What is the difference between layoff and retrenchment

As per Section 25A , the compensation accrued from the layoff provisions mentioned in the said Act shall not apply to the following kinds of industrial establishments :. As per Section 25B , a workman is said to render continuous service if he has worked for at least one year without any interruption. He shall be eligible for compensation if he has rendered a minimum of one year of continuous service.

The interruption of such continuous service is not affected by reasons such as an accident, authorized leave, sickness, legal strikes, a lock and the termination of work that is not due to the fault of the workmen. There are two exceptions where even if a workman is not in continuous service shall be deemed to be in continuous service — they are —. As per Section 25C of the said Act, the workman who is laid off is entitled to compensation that is equivalent to half of the total wages and allowance given for the said period of lay-off.

However such compensation is subject to the following conditions —. Section 25E states when a workman shall not be entitled to layoff compensation —. These restrictions apply to those industrial establishments which are not seasonal in nature and where there more than workmen.

An employer cannot lay off a workman whose name is mentioned in the muster roll of his industrial establishment except when the reason for such layoff is lack of power or a natural calamity.

If the work is regarding a mine then the reasons can also be fire, explosion, excess of inflammable gas or a flood. An employer can lay off the workmen after acquiring the permission of the concerned authorities specified by the government or the government itself.

For this purpose, an application shall be made by the employer stating the reasons for such lay-off and a copy of the same application shall be provided to the workmen who are subjected to such lay-off. After receiving an application, the concerned authority or the government can inquire about such lay off. After such inquiry, the order of the concerned authority or the government must be communicated to the employer and the employees being laid off. The order of the concerned authority or the government shall be considered as final and will be binding for a period of one year from the date of such order.

If the concerned authority or the government does not communicate its order regarding its grant or refusal to grant permission for such lay off within 60 days from the date of application then such application for permission shall be considered as granted. The order of the concerned authority or the government can be referred to a tribunal for adjudication or reviewed either in its own motion or through an application made by an employer or any workman.

In case any lay off occurs even after the permission to do so is refused then such lay off will be considered illegal and the workmen laid off will be entitled to the benefits of the law.

Cancel Sign In. Please purchase a SHRM membership before saving bookmarks. OK Join. An error has occurred. From Email. To Email. Message Hi, I thought you'd like this article I found on the SHRM website: What is the difference between a furlough, a layoff and a reduction in force?

Send Cancel Close. Post a Job See All Jobs. Employee Termination and Layoffs. HR Daily Newsletter News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day. Contact Us SHRM The general due process involves consultation with employees who are likely to get affected by the retrenchment. Several sessions of consultations, objective information collection and selection based on a mutually agreed about criteria is done before employees are retrenched.

Selection criteria for retrenchment may be based on principles such as LIFO or last in first out or could be based on experience, skills knowledge etc. Retrenchment involves a severance pay, which could either be one week pay for each completed year, or an amount suggested by the consulting committee. Retrenchments are permanent terminations, and the employee is not likely to be re-employed.

Companies engage is mass retrenchments usually when technology or machinery is introduced to the same task. A business relies on many aspects for its smooth functioning, managing profits and losses and keeping its staff and workers happy and contended at the same time is a difficult task. Businesses must take strong and timely decisions to keep up with the cut-throat market. Re-joining is possible in the case of Layoffs.

Retrenchments are a form of permanent termination of employee contracts that are also involuntary in nature. It must be accorded with due compliance.

You can read more about the process of retrenchment and the CCIH in this article. Retrenchment and layoff benefits are the same under Malaysian law. For the workers who are not covered by the EA , the employment relationship with the employer boils down to the employment contract or contract of service, subject to such other industrial laws and guidelines such as the CCIH. The Industrial Court of Malaysia a forum to challenge retrenchment where an employee considered it as an unjust dismissal.

As a statutory tribunal under the Industrial Relations Act , the Industrial Court is duty-bound to investigate the facts and circumstances of each case that brought before it to determine whether the retrenchment exercise was in fact made in good faith due to genuine reasons, just cause and excuse, and untainted by any unfair labour practice.

A layoff is volatile in nature while retrenchment is non-volatile. The biggest difference between layoff and retrenchment is that a layoff is volatile in nature.

In layoffs, employees will be recalled once the layoff period ends. On the other hand, retrenchment is non-volatile in nature and involves the full and final termination of services.

A layoff does not involve the termination of the employment agreement, since it refers to a temporary situation where an employee on a particular type of contract does not receive paid work for a period of time.

The employee stays an employee but is not receiving work that would entitle them to get paid. It's important for employers to understand the legal distinction between these two methods, especially when communicating to the employees.

What is AJobThing all about? Click here to find out about what we do! Registering Your Account.