Vijay Ch
Asked September 08, 2016

Retrenchment Compensation

  • 1 Answer

I have been working from last 11 years in a software company which is having head count of more than 300 people. Suddenly I got a 2 notice for termination without mentioning any details on termination but when i approached them they said that their revenue sources are dried up so they can't afford me any more. Now, my question is, I am i eligible for any retrenchment compensation? and how should i approach it. Also, please note that there is risk of giving wrong feedback on me to my future new employer .

Answer 1

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Saurabh Kumar

The Supreme Court has held that the reasons of termination/retrenchment are not limited to any particular class of reasons, and need not be only on economic grounds such as redundancy, etc[1].

I believe that you are deserving of  retrenchment compensation as you were in an industrial unit as it is engaged in[2]-


(i) systematic activity, (ii) organized by co-operation between employer and employee, (the direct and substantial element is chimerical)(iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss e.g. making, on a large scale, prasad or food), prima facie, there is an 'industry' in that enterprise.

According to Section 25 F of the Industrial Disputes Act- you are fit to seek retrenchment compensation “which shall be equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months”- i.e. since you worked for 11 years, your retrenchment compensation should be equivalent to , say your average monthly salary was 20,000 rupees per month, your compensation should be either 10,000 multiplied by 12 months multiplied by the number of years served i.e. 11 years which comes up to rupees 13,20,000 rupees


Thus, I suggest you send a legal notice to your HR department seeking the amount of retrenchment and citing Section 25 F of the Industry Disputes Act and the two aforementioned case laws and ask them to respond back with 15 days to a month. If they don’t respond back, you can file a case in a labour court , you can consult this website to understand the format of affidavit to file a case in a court of law .


Retrenchment is your legal right. The company cannot deny you the same unfairly. Thus, I suggest you apply for the same without any hesitation. 



[1] Delhi Cloth and General Mills Co. Ltd. v. Sambu Nath Mukerji

[2] Bangalore Water Supply V Rajappa

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