Oracle’s recent mass lay-off in India made headlines when it was reported that they cut down their workforce by 12,000 just last week. The company also offered a severance package for its employees. While companies consider such restructuring necessary for their long-term growth, such firings can leave many employees in complete shock since most are unaware of their rights as employees in these situations. Many don’t know for how long they will get their salary, whether they need to serve the notice period after the lay-off, how their severance package is calculated, and what legal rights they have if the company delays or fails to provide their entitlement?
1. Employers should inform employees well in advance
Nishith Upadhyaya, executive director, knowledge and advisory services, SHRM, APAC & MENA, told ET Wealth Online the number of days a company must inform an employee about the lay-off in advance depends on the employment contract and applicable labour laws.
“In many cases, organisations either ask employees to serve a notice period commonly between 30 and 90 days or offer pay in lieu of notice, where the employee is compensated without being required to work,” says Upadhyaya.
2. Conditions for attending office after being laid off
Does an employee need to attend the office if they are laid off, or serve a full notice period? According to Upadhyaya, it depends on the company’s direction and is usually clarified in the separation communication shared by the organisation.
“They may be asked to continue working, placed on garden leave, or relieved immediately with notice pay,” explains Upadhyaya.
3. How their severance package will be calculated
Vivek Daswaney, partner, Economic Laws Practice, the computation of severance in India is not uniform and depends primarily on whether the employee qualifies as a ‘worker’.
Daswaney presents two examples-
For employees classified as ‘workmen,’ severance (i.e., retrenchment compensation) is governed by a statute and is calculated at a minimum of 15 days’ average pay for every completed year of continuous service, as prescribed under the Industrial Disputes Act, 1947, and retained under the Industrial Relations Code, 2020.
For managerial or senior employees (non-workmen category), severance is largely contractual and depends on company policy, appointment letter or negotiated terms.
4. Monetary benefits employees are entitled to receive after lay-off
Daswaney explains employees are generally entitled to unpaid salary up to the last working day, notice pay (if applicable), leave encashment for accrued but unused earned leave, and gratuity (subject to eligibility conditions).
Any pending reimbursements or contractual benefits must also be settled, says Daswaney.
According to the Code on Wages, ‘wages’ payable to an employee need to be paid within two working days of his or her removal, dismissal, retrenchment or resignation as the case may be, according to Daswaney.
Another important condition that Daswaney points out is that monetary commitments made to the employees in their appointment letter must be checked and paid to avoid contractual breach.
5. What happens to bonus, variable pay/incentives and ESOPs after lay-off?
As per Daswaney, bonus, where governed by statute, is payable on a pro-rata basis for the period worked, while contractual or performance-linked bonuses may be subject to conditions such as continued employment on the payout date and contractual commitment.
Explaining further conditions, Daswaney says variable pay and incentives are governed by company policy and depend on whether they are discretionary or have already been ‘earned’ based on the performance of the laid-off employee.
“ESOPs are governed by the plan terms and applicable regulations. Vested options are usually exercisable within a limited post-termination window, while unvested options typically lapse, subject to more favourable treatment in ‘good leaver’ scenarios,” says Daswaney.
6. Things to remember before signing severance package papers
Upadhyaya advises employees to carefully review the payout breakdown, timelines, and any clauses related to confidentiality or future obligations before signing any severance or full-and-final settlement agreement.
7. Employee’s legal rights if dues are denied
According to Upadhyaya, the first step is to raise the concern internally in writing with clear details.
“Most organisations aim to resolve such matters, but if the issue remains unresolved, employees have the option to seek external support through labour authorities or legal advisors,” says Upadhyaya.
Understanding these rights and processes can help employees navigate the transition with greater clarity and confidence, opines Upadhyaya.