Sample Copy. Not For Distribution. · -Chandra Prakash Purohit my former student at Lal Bahadur...
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iii
Managing
Redundancy
An HR & Legal Guide for
Managing Employees during Turbulent Times
Deepak Sharma
EDUCREATION PUBLISHING (Since 2011)
www.educreation.in
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Disclaimer
Views expressed by the author are not meant to
judge or assess any corporate event or decision in
terms of right or wrong. The cases/caselets
mentioned, Seelan Raj case, exhibit mentioned at
the end of chapter 2 on Pink Slips in Indian IT
sector, case study on Smith(name changed) at end
of chapter 3, case on Jet Airways, caselet on Air
India & Kingfisher, exhibit on Mahindra and
Snapdeal are all mentioned with the objective to
make us learn from different events/situations.
Such situations are not mentioned with any
intention to bring any disrepute to any
organization, group or individual. Rather the
intention is to discuss these situations and events
for academic purpose to facilitate learning and
orientation towards ‘managing redundant
jobs/roles’ in a more effective way.
- Dr.Deepak Sharma
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v
Content List
Sr. Content Page
- Foreword vii
- Preface xi
- Acknowledgements xiii
- Abbreviations Used xv
- Table of Cases xvi
1. Introduction 2
2. Managing Redundancy: Legal
Framework
24
3. Voluntary Retirement Scheme:
Legal Framework
83
4. Role of Human Resources in
Managing Voluntary Retirement
Schemes
134
5. Handling Redundancy-I :
Planning Redundancy & Impact
of Redundancy on
Organizational Culture
165
6. Handling Redundancy-II : Roles
and Challenges for HR
Professionals
198
- Subject Index 235
- About the Author 238
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Foreword
Prof.Dave Ulrich1
Email:[email protected]
Talent matters to organization success. Few would
dispute this reality. In our work, we have organized
the flow of talent into three phases: IN (bringing
new people into the organization) THROUGH
(moving existing employees throughout their
organization through development, assessment,
rewards, and career stages), and OUT (removing
employees from the organization. 2
1 Rensis Likert Professor of Business at the Ross School,
University of Michigan and a partner at the RBL Group;
he has published over 200 articles and book chapters and
over 30 books. He has consulted and done research with
over half of the Fortune 200. Since 2001 he has been
almost consistently ranked as most influential
International Thought Leader and Management Guru in
human resources by various HR forums. He has also
received Lifetime Achievement Award from American
Society of Training and Development (ASTD), World
Federation of Personnel Management and from HR
Magazine for being ‗Father of Modern HR‘. His Why of
Work (co-authored with Wendy Ulrich) was #1 best
seller for Wall Street Journal and USA Today. He has
been listed in Forbes as one of the "world‘s top five"
business coaches. 2 Justin Allen and Dave Ulrich. 2013. Talent
Accelerator: Secrets for Driving Business Growth In
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viii
While many have chronicled brining people in
(setting standards, sourcing, screening, securing and
orienting new employees) and managing current
employees (working planning, training and
development, career planning, attending to high
potentials, and managing appraisal and rewards),
less work has been done on removing people from
the organization.
In this thorough book, Dr. Deepak Sharma
explores the processes of removing employees from
the organization. He recognizes that removing
employees from the organization is often due to
changing business conditions. In his review of
Indian high technology firms, he acknowledges that
economic cycles, automation, and firm changes may
make some employees ―redundant‖ (title of the
book) and require that organizations remove
employees.
He reinforces the key principles of
appropriately removing employees:
Be strategic, not across the board downsizing.
He points out that keeping the right employees
in the right roles becomes a part of strategic
workforce planning.
Be fair, but be bold in removing people.
Fairness implies that organizations have
Asia. RBL Group and Ministry of Manpower
(Singapore).
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transparent and equitable processes for
removing redundant employees and leaders lead
by making bold decisions and moving quickly.
Have a clear strategy for removing employees
with the right legal framework.
Pay attention to those who stay as much as those
who leave to ensure on going productivity.
To flesh out these downsizing principles, which
apply to both voluntary and involuntary
(performance based) settings. Deepak offers
exceptional insights and advice.
He offers insights on making redundancy
choices based on a legal framework so that any firm
operates within the boundaries of the law. He
shows how removing redundancies is a major part
of an overall HR strategy for the organization. He
offers specific guidelines for employers and
employees facing redundancies.
When Deepak‘s insights are applied, leaders can
turn the despair of difficult business conditions and
removing people into an opportunity to define and
engage the right talent for organization success.
At times it is enlightening to talk about
all the upbeat and positive aspects of talent, but
dealing forthrightly with the darker and difficult
side of removing employees is an important part of
good leadership. Deepak‘s specific cases and
examples of his ideas in the context of India‘s high
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x
technology offers readers tools that can be accessed
and used.
I hope readers will find the book thorough,
informative, and useful in managing the entire flow
of talent in, through, and especially ―out‖ of the
organization.
Dave Ulrich
August 2017
Alpine, Utah USA
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xi
Preface
Various studies have focused on understanding why
downsizing efforts in large number of organizations
failed to achieve the kind of results they intended to
achieve. It is largely due to the short sighted interest
of the organization in just trying to achieve cost
cutting through shedding off manpower. This might
actually lead to loss of talent which the organization
might require in times of need.
It becomes necessary to look at
redundancy management from a long term
perspective where it may be considered as part of
organizational renewal which is not only aimed at
cutting cost (also read as reduced manpower) but a
process in which employees of the organization are
made active partner in identifying areas of
redundancy and inefficiency, where trust and
communication is not broken in the entire process
and even if some roles/jobs have to be abolished the
employees who were in those roles to be treated
with dignity. One more reality of today is that the
concept of lifetime employment is fading away and
as the digitization and automation is increasing
rapidly, especially in IT sector, more and more jobs
are moving into the risk zone. As a consequence,
workforce of tomorrow has to understand that they
need to be high on ‗employability quotient‘ where
they may learn to manage their career in terms of
learning new competencies as they grow in life and
career.
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xii
The book aims to understand redundancy through
the eyes of labour laws and its compliances
including interpretation of statutes by Supreme
Court, redeployment that may lead to talent from
getting lost, VRS and role of HR in designing and
implementing VRS & judicial perspective of Courts
in interpreting VRS and its implementation, part
played by HR in handling redundant positions/jobs
and HR and its role in understanding and catering to
needs of both survivors and victims of redundancy
drive and managing employee exit. Legal
compliances regarding certain sectors/kinds of
industries have also raised many complex questions.
I have tried to answer some
of them if not all. HR strategies suggested in the
book are about delivering business success in tough
times and through understanding what we actually
mean by handling redundancy, and strategies of
managing them keeping the employee as well as
organizational interest in mind.
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xiii
Acknowledgements
Working to complete the book was a pleasure.
Managing redundancy is highly relevant in today‘s
volatile business environment where technology is
changing at a rapid pace and competencies acquired
by employees/ professionals are becoming outdated
and thereby roles having those competencies are
becoming redundant.
For the completion of the book I feel deep sense of
gratitude to—
-Lord Ganesha for giving me that much strength to
do something meaningful in life
-Late Shri.S.N.Sharma and Late Smt.Shanti
Sharma, my grandparents, for making me what I am
today and showering wholeheartedly all possible
blessings on me and being a constant source of
encouragement, support and motivation and I know
who are still there and would remain there with me
till I exist in this world
-Prof.Dave Ulrich for the support he showed
towards ‗Managing Redundancy‘
-Dr.Suman Sharma, my mother, for believing in my
capabilities and making me strong and for
constantly taking all my troubles on her shoulders
till date to keep my life smooth and without whose
blessing I would not have been able to do whatever
I have done or achieved in life; without her coming
out with this book would not have been possible for
me
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xiv
-Runu, my wife, for supporting me and always
allowing me to work on my books and taking care
of all other issues which would have prevented me
from coming up with this book (all the words
mentioned here are too less to thank her)
-Arjun and Shlok, my sons, for being a constant
source of motivation and for giving me a reason to
work more and achieve more in life
-My cousin Divya for always encouraging me in all
my commitments
-Chandra Prakash Purohit my former student at Lal
Bahadur Shastri Institute of Management, New
Delhi for helping me out in case of Jet Airways
-All my well-wishers for supporting me and
wishing me success in life.
- Dr.Deepak Sharma
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Abbreviations Used __________________________________________
IDA: Industrial Disputes Act, 1947
IT: Information Technology
ITeS: Information Technology Enabled Services
VRS: Voluntary Retirement Scheme
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xvi
Table of Cases
Case Page
A
A.K. Bindal & Anr v. Union of India(2003)
5 SCC 163 101
B
B.C. Shivanne Gowda v. Hindustan Paper
Corp Ltd. (2003) IIILLJ 1098 Kant 113
Balram Gupta v. Union of India and Anr.
(1987) Supp. SCC 228 98
Bank of India v. O.P.Swarnakar(2003) 2
SCC 721 101
Bank of India v. Pale Ram Dhania2004 SC
L&S 698 101
Bayer Bio Sciences Pvt. Ltd. v. Presiding
Officer Labour Court-I2011 (129) FLR 17
(AP HC)
116
Bhogpur Corporation Sugar Mills Ltd. v.
Harmesh Kumar, 2006 13 SCC 28 56
Board of Trustees, Visakhapatnam v.
T.S.N. Raju(2006) 7 SCC 664 102
C
C.V.Francis v. Union of India2013 LLR
SC 785 88
Carona Ltd. v. Sitaram Atmaram
Ghag2000 (86) FLR 391 110
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xvii
Central Bank of India v. S.Satyam1996 5
SCC 419 51
Chairman and MD Indian Overseas Bank
v. Tribhuvan Nath Srivastava2011 LLR
225 SC
88
Chintaman Rao v. State of Madhya Pradesh
AIR (1958) SC 358 31
D
Delhi Cloth and General Mills Co. Ltd. v.
Shambhu Nath Mukherji1978 I LLJ SC 47
Delhi Stock Exchange Karmchari
Sangharsh Samiti v. Union of India2004
LLR 77 Del HC
116
Desikachari v. The Mall1961 (II) LLJ 771
(Mad HC)
102
E
EID Parry India Ltd. v.
M.N.Padmanabhan2008 LLR 1087 Mad
HC
104
Excel Wear etc. v. Union of India and
Ors[1979] 1 SCR 1009 42
F
Food Corporation of India v. Ramesh
Kumar2007 LLR 1123 SC 101
G
Gammon India Ltd. V. Niranjan Das1984
AIR 500 38
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xviii
Glaxo Labotratories (India) Ltd. v.
Presiding Officer(1984) 1 SCC 1 49
GM Appellate Authority v. Mohd.
Nizamuddin2006 7 SCC 410 100
Godrej Soaps Ltd. v. Baban Baburao
Nimane2003 III LLN 1036 Bom HC 107
Greaves Cotton Ltd v. Govt. of N.C.T. of
Delhi2011 LLR 315 Del HC 116
H
Harjinder Singh v. Punjab State
Warehousing Corporation2010 3 SCC 192 47
Hec Voluntary Retd. Employees Welfare
Society v. Heavy Engineering Corporation
Ltd2006 3 SCC 708
99
Hindustan Lever v. PO Meerut2004 102
FLR 652 105
Hindustan Steel Works Contruction Ltd. v.
Shiva Kant Jha@SKJha2005 BLJR 534
(Jhar HC)
113
I
I.D.L.Chemicals Ltd. v. T.Gattiah D.B.
Writ Appeal 16 of 1981 41
Inderjit Bhanot v. Punjab National
Bank2007 LLR 125 Del HC 114
Indian Hume Pipe Co. Ltd. v. Presiding
Officer, Labour Court AIR 1964 AP 56 58
J
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xix
J.N. Srivastava v. Union of India and
Anr(1998) 9 SCC 559 96
K
K.V. Rajendran v. Dy. Commissioner of
Labour, Madurai and others(1980) 2 LLJ
275 41
Kanan Das v. Hindustan Copper Ltd2005
LLR 237 Jhar HC 114
M
M/s Kec International Ltd. v. Kamani
Employees Union & Others1998 (3) Bom
CR 590
102
M/s. J.K. Synthetics and Anr. v. Union of
India and Ors. (1984) 48 FLR 125 41- 42
Madhya Pradesh State Transport
Corporation v. Manoj Kumar2016 III CLR
620 SC
86
Manjubala Sinha v. State of Bihar2002
LLR 175 Pat HC 109
Maruti Udyog Ltd. v. State of
Haryana2008 LLR 936 P&H HC 109
Meenakshi Mills Ltd. v. Meenakshi Mills
Ltd. AIR 1994 SC 2696 42
Milind Pandharinath Behere v. Union of
India2010 LLR 124 Bom HC 115
N
Nagesh B. Prabhu v. Syndicate Bank,
(2004) IILLJ 83 Kant 115
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xx
Nand Keshwar Prasad v. Indian Farmers
Fertilizers Cooperative Ltd. and Ors(1998)
5 SCC 461
98
National Textile Corporation Ltd v.
M.R.Jadhav2009 LLJ 224 SC 99
O
ONGC v. L.K.Khan Babi2010 LLR 357 93
P
PAL VRS Employees Welfare Association
v. Premier Automobiles Ltd2002 LLR 901
Bom HC
112
Papnasam Labour Union v. Madura Coats
Ltd1995 AIR 2200 46
Philips India Ltd. v. P.N.Thorat Assistant
Comm. of Labour & Conciliation
Officer2006 LLR 421 Bom HC
115
Power Finance Corporation Ltd. v. Pramod
Kumar Bhatia(1997) 4 SCC 280 93
Pramod Jha v State of Bihar2003 4 SCC
619 38
Punjab and Sind Bank v. Mohinder Pal
Singh2005 12 SCC 747
95
Punjab National Bank v. Virender Kumar
Goel2004 2 SCC 193
94
R
R.Sikar v. Presiding Officer Labour Court
2004 LLR 1064 Mad HC 116
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xxi
Rai Sahib Ramdayal Ghasiram Oil Mills
and Partnership Firms v. Labour Appellate
Tribunals1963 2 LLJ 65
57
Ramesh Chandra Sankla v. Vikram
Cement2009 AIR SC 713 94
S
Seelan Raj And Ors vs Presiding Officer
Labour Court Chennai 2001[4] SCC 634 68
S.V.Vanajakshi v. Tucs Limited2011 LLR
557(SN) Mad HC 111
SBI v N.Sundara Money1976 SCR (3) 160 37
Shambhu Murari Sinha v. Project and
Development India Ltd AIR (2002) SC
1341
98
State bank of Patiala v. Phoolpati2005 3
SCC 88 97
State Bank of Patiala v. RC Kanoji2004 2
SCC 651 100
State of Bombay v Hospital Mazdoor
Sabha AIR 1960 SC 610 37
T
Tata Iron & Steel Company v. Gyanendra
Sahay2005 LLR 438 Jhar HC 110
Tribal Co-Operative Marketing v.
Siddhartha Kumar2008 LLR 915 Del HC 111
Tulip Star Hotels v. Union of Centaur –
Tulip Employees2007 LLR 1002 SC 100
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U
Union of India and Ors. v. Gopal Chandra
Misra and Ors(1978) 2 SCC 301 98
UP State Brassware Corporation v. Uday
Narain Pandey AIR 2005 SCW 6314 50
V
V.Ramalingam v. Presiding Officer Labour
Court Chennai2007 LLR (SN) 329 Mad
HC
116
Vice Chairman & Managing Director,
Andhra Pradesh State Irrigation
Development Corporation Ltd. v. R.
Varaprasad2003 11 SCC 572
99
Vijay Kumar v. Whirlpool of India2007
AIR SCW 7323 100
Vishakhapatnam Port Trust v. Ch V.V.
Satyanarayana2003 LLR 18 AP HC 106
W
Workmen of M/S Firestone Tyre v.
Firestone Tyre & Rubber Company1976
SCR (3) 369 33
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2
Introduction
LLLLL
edundancy is a state of being excessive.
Redundancy means someone loses his job
as he is not needed by the employer. It is a
situation in which somebody is made to
feel that he is unnecessary as the human resources
in the organization are more than they are needed
by the employer. Recently, many Information
Technology organizations in India retrenched
thousands of workforce, putting the future of such
workers into unpredictability with little or no
severance package and making people wonder as to
why jobs in IT organizations were considered
stable.
As per reports, Information technology (IT)
organizations in India appear to be moving towards
industry‘s largest retrenchment drive with seven of
the biggest IT firms planning to ask at least 58,000
engineers to leave Software organizations in India
as predicted by Assocham, such as Wipro and
Infosys are in the process of saying good bye to
employees on a large scale. India‘s IT industry saw
1
R
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Managing Redundancy
3
more than anticipated recession. It was in news that
the seven biggest IT organizations which together
gave employment to 1.24 million people, planned to
terminate employment of 4.7% of their workforce in
2017, which included mid-level employees as well
as senior level employees. The way IT service was
being delivered has witnessed a change. Adding to
that complexity is the President of United States‘
protectionism which is still making offshore
business more complex. The result may be what
Indians may not welcome. Indian talent may
witness loss of ground as far as their demand is
concerned and clients of tomorrow may require a
high degree of automation in technology.
Another leading IT player in India regarding its
workforce in United States felt that local workforce
would constitute over 50 per cent of its employees
in the US within next few months.
Recently, one IT based organization offered its
top executives - directors, associate VPs and senior
VPs - a VRS package, a part of its overall strategy
to shift operations to automation and digital
technology. It was reported that at least 1,000
executives were likely to leave the organization. It
was bring reported that the corporation was looking
to retrench about 6,000 workers in India.
Many organizations put a higher number of
employees on notice by awarding them the lowest
ratings which was seen as a strategy to say goodbye
to these underperformers. Again, as per reports, one
IT organization placed more than 15,000 employees
in the lowest category, and another placed more
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4
than 3,000 senior managers in the category of
employees needing improvement.
IT organizations report that annual performance
appraisal leads to the separation of some employees
from the organization and these numbers may vary
from year to year. In the past, between 1% and
1.5% of a large Indian IT firm‘s employees would
be asked to leave every year on account of poor
performance. The number was 3% for foreign
companies with large Indian operations. As per
reports, this year, across Indian and foreign
companies the range may be 2-6%.
Also, HCL Technologies went into the mode of
employee separation and reduced its workforce
coming out with plea that employees‘ skills had
become redundant and no longer were in
consonance with company‘s requirements.
Recently, IBM went for employee separation and
reduced more than 70,000 workforce and paid one
month total severance pay irrespective of number of
years of service put in by the employee. The
development came few days after IBM declared to
investors that the change in size of the workforce
between 2014 and 2015 has only been marginal.
Employee separation went upto 70,000 but new
employees have filled the gap.
In November 2016 it was reported that Larsen &
Toubro, India‘s biggest engineering firm, shed
14,000 employees, or 11.2% of its total workforce,
in one of the biggest corporate retrenchment
exercises. Digitisation of operations caused
redundancies that led to downsizing.
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Managing Redundancy
5
The environment in which organizations operate is
never certain and predictable. The demand for
human resources may be there today but tomorrow
people in certain departments or with certain skills
may not be required. The market for a product may
not be favourable and workforce producing those
products may have to be involved in different
products or may be required to say ‗goodbye‘.
Either such workforce has to be prepared to take a
new role or they may no longer be required in the
organization. With the fast changing consumer
requirements and market unpredictability the
relevance of managing workforce for today and
tomorrow, i.e. keeping them future ready for
different roles and responsibilities would
differentiate between average and high performing
organizations.
At the heart of the problem appears the
fundamental change in the business model that
Indian IT organizations have to combat with. World
is going digital at a fast pace and they have to keep
up the pace and retrenchment appears to be a
natural consequence of the process.
Reasons for Obsolescence -
Internal as well as External
Reason for employee obsolescence may be internal
to the organization or external to the organization.
Factors internal to the organization means factors
lying within the organization making a particular
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