February 25, 2020

New Bill Passed In Parliament – 9 Months Of Assured Income If An Employee Gets Terminated. How Beneficial Is This?

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The Terminated Employee Welfare Bill,2020 was passed in Rajya Sabha. How Beneficial Is This?

‘The Terminated Employee Welfare Bill,2020’ – It’s definitely some news to cheer for private sector employees with the passing of this bill. This bill highlights to provide welfare measures to the employees, who have been terminated by the employers with reasons as stated in the bill. An employee whose employment is terminated for the reasons of the winding up of the organisation or the establishment due to:

  1. Economic slowdown; or
  2. Change in technology in the respective field; or
  3. The owner or director managing the affairs of the establishment becoming insolvent; or
  4. The orders of any court; or
  5. Incurring losses and unable to carry on the business; or
  6. the change in Government policy;

The bill states – If an employees get’s terminated above aforesaid reasons – He shall be entitled to unemployment compensation health insurance benefits or any other benefits as may be prescribed by the Central Government. If such benefits are not part of the employee-employer agreement, terminated employee becomes eligible to receive unemployment benefits for nine months or till the time he gets employed elsewhere, whichever is earlier.

The unemployment compensation shall not be less than 60% of the gross salary of the terminated employee or as per the terms of the employee-employer agreement, whichever is higher and it shall be borne by the employer. A terminated employee shall be entitled to the terminal benefits on the cessation of employment like provident fund, gratuity, leave encashment etc along with health insurance benefit.

If due to any reason, the employer is not able to pay the benefits within one month from the date of the termination of the employment, the employer shall pay to the terminated employee an interest at the rate of 12% per month for such delay.

Employee Benefits:

No doubt, if you are an employee this bill certainly gets you a creamy layer of entitlement by protecting you from being terminated by your employer. Please note you can receive benefits under this act only if the company if the company decides to wind up because of above mentioned reasons, else employer-employee agreement earlier entered into will still remain in effect. After employment, a person often takes a few loans to meet his needs, gets their children admitted at a certain level of school. All this cannot come to a halt without any of his fault. The main intent is to make sure the family of the employee should not suffer because of such events. Nine months of protected time – gives an employee reasonable time to plan for future prospects in other companies & secure their future.

All said, now let’s look at the flip side to this bill. If all companies decides on meticulously planned exit of employees, that also means less jobs openings for fresh hiring. Jobs in MSME sectors, especially startups will certainly be hard hit due to these factors. Medium scale companies are huge job creators for a huge section of population, as it is almost like a stepping stone for most graduates to build their careers during the initial phases of life. Most often experience gained from such companies enable them to gradually progress towards working for MNC companies.

There isn’t any greater joy for MNC company employees out of this, as the probability of MNC companies legally winding up operations due to above reasons are less than 5% of the overall MNC job market. And yes if you are part of a company representing that 5%, you will definitely be protected from such act of winding up of the company.

Click Next To See How It May Benefit Employers:  Click Here To Read More.. 


–    Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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