Retrenchment
This query is : Resolved
06 February 2009
Efficiency Ltd.,is in the process of reorganzation of its business.It is likely to result in some labour being rendered surplus.It has proposed retrenchment of economic dead weight.Can the company do so?
09 February 2009
Yes the company can do so. But before doing retrenchment what the company will do it will apply to the court of law for permission otherwise the company will face problems in labour courts. Certain companies are taking the details of persons who opt for voluntary retirement and submit it to the court of law for permission.
13 February 2009
Sir thankyou so much for the reply.But again a doubt,"CAN THE COMPANY PROPOSE RETRENCHMENT OF ECONOMIC DEAD WEIGHT?"
Please explain me more if you dont mind.
Please explain me more if you dont mind.
13 February 2009
Sir thankyou so much for the reply.But again a doubt,"CAN THE COMPANY PROPOSE RETRENCHMENT OF ECONOMIC DEAD WEIGHT?"
Please explain me more if you dont mind.
Please explain me more if you dont mind.
21 July 2025
Great question! Let me explain:
"Economic dead weight" usually refers to employees who are not contributing effectively to the company—maybe due to redundancy, inefficiency, or obsolete skills.
Can a company propose retrenchment of economic dead weight?
Yes, it can, but with important conditions under the Industrial Disputes Act, 1947 (in India) or relevant labor laws in your jurisdiction.
Retrenchment means termination of service by employer for reasons other than disciplinary action or voluntary resignation—typically due to closure, reduction of workforce, or reorganization.
Key points:
Justification:
The company must have a valid economic reason, like restructuring or downsizing to improve efficiency. Identifying “economic dead weight” can be a basis, but the company must justify it.
Procedure:
The company must follow due procedure:
Give notice to employees (usually 1 month).
Pay retrenchment compensation as per law.
Inform government authorities or labor courts, as applicable.
Failure to follow procedure can lead to legal challenges.
Fairness:
Retrenchment should not be arbitrary or discriminatory. Employees selected for retrenchment should be chosen based on objective criteria like seniority, performance, skills, etc.
Court Permission (if required):
In some cases, if there is a Standing Order applicable or a collective bargaining agreement, the company may need permission from labor authorities before retrenching employees.
Summary:
Yes, the company can propose retrenchment of economic dead weight, provided it follows the legal procedure and pays due compensation.
The company should maintain transparency and document the economic reasons clearly.
Seeking legal advice and following labor laws strictly is critical to avoid disputes.
"Economic dead weight" usually refers to employees who are not contributing effectively to the company—maybe due to redundancy, inefficiency, or obsolete skills.
Can a company propose retrenchment of economic dead weight?
Yes, it can, but with important conditions under the Industrial Disputes Act, 1947 (in India) or relevant labor laws in your jurisdiction.
Retrenchment means termination of service by employer for reasons other than disciplinary action or voluntary resignation—typically due to closure, reduction of workforce, or reorganization.
Key points:
Justification:
The company must have a valid economic reason, like restructuring or downsizing to improve efficiency. Identifying “economic dead weight” can be a basis, but the company must justify it.
Procedure:
The company must follow due procedure:
Give notice to employees (usually 1 month).
Pay retrenchment compensation as per law.
Inform government authorities or labor courts, as applicable.
Failure to follow procedure can lead to legal challenges.
Fairness:
Retrenchment should not be arbitrary or discriminatory. Employees selected for retrenchment should be chosen based on objective criteria like seniority, performance, skills, etc.
Court Permission (if required):
In some cases, if there is a Standing Order applicable or a collective bargaining agreement, the company may need permission from labor authorities before retrenching employees.
Summary:
Yes, the company can propose retrenchment of economic dead weight, provided it follows the legal procedure and pays due compensation.
The company should maintain transparency and document the economic reasons clearly.
Seeking legal advice and following labor laws strictly is critical to avoid disputes.
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