MBA II SEM NOTES

HRM - Employee Separation

1. Resignation :
- An employee may decide to quit an organisation voluntarily on personal or professional grounds such
as getting a better job, changing careers wanting to spend more time with family, or leisure activities.
The decision could, alternatively, be traced to the employee’s displeasure with the current job, pay,
working conditions or colleagues.

- Sometimes an employee may be forced to quit the organisation compulsorily on grounds of negligence
of duty, insubordination, and misuse to funds etc. the resignation in this case, unlike voluntary
separation, is initiated by the employer.

- If the employee refuses to quit, he may have to face disciplinary action.

2. Retirement:
Like a quit, a retirement is normally initiated by the employee. However, a retirement differs from a
quit in number of ways.
- First, a retirement usually occurs at he end of an employee’s career.. a quit can happen at any time.
- Second, retirements usually result in the retiree’s receiving benefits in the form of provident fund,
pension, gratuity, encashment of earned leave etc., form the organisation.
- People who quit do not receive these benefits, (without a minimum qualifying service period in case of
voluntary separations).
- Finally, the organisation normally plans retirements in advanced. HR staff can groom current
employees or recruit new ones during the intervening period in a methodical way. Quits are too easy to
estimate and plan for.
- Employees retire from service on account of two reasons:

 Compulsory Retirement:
- Government employees retire compulsorily after attaining the age of superannuation (either 58 or 60).

- In the private sector the retirement age may well go beyond 60, depending on a person’s ability to
perform will in a competitive scenario.

 Voluntary Retirement:
- In case of voluntary retirement, the normal retirement benefits are calculated and paid to all such
employees who pour tin a minimum qualifying service.

- Sometimes, the employer may encourage the employee to retire voluntarily – with a view to reduce
surplus staff and cut down labour costs. Attractive compensation benefits are generally in built in
all such plans (referred to as golden handshake scheme).

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 - To reduce spot retirement anxieties, companies these days organize counseling sessions, and offer
investment related services (e.g., Citibank, Bank of America). Some companies extend medical and
insurance benefits to the retirees also, e.g., Indian oil corporation.

3. Death: Some employees may die in service. When the death is caused by occupational hazards, the
employee gets compensation as per the provisions of workmen’s compensation Act, 1923.

On compassionate grounds, some organisations offer employment of the spouse/child /dependant of the
employee who dies in harness.

4. Lay off : A layoff is temporary removal of an employee frorm the pay roll of an organisation due to
reasons beyond the control of an employer, Global competition, reductions in product demand, changing
technologies that reduce the need for workers, and mergers and acquisitions are the primary factors behind
most layoffs. The services of the employees are not utilized during the layoff periods.
Under the Industrial Disputes Act, 1947, a lay-off implies the following things (section 2 KKK)
 The employer is temporarily unable to employ some workers on a full –time basis.
 The reasons for the refusal of employment could be traceable to shortage of inputs, power,
accumulation of stocks, breakdown of machinery etc.
 The employer – employee relationship stands suspended during the period of lay off.
 The employee gets (excluding holidays) only fifty per cent of his normally eligible total basic
wages plus dearness allowance during the period of lay off.
 To claim this compensation the laid off workman (a) should not be a casual worker (b) his name
must be on the muster rolls (c) he must have one year’s continuous service (d) he must report for
work at he appointed time at least once a day.

5. Retrenchment :
Retrenchment is the permanent termination of an employee’s services due to economic reasons (
such as surplus staff, poor demand for products, general economic slowdown, etc.). It should be noted
here that termination of services on disciplinary grounds, illness, retirement, winding up of business
does not constitute retrenchment.

In respect of organisations employing 100 or more persons, the Industrial Disputes Act 1947, makes it
obligatory for the employer to give advance notice or pay equivalent wage before the actual lay off
date.

To claim 50 per cent of basic wages plus dearness allowances, the worker (who is not a causal worker,
Whose name appears on pay roll, who has completed 12 months of continuous service) must present
himself on each working day at the appointed time inside the factory/ office premises during the lay
off period. If necessary, he might be asked to report a second time during the same day.

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 Difference Between Layoff and Retrenchment
Basis for
Layoff Retrenchment
Comparison
Retrenchment means involuntary separation
Lay-off refers to the provisional
of an employee due to the replacement of
Meaning termination of the employee, at the
labor by machines or the close of the
instance of the employer.
department.
The layoff is of a temporary nature,
i.e. it is for a definite period, in which
Nature Retrenchment, is permanent in nature.
the employees are recalled after the
expiry of the term
Shortage of raw materials, Economic Replacement of the worker by machines or
Reason recession, Breakdown of machinery, closure of the unit due to the lack of
Accumulation of stocks product’s demand produced by the unit
Operation of
Stops after the declaration. Continues even after the declaration.
company
Employee's connection with the
Re-appointment As soon as the lay-off period ends.
organization are severed immediately.
The employee gets (excluding
holidays) only fifty per cent of his It is obligatory for the employer to give
Compensation normally eligible total basic wages advance notice or pay equivalent wage
plus dearness allowance during the before the actual date of retrenchment.
period of lay off.
Payment of
gratuity is paid only in retrenchment
Gratuity gratuity is not paid in case of layoff

the laid off workman

(a) should not be a casual worker
(b) his name must be on the muster the laid off workman
rolls (a) should not be a casual worker
Compensation (c) he must have one year’s (b) his name must be on the muster rolls
claim continuous service (c) he must have one year’s continuous
(d) he must report for work at he service
appointed time at least once a day.
(e) he might be asked to report a
second time during the same day.

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6. Discharge and Dismissal:
Dismissal is the termination of the services of an employee as a punitive measure for some
misconduct.

Discharge also means termination of the services of an employee, but not necessarily as a punishment.
A discharge does not arise from a single, irrational act. There could be many reasons for it such as:
Discharge/ dismissal are drastic measure seriously impairing the earnings potential and the image of
an employee. It should be used sparingly, in exceptional cases where the employee has demonstrated
continued inefficiency, gross insubordination or continued violating rules even after several warnings.
Before discharging, it must be stated clearly. The employee should be given the opportunity to defend
himself.
If the grounds under which an employee has been discharged are the strong enough, there should be
provision for reviewing the case. In any case the punishment should not be out proportion to the
offence.

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Performance Appraisal

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