Redundancy Pay for White Collar Jobs in India: Time for action?
Thread below.

Last month, prof @RakeshSinha01 jee's private member bill (The Terminated Employee Welfare Bill, 2020) was tabled in Rajya Sabha.

The bill seeks to protect the livelihood & welfare of d terminated employees by providing minimum assured income of 9 months in case of termination of employment due to economic slowdown/employer becoming insolvent/change of technology etc. It is a welcome change for many reasons

One, job redundancy in India is an unregulated space. Working professionals don’t enjoy any statutory protection against redundancy, there’s no law which offers any succour against the loss of income caused by redundancy.

Given the lack of statute, the redundancy process followed currently, at worst, offers no support and at best, makes it dependent upon the whims and fancies of the employer.

Opportunity to receive any severance against a job loss is mostly a function of the generosity of the employer or for some multinational set ups, a function of their overarching corporate philosophy irrespective of the local geography’s statute or lack thereof.

Working class is a tax paying, mortgage consuming class. Some unintended outcomes of unplanned redundancy and the subsequent the loss of income, hence, are credit defaults and lower tax collections.

Not to mention, the lack of statute adds to the prevailing confusion in the minds of employer about how to handle potential redundancy process.

Successive governments have overlooked these issues (as well as the natural welfare for employees) and have absolved themselves of the responsibility of regulating job redundancy through legislation. The time is ripe now for the government to step in and do its bit.

Two, post Lehman crisis of 2008, Indian corporate scene has altered. Redundancies which were far and few and were considered to be a taboo are more common place than ever. There’s also a greater realisation in the minds of the professional class regarding the inevitability of it.

Three, while this trend is here to stay and welfare of terminated employee is a latent need, these are not part of the current corporate discourse or employee relations narrative.

Tabling of this bill, in that sense, is a welcome change - slowly and surely, concept of redundancy protection and severance pay is seeping in the Indian corporate narrative.

While the government gets in action, there are a few takeaways for the organisations as well.
First things first, any employer must have the freedom to rearrange and restructure the business as it deems fit. This statement could not be truer given the VUCA world we live in.

But when an employer rearranges its business, there is a price to pay in form of the job and income loss it may cause. Severance pay, in that sense, is making up for losses caused to the employee because of a sudden, unanticipated change of course on part of the employer.

In mature, evolved economies, this price is paid by the employer whereby it compensates the employee for the loss of income through a stipulated sum of money and benefits.

On one hand, severance pay empowers employers to take a difficult call in the true interest of the business while allowing them to treat “At Risk” employees fairly.

On the other, it regulates the behaviour of employers from wanton abuse of this freedom to rearrange, reminding them that the freedom to do so comes at a price.

Reduction of workforce (as against termination for cause) is a legitimate way of rearranging one’s business and any loss of jobs and subsequent income must be indemnified for. The employer’s duty of care towards employees must extend for cases of “At Risk” employees too.

While organisations get going on this front, here are some recommendations I would like to make:

1. Encourage dialogue, seek consultation: Downsizing is painful & your openness to have a dialogue and honest consultation with employees can bring down anxieties and help garner support. Please talk to your employees with a sense of transparency on the challenges of business.

Let them know you are working on solutions but should these not materialize, they may not have a job. However, should it result in a job loss, they would receive a fair severance pay.The process of consultation builds transparency, offers dignity & fosters understanding.

2. Devise a severance norm: Create a severance payment structure and methodology. As a reference, US offers 15 days of severance pay per completed year of service, UK offers 30 days of pay per completed year of service.

Some European economies end up offering severance pay which are much higher & can go up to 24 months average http://compensation.My  own view is to support employees with a severance pay which will protect them for 3-12 months for varying seniority (& difficulty in finding job).

3. Make provisions: Show that you care for your employees, including the departing ones, by provisioning a severance reserve on your P&L. When the situation demands, you will neither lack intent nor funds.

4. Offer support: Money isn’t everything! The same person who you are asking to leave today sacrificed his/her personal time to prioritise for your business.

Be nice and offer exit management support such as resume building services to help with CVs and interview preparation, engage contingency hiring partners to help them network & find jobs. The goodwill shall be returned to you through brand advocacy.

It is a long road but it’s worth a start.

End of thread