What is the termination of employment?
Employee termination is the process of ending an employee’s employment with the organization. The termination can be from both sides, either from the employer or from the employee.
The termination of employment can be voluntary, as in the employee deciding to quit the company, or involuntary, the employer laying off or firing the employee. The process falls under the work of the human resources department of the company.
When an employee is terminated from the company’s side, it is usually the last step in an attempt to make the employee work according to the company’s standards. In India, employees are provided either a one-month notice or an equivalent payment of one month’s wages in lieu of notice.
What are the types of employment termination?
Voluntary termination happens when an employee chooses to quit a job or terminate a contract before its completion.
Voluntary terminations encompass the following reasons for ending employment:
1. Conclusion or expiry of contract or grant
The employee agrees to undertake a particular task for a defined period, as outlined in their offer letter or contract.
2. Resignation for known or unknown reasons
The employee decides to depart from the role and starts the separation/resignation procedure.
Involuntary termination means being fired from a job because of the employer’s choices, not the employee’s. It happens when the employer decides to end the employment, even if the employee is still willing to work.
Employers can only end an employment relationship for specific reasons that are outlined in official guidelines. They must provide employees with a 30-day notice, along with an official signed notice, before terminating their employment.
Conditions for involuntary termination:
- Employee misconduct, either ordinary or serious in nature.
- Event of business liquidation or factory closure.
- Suspension of business due to unforeseeable events.
- Employee death.
What are the possible reasons for the termination of an employee?
The reasons for termination of an employee are different for voluntary and involuntary termination. Both have been stated below.
Voluntary Termination Reasons
The following are the 10 possible reasons for voluntary termination of an employee.
1. Retirement: Employee voluntarily leaves the company at age 60+.
2. Better Work Opportunity: Employee leaves for a better position elsewhere.
3. Higher Salary: Employee leaves for higher pay.
4. Work Environment: Employee leaves due to dissatisfaction with work nature, hours, or conditions.
5. Conflict: Employee leaves due to unresolved conflicts at work.
6. Military Service: Employee leaves for active duty in the military.
7. End of Contract: Employment contract ends, academic or non-academic.
8. Family Reasons: Employee leaves for child care, family, or partner support.
9. Higher Education: Employee leaves for educational pursuits.
10. Health Reasons: Employee leaves to tend to personal health issues.
Involuntary Termination Reasons
The following are the 10 possible reasons for the involuntary termination of employees:
1. Company Property Damage: Accidental or intentional damage to company property can lead to termination.
2. Drug or Alcohol Possession at Work: Being under the influence at work affects performance and may be illegal.
3. Falsifying Company Records: Unethical behavior with company records can have legal consequences.
4. Insubordination: Refusal to follow orders or obstructive behavior towards managers can result in job loss.
5. Misconduct: Includes harassment, bullying, theft, fraud, and unethical conduct, all of which are grounds for dismissal.
6. Poor Performance: Consistent underperformance, failing to meet KPIs, frequent warnings, missed attendance targets, or needing constant supervision can lead to termination.
7. Stealing: Regardless of the value, stealing from the company is a fireable offense.
8. Using Company Property for Personal Use: Occasional use is acceptable, but excessive personal use of company resources is not allowed.
9. Excessive Time Off: Frequent lateness, excessive sick days, or overusing vacation days can impact work and lead to termination.
10. Company Policy Violation: Breaking any company policies or rules, from office conduct to social media policies, can result in job loss.
How to terminate an employee?
Here are 8 steps to terminate an employee:
Step 1: Inform the Employee
Clearly communicate the termination without unnecessary details. Be straightforward and concise. Send a termination mail to inform the employee formally.
Step 2: Choose Appropriate Timing
Select a suitable time before sending the termination letter, such as weekdays for an immediate job search or Fridays for a cooling-off period over the weekend.
Step 3: Prepare Final Paycheck
Immediately calculate and prepare the final paycheck, including any outstanding wages. Avoid delays in payment.
Step 4: Collect Company Property
Gather all company-owned items (keys, access cards, etc.) during the termination meeting. Emphasize the need for confidentiality regarding company information.
Step 5: Negotiate Severance Agreement
If applicable, negotiate a severance package after confirming the termination. Create a formal agreement offering additional pay in exchange for the employee refraining from legal action.
Step 6: Designate Reference Handler
Decide who in the company will manage reference requests for the terminated employee. Exercise caution to prevent legal complications when providing references.
Step 7: Assist with Unemployment Benefits
Help the eligible employee with the unemployment benefits application process, if applicable.
Step 8: Consider Legal Advice
Evaluate the situation and consult legal counsel if there are complexities or legal compliances, or if the terminated employee has filed complaints against the company.
What is the labor law for the termination of an employee?
Indian employment termination laws are primarily governed by the Industrial Disputes Act, 1947 (ID Act) for workmen, along with state-specific rules and labor laws. They have been explained in brief below:
1. Industrial Disputes Act, 1947 (ID Act)
The ID Act governs employment termination for employees categorized as “workmen” in India.
Workmen include individuals engaged in manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward, excluding managerial or administrative roles or those earning wages exceeding INR 10,000 per month.
It provides provisions for employment termination, including retrenchment and specific regulations for reduction-in-force.
2. Industrial Employment (Standing Orders) Act, 1946 (IESOA)
The IESOA mandates the formulation of standing orders by employers, which specify the terms and conditions of employment.
Standing orders are a set of rules that cover various aspects of employment, including termination procedures.
3. Maternity Benefit Act, 1961
Employers cannot terminate employees under these circumstances:
When female employees are on maternity leave as per the Maternity Benefit Act, of 1961.
When employees are receiving sickness, maternity, or disablement benefits, undergoing medical treatment, or are absent due to pregnancy-related illness.
4. Rights of Persons with Disabilities Act, 2016
Protects individuals with disabilities against discrimination in employment.
Prohibits termination based on disability if proper procedures are not followed.
5. Transgender Persons (Protection of Rights) Act, 2019
Provides protections against discrimination for transgender persons in employment.
Prohibits termination based on gender identity if proper procedures are not followed.
6. Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act, 2017
Protects individuals with HIV/AIDS from discrimination, including in employment.
Prohibits termination based on HIV/AIDS status if proper procedures are not followed.
7. State-Specific Rules and Labour Laws:
Each Indian state has its own set of rules and labor laws governing employment termination, especially for commercial establishments.
These state-specific laws outline the termination procedures and notice requirements for non-workmen category employees.
When employers do not follow the guidelines mentioned in the above laws of the Indian government, they are subject to unlawful termination of employees. In such cases, employers can face legal complications.
Frequently Asked Questions (FAQs)
1. Can you terminate someone from the management?
Yes, employers can terminate someone from a management position, following legal guidelines and employment contracts. In fact, the company can terminate any employee of the organization. The specific procedures and grounds for termination depend on the employment laws of the country or state, and the terms of the employment contract.
2. If I get terminated, can I get another job?
Yes, you can get another job if you get a termination. It doesn’t mean it’s the end of your career. You can always apply to other opportunities and wait to get selected. Ensure that during the process, you focus on upskilling yourself.
3. What is the difference between terminated vs laid off?
Termination, also known as being fired, involves the removal of an individual employee. In contrast, a layoff affects multiple employees simultaneously due to factors like company changes, restructuring, financial challenges, or economic downturns.
4. Can a company terminate an employee without notice period?
According to the rules of the Indian government, companies must usually give notice before firing an employee. However, immediate termination without notice can occur in cases of severe misconduct, contract violation, job redundancy, or during probationary periods.
5. What is the difference between termination and dismissal?
Termination signifies the end of any employment contract and can take various forms like retrenchment, discharge, or dismissal. Dismissal, on the other hand, is a type of termination specifically imposed as a disciplinary action for severe misconduct, such as habitual lateness, fraud, or breach of confidentiality.
6. What is the difference between cessation and termination?
“Cessation of employment” is broader than “termination of employment.” Termination refers to the ending of employment, whereas cessation denotes stopping or discontinuing employment, whether temporarily or permanently.