Lay-off Compensation to Workmen: What Is It? 

As per The Industrial Disputes Act, 1947 under section 25C, when an employee’s name is written on the muster roll of the establishment, where he has been working for more than than one year is laid-off by the employer whether intermittently or for temporarily has the right to get paid 50% of the daily wage by the employer for the particular duration/day he/she had been laid–off.

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Lay-off refers to the inability of an employer to employ the account of the shortage of power, machine failure, shortage of raw material, natural calamity, or for any other disconnected reason. Also, the workman's name should be on the muster roll and he must not have been retrenched.

If an employee of an industrial organization comes to his place of work and his name is on the muster roll, and the employer does not give him any task/employment within two hours, then he will be considered laid-off for the day.

Who Is Liable to Pay Lay-off Compensation?

When an employee works for an industrial organization, he starts relying upon it more every day. It is not his responsibility if there is a shortage of any type of raw material, mechanical breakdown, etc. It is the employer’s responsibility. The employer should make sure that the particular employee is given another task to work on. It would be the employer’s choice if he does not provide another task/work/employment to the workman.

Since getting work from an employee is the employer’s duty, he has to pay 50% of the salary and dearness allowance as the lay-off compensation even if he does not employ the employee who has been working in the organization for more than 1 year.

Here Is An Example

Rajesh works in a factory. The factory runs on heavy machines. Each machine requires one person to operate. Now Rajesh works on one of those machines. One day he went to the factory and finds out that the machine is not working. He informs his employer and he calls the mechanic to fix the machine. As per the mechanic, it was going to take some time or maybe a day.

Now that Rajesh has nothing to do, and his employer also does not give him any other task to do the lay-off period begins after 2 hours. Even if Rajesh is not working, the employer cannot cut out the wage of that day and has to pay for it.

Lay-off Compensation (Workmen Right)

It is a right of a workman under section 25C of the Industrial Disputes Act. When an employee is laid off by the employer then he is entitled to get 50% of the total wage and dearness allowance for the lay-off period.

The right to compensation is subject to the conditions mentioned below:

  • He is not a “Badli Workman. (Badli workman is someone who comes on behalf of the permanent employee)
  • Employee should have completed no less than 1 year in the establishment.
  • The employee’s name should be borne on the muster rolls.

Conditions Post Expiration of Lay-off Period

There is a limited period of Lay-off that is 45 days. If the lay-off period exceeds 45 days then the employer has two options:

  • He can the lay-off compensation for this period
  • He can retrench the workman

If the employer decides to fire the workman then under section 25F, the employer will have to modify the lay-off compensation paid during the 1 year against dearth compensation. This is designed to relieve the hardship caused due to unemployment.

What Are the Duties of an Employer in Connection With Lay-off?

The employer has to maintain a muster roll and provide it to the workmen so that they can enter their names as presents for work at the organization during the working time despite that workman has been laid-off.

The employer must satisfy the reasons mentioned in section 2 (kkk) and the period of detention should not exceed 2 hours after the beginning of the stoppage.

The compensation for lay-off provided by the employer must be at the rate and as per the specified period in section 25-C of the Act.

 When Is a Workman Not Entitled to Lay-off?

There is a provision under section 25-E that states certain exemptions for the payment of lay-off compensation. Meaning, even if the employee is laid off there are certain conditions under which he cannot claim compensation. Those conditions are as follows:

  • If the employee refuses to accept alternate employment in the same place then he will not be entitled to get a lay-off compensation.
  • If the employer provides the employee alternative employment in another establishment in the town within 5 miles radius and the workman refuses to do it then he will not be entitled to get a lay-off compensation.
  • The alternative employment does not require any other skillset or experience and the workman refuses to do it then he will not be entitled to get a lay-off compensation.
  • It carries the same wage as the original employment and the workman still refuses, he will not be entitled to get lay-off compensation.


There are different clause in the Industrial Disputes Act, 1947 for both employee and the employer. However, lay-off compensation is a workman’s right but there are certain conditions under which the workman will not have the right to get lay-off compensation amount from the employer.

Written By: PolicyBazaar - Updated: 29 July 2021