Aspects Related To Termination Of An Employee In India

Every sector in India went through a bad phase after the impact of the Corona Pandemic. Be it the employers or the employees, both suffered from specific setbacks whether it is a loss in their business or losing their jobs. However, here we will talk about the legal process of terminating an employee and the laws related to it.

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Labour Law In India

It implies that labor and employment regulations in the country are regulated at federal and state levels. The primary federal laws governing termination include the Industrial Employment (Standing Orders) Act of 1946 (IESA) and the Industrial Disputes Act (IDA) of 1947, as amended.

In addition, the implementation of the laws of the respective states differs according to the field of activity of the employer: these are described in the laws and their supporting rules.

There is no standard procedure to terminate an employee in India. An employee can be terminated either under the term of the contract signed by him/her individually while joining the company or by following the country’s labour law if there was no contract signed between the employer and the employee.

Employers & Employees Recognized In India

There are two types of employers and two types of employees.

Types of employers:

Establishments: This term includes all types of employers.

Factories: This term refers specifically to employers in the manufacturing sector.

Types of employees:

Employees: A term that refers to all employees in any type of position

Workman: This term was defined in 1947. Employees who are not employed in administrative roles, supervision or management are called workman


When an employee voluntarily ends employment with the company. In simple words, resigns. This can involve personal reasons on the part of an employee, such as getting a new and better job, leaving a field, or starting their own business. It can also be for professional reasons called constructive dismissal.

It refers to a situation where an employee is not satisfied with their work, office environment, etc. He could be the victim of harassment, low salary, longer working hours, long commutes, etc.


When an employee is forced to leave an organization against their will. A company can opt for involuntary dismissal during layoffs, downsizing, etc. and downsizing refers to a company reducing its workforce. Employees who are downsized are usually terminated without fault.

Companies are changing to reduce costs and restructure their workforce. Downsizing is common when a company goes bankrupt or merges. They can also be fired because an employee's skills are no longer useful to a company these days.

Follow the treatment of their work due to unsatisfactory work performance, or because their behaviors and attitudes cause problems in the workplace. If your company is found guilty of wrongfully dismissing employees, you will be required to compensate them and restore their jobs or offer them similar positions. Companies could also be penalized if found guilty of wrongful dismissal.

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Termination As Per Contract

In most cases, employment contracts are very specific as to the process for terminating the employment relationship. This is mainly the case when the termination is amicable and in special cases where the employment contract is for a fixed term. For example, consultants to international organizations or interns to private organizations often have defined work periods.

An employee is considered terminated upon entering into such a contract unless a new contract is offered or the terms of the original contract are changed. As in most countries, employees fired by employers often receive a month's notice or a month's salary instead.

Rules For Termination of Employee In India

India The decision to dismiss employees most likely falls under one of the reasons described above. Regardless of the cause of an employee's termination, certain federal and state rules must be followed by every organization.

A notice period of 30 to 90 days is standard for terminating staff in your organization. Under the Labor Disputes Act 1947, the law states that when dismissing more than 100 members working in a manufacturing plant, mine or plantation unit, government approval is required. Dismissal of employees in other industries only requires government notification.

Under Indian labor law, an employee can be legally dismissed from an organization for any of the following reasons:

  • Disobedience or total insubordination
  • Any kind of Fraud
  • Theft Loss or damage to the property of the employer voluntarily
  • Bad behavior during working hours
  • Neglecting work that leads to any kind of loss or damage.

Employee protections against dismissal

Any dismissal for misconduct must be replaced by an internal investigation conducted in accordance with the principles of natural justice. The employee must be given a reasonable opportunity to be heard as part of the investigation process.

If the services of a worker (who has been in continuous service for at least one year) is terminated for reasons other than misconduct, in addition to the notice of termination, the employer is also required to notify the relevant government dismissal equal to 15 days The average salary for each completed year of continuous service or fraction of a year exceeding six months (severance pay) is payable to workers.


There is a law for everything in the Constitution of India. As we have mentioned almost everything related to the labour laws and how the termination of an employee turns out whether it is voluntarily or involuntarily. It is important to be aware of the consequences that the termination of an employee can bring to the employer and on the other hand the employees must be aware of their rights when there is a wrongful termination involved.

Written By: PolicyBazaar - Updated: 23 August 2022
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