why they are being fired and how long they will be given that notice and (ii) getting permission from the relevant State Government first (Section 25N of the IDA).
Also, if permission isn’t asked for, the firing will be considered illegal from the date the notice was given, and the worker will be entitled to all the benefits under the law as if he hadn’t been given notice. As a practical matter, getting the State Government to agree to layoffs is thought to be almost impossible because of the effects on unemployment. Because of this, companies rarely ask the State Government for permission to lay off workers. If you break these rules about retrenchment, you could go to jail for up to one month or pay a fine of up to Rs 1,000, or both. If the State Government agrees, the employees’ jobs can be ended with three months’ notice and payment of 15 days’ average pay for each completed year of service over six months