Termination of employees in India

July 13, 2021

Image source: https://www.rightsofemployees.com/termination-policy-in-indian-labour-laws/

This article has been written by Kalpesh Amrute, pursuing the Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho.


“Hiring” and “firing” are two important functions of HR. We do have experts for hire but for firing? Not really. Nobody likes to get terminated from their job, even for an HR it is “not so desire” kind of job, but “have to” do it when the situation demands, and when that moment comes how many HR professionals are really prepared with the right knowledge and process to carry out it in “legally correct” manner. When the present world is dealing with the Covid-19 pandemic, many people have lost their job, rather, keep losing it than getting one. So, when hiring is comparatively low and firing is at high, understanding the fundamentals of termination becomes indispensable.  

Although there is no specific or standard process to terminate an employee in India, there are certain acts that throw some light on the topic and provide certain provisions to deal with it. This article mainly focuses on understanding some fundamentals related to termination, some key labor statutes related to termination, and the possible process of termination. It also highlights some important aspects to be considered before terminating anyone.

Important terminologies related to termination

  • Suspension is the cessation of work for a limited period of time.
  • Termination is where a person is discharged from his duties permanently.
  • Suspension is temporary in nature.
  • Termination is permanent dismissal from a job. 
  • In case of suspension, a person is still on the job.
  • In case of termination, a person loses his job forever.
  • While suspended, an employee receives a subsistence allowance during his suspension.
  • In termination, since a person is not on the payroll of the organization, no question of payment.
  • While the suspension is an ad hoc arrangement to carry out an investigation of a pending inquiry.
  • Termination is a final result of an inquiry-based on the outcome of an investigation.


Acquaintances with statutes related to termination 

As per The Constitution of India, the seventh schedule, labor, and related things fall under the “Concurrent List”. This means both center and state governments can make their own laws to govern it. Hence, acts related to “Industrial Relations” (Central Acts) and acts related to “Employee Health and Safety” (State Acts) have some provisions related to termination. 

Possible process of termination

While termination of service can happen for various reasons from voluntary resignation by an employee to reach the age of superannuation. However, termination resulted because of misbehavior or as a result of any disciplinary action which may invite an “Industrial Dispute”. how to avoid it then? Unfortunately, while The Industrial Dispute Act does define what is an industrial dispute, there is no standard procedure laid down in the act, hence, procedures based on the principles of natural justice derived from Articles 14 and 21 of The Constitution of India are followed.

Broadly, following steps to be followed in case a workman is found guilty for misconduct and inflict punishment thereon. 

  1. Issuing a charge sheet A charge sheet in simple words is a document explaining the alleged act of misconduct or misbehavior against an employee. The basic idea of issuing a charge sheet is to give a clear idea to an employee about the charges against him. Articulation of words is very important while drafting any charge sheet. For example, if an absence from work or negligence on part of an employee is of habitual nature then the words like “habitual” are an essential constituent of the charge and must be mentioned in the charge sheet. If certain acts like “theft”, “forgery”, “disobedience” are specifically mentioned in the service rules, then, while drafting the charge sheet such act should be referred to with those specific names given in the service rules.  Along with drafting, a proper servicing of a charge sheet is also very much important. 
  2. Conducting domestic inquiryEven though there is no standard procedure to carry out the domestic inquiry is not prescribed; it should be in line with the principles of natural justice. Let the respondent have a fair chance to present his side against the allegations made. In the case, Khardah Co. Ltd vs Their Workmen, Bench of Justice Gajendragadkar has precisely delineated the preferred procedure of domestic inquiry. 

Following principles need to be adhered to while carrying a domestic inquiry – 

3. Reporting of the inquiry A proper unbiased report must be followed upon completion of the domestic inquiry. A written report will always be handy in case of any future judicial inquiry. The report and the findings should strictly be based on the facts and supporting evidence produced before the inquiry officer in support of the charges mentioned in the charge sheet. In case of the absence of a report, the Industrial Tribunal may outrightly reject any domestic inquiry, and the hearing will take place solely on the merits of the dispute itself. Even though final punishment is at company management’s discretion, submission of the report to the delinquent employee is imperative as it is held by the Supreme Court in the Electronics Corporation of India vs B Karunakar case.   

4. Final punishmentIn case of any proven misconduct or misbehavior a punishment is a must. This helps organizations to maintain discipline by refraining other employees from committing any similar act. Conducting a proper inquiry and its documentation is key before any punitive action is taken by the management. 

Good to know


While maintaining discipline and following decorum of the organization is paramount and some tough decisions are inescapable for the survival of the business, it is important to understand that employees are not any tools to be thrown away upon diminishing their utility. Just like a farmer acquires a land after so many years of cultivating it, an employee owns “that” post to a certain extent for which he is relentlessly working for many years. Therefore, before terminating anyone prematurely, possibilities of retaining, transfer, etc. should be explored. After all, their earning bread and butter depend on that job.

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