Lesson 8 of 10 · about 6 minutes

Joining, discipline and leaving

The appointment letter, standing orders, suspension and subsistence allowance, and retrenchment with its notice, compensation and re-skilling fund.

Written from the official text · not reviewed by a lawyer · follows the Central Rules

Key points

  • An employer must issue a letter of appointment to every employee on appointment OSH s. 6(1)(f).
  • Standing orders are needed in every industrial establishment with three hundred or more workers, now or on any day of the preceding twelve months IR s. 28(1). Until its own are certified, the Central Government’s model standing orders apply to it s. 29(2), and adopting the model standing orders counts as certification s. 30(3).
  • When a worker is suspended pending an inquiry into misconduct, the inquiry is to be completed ordinarily within ninety days from the date of suspension s. 38(1).
  • During suspension the worker gets a subsistence allowance of fifty per cent of their wages for the first ninety days, and seventy-five per cent after that if the delay is not due to the worker’s own conduct s. 38(3).
  • Retrenchment is ending a worker’s service for any reason other than as a disciplinary punishment; it does not include voluntary retirement, superannuation, the end of a contract or of fixed-term employment, or termination for continued ill-health s. 2(zh).
  • A worker with continuous service of not less than one year s. 70 may be retrenched only after one month’s written notice giving the reasons, or wages in lieu of notice s. 70(a), and compensation of fifteen days’ average pay for every completed year of service or part of a year over six months s. 70(b).
  • The employer also contributes fifteen days’ wages last drawn for every retrenched worker to the worker re-skilling fund s. 83(2)(a), which credits that amount to the worker within forty-five days of the retrenchment s. 83(3).
  • An industrial establishment with not less than three hundred workers on average per working day in the preceding twelve months, or the higher number the Government notifies, comes under the Code’s Chapter on lay-off, retrenchment and closure in larger establishments s. 77(1).

If you are an employer

  • Serve notice of the retrenchment on the appropriate Government or the authority it specifies s. 70(c).

If you are a worker

  • If you leave, are dismissed or quit during the year, you are paid wages in lieu of the annual leave you had earned OSH s. 32(1)(vi).

Try it

A worker with average pay of ₹26,000 a month is retrenched after 9 years and 7 months of continuous service, without notice. A day's average pay is taken as the monthly figure divided by 26, since the Code does not fix the divisor.

Worked example
Continuous service of at least one yearIndustrial Relations Code, s. 70yes
Years counted (part year over six months counts as a year)Industrial Relations Code, s. 7010
Day's average pay (average monthly pay ÷ 26)Industrial Relations Code, s. 2₹1,000
Compensation: 15 days' average pay per year countedIndustrial Relations Code, s. 70₹1,50,000
Wages in lieu of one month's noticeIndustrial Relations Code, s. 70₹26,000

Worked out by the library's own retrenchment compensation calculator when this page was built.

Check your understanding

8 questions. Choose an answer, then open “Show the answer” to check it against the law's own words.

  1. Question 1. Under the OSH Code, what must an employer issue to every employee on appointment?
    Show the answer

    Answer: A letter of appointment

    The employer must issue a letter of appointment to every employee on appointment, with the information and in the form the appropriate Government prescribes s. 6(1)(f).

    issue a letter of appointment to every employee on his appointment in the establishment, with such information and in such form as may be prescribed by the appropriate Government
    The law's words: OSH Code, s. 6 — Duties of employer
  2. Question 2. From how many workers does an industrial establishment need standing orders under the IR Code?
    Show the answer

    Answer: Three hundred or more

    The standing orders Chapter applies to every industrial establishment with three hundred or more workers, now or on any day of the preceding twelve months s. 28(1).

    The provisions of this Chapter shall apply to every industrial establishment wherein three hundred or more than three hundred workers, are employed, or were employed on any day of the preceding twelve months.
    The law's words: Industrial Relations Code, s. 28 — Application of this Chapter
  3. Question 3. A worker is suspended pending an inquiry into misconduct. Within what period should the inquiry ordinarily be completed?
    Show the answer

    Answer: Ninety days from the date of suspension

    The investigation and inquiry are to be completed ordinarily within ninety days from the date of suspension s. 38(1).

    both the investigation and inquiry shall be completed ordinarily within a period of ninety days from the date of suspension
    The law's words: Industrial Relations Code, s. 38 — Time-limit for completing disciplinary proceedings and liability to pay subsistence allowance
  4. Question 4. What subsistence allowance is a suspended worker paid for the first ninety days of suspension?
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    Answer: Fifty per cent of wages

    The allowance is fifty per cent of the wages for the first ninety days of suspension s. 38(3)(a).

    at the rate of fifty per cent. of the wages which the worker was entitled to immediately preceding the date of such suspension, for the first ninety days of suspension
    The law's words: Industrial Relations Code, s. 38 — Time-limit for completing disciplinary proceedings and liability to pay subsistence allowance
  5. Question 5. What notice must be given before retrenching a worker with at least a year of continuous service?
    Show the answer

    Answer: One month's notice in writing with the reasons, or wages for the notice period

    The worker must be given one month’s notice in writing indicating the reasons, or be paid wages for the period of the notice s. 70(a).

    the worker has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the worker has been paid in lieu of such notice, wages for the period of the notice
    The law's words: Industrial Relations Code, s. 70 — Conditions precedent to retrenchment of workers
  6. Question 6. A worker with average pay of ₹26,000 a month is retrenched after 9 years and 7 months of continuous service. Taking a day's average pay as the monthly figure divided by 26, what is the retrenchment compensation, leaving notice pay aside?
    Show the answer

    Answer: ₹1,50,000

    Compensation is fifteen days’ average pay for every completed year or part of a year over six months, so 10 years count; at ₹1,000 a day that is ₹1,50,000 s. 70(b). The divisor 26 is an assumption, as the Code does not fix it.

    compensation which shall be equivalent to fifteen days' average pay, or average pay of such days as may be notified by the appropriate Government, for every completed year of continuous service or any part thereof in excess of six months
    The law's words: Industrial Relations Code, s. 70 — Conditions precedent to retrenchment of workers
  7. Question 7. For every retrenched worker, how much does the employer contribute to the worker re-skilling fund?
    Show the answer

    Answer: Fifteen days' wages last drawn

    The employer contributes an amount equal to fifteen days’ wages last drawn for every retrenched worker s. 83(2)(a).

    an amount equal to fifteen days wages last drawn by the worker immediately before the retrenchment, or such other number of days as may be notified by the Central Government, for every retrenched worker
    The law's words: Industrial Relations Code, s. 83 — Worker re-skilling fund
  8. Question 8. Which of these is “retrenchment” under the IR Code?
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    Answer: Termination by the employer for any reason whatsoever, otherwise than as a punishment

    Retrenchment is termination by the employer for any reason whatsoever, otherwise than as a disciplinary punishment; voluntary retirement and superannuation are not included s. 2(zh).

    "retrenchment" means the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action
    The law's words: Industrial Relations Code, s. 2 — Definitions

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The provisions this lesson rests on

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Official text reproduced from the Gazette of India, India Code and State Government sources. This is not legal advice; check the source PDF before relying on any provision.