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How to Fire an Employee Legally in India?

One of the most dreadful aspects of being a business owner or manager is to terminate employees. However, it is paramount for the employer to handle termination of an employee in the most professional manner.
Written by:
Shivi Gupta
Published on
24-Jul-18

One of the most dreadful aspects of being a business owner or manager is to terminate employees. Sometimes it becomes thoroughly necessary to fire an employee to prevent the business from getting directly or indirectly affected. However, it is paramount for the employer to handle termination of an employee in the most professional manner.

The resolution to fire an employee launches numerous duties of the employer to deal with the termination with utmost legal care so as to avoid any legal clashes with the employee down the road. Both employee and employer’s interests have to be balanced while carrying out the termination.

To avoid any legal dilemmas and fire an employee legally, an employer must ensure to observe the following requirements before terminating an employee’s services: 

Consult the Company’s HR Policies: The first and foremost step before you fire an employee is to consult the company’s HR policies and verify company’s policy of termination of an employee. Violation of the HR policies by the employee is a concrete ground for termination of employment. Other causes for firing an employee include: 
  1. Frequent causes: Inefficiency, dishonesty, carelessness or indifference in working or performing the assigned duties.

  2. Uncommon causes: Accidents, insubordination uncleanliness, destructive negligence, wastefulness and physical unfitness.

  3. Other causes: Carelessness, lack of cooperation, laziness, frequent absence without prior application of leave, dishonesty and adverse attitude towards the organization.

 

Refer to the Employment Agreement: A well-drafted employment agreement made by a labour court lawyer contains provisions relating to termination of the employee and what procedure will the company be required to follow when firing that employee. The notice period must be followed and the severance pay mentioned in the employment agreement must be paid to the employee.

What is the Legal Way to fire an employee?

To avoid unnecessary lawsuits arising from discharges, proper rules should be framed to govern them. Here’s the complete procedure to fire an employee legally: 

Serve a Notice: Do not fire an employee without warning! A notice period of 30 to 90 days must be served before terminating an employee. The notice must be given in writing clearly mentioning the reason for termination. An employee may hire a labour lawyer to file a lawsuit against an employer if a proper and timely notice is not served before his termination. 

Settle the Severance Pay: Severance pay is the compensation or benefit paid in the form of money by the employer at the time of resignation on mutual agreement, retirement, laid off or employee leaving the company for any reason except on dismissal by misconduct.

At least one month's payment must be paid to an employee who has completed at least one year of continuous service before termination. In case of mass termination in factories, mines or plantations which employ more than 100 employees, the employer must give at least 3 months of wages to the workmen proposed to be terminated.

The Payment of Gratuity Act 1972 says that a worker is entitled to gratuity payment on termination of his service after 5 years of continuous employment. Under the Industrial Disputes Act, 1947 retrenched workers are entitled to 15 days' wages for each completed year of service.

Avoid Constructive Dismissal: Constructive dismissal is a situation created by the employer in which the employee is forced to quit their job not because they wish to, but they are forced to do so because of the employer's conduct. The resignation could be the result of bad working conditions or changes in terms of employment which leaves the employee with no other choice but to quit. Factors that may amount to constructive dismissal are: 

1) A Demotion 2) Reduction in salary 3) Transfer to a less desirable position 4) Harassment or humiliation by the employer 5) Offer of an early retirement 6) Indirect threats of termination

Conduct an Exit Interview: Exit interviews with an employee who has been fired or has resigned can be very beneficial. Good exit interviews fetch important information about the organization, for evaluating and improving the working environment, culture, management, and development.

It is advised to consult a labour court lawyer in India before you fire an employee as a lawyer can provide advice, draft severance agreements, and attend the termination meeting and perform the termination of the employee. If an employee proceeds to file a complaint against the employer, the company would require legal representation. Have an employment-related legal issue? Talk to the best lawyers in India at MyAdvo. Email us at info@myadvo.in or call now at 9811782573.