Sample Copy. Not For Distribution. · -Chandra Prakash Purohit my former student at Lal Bahadur Shastri Institute of Management, New Delhi for helping me out in case of Jet Airways

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Managing Redundancy


ii

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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


iv

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


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


vi


vii

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


mailto:[email protected]

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).


ix

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


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


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.


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.


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


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


xv

Abbreviations Used __________________________________________

IDA: Industrial Disputes Act, 1947

IT: Information Technology

ITeS: Information Technology Enabled Services

VRS: Voluntary Retirement Scheme


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


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


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


https://indiankanoon.org/doc/1151031/

https://indiankanoon.org/doc/1151031/

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


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


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


xxii

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


Managing Redundancy

1


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


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


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.


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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Sample Copy. Not For Distribution. · -Chandra Prakash Purohit my former student at Lal Bahadur Shastri Institute of Management, New Delhi for helping me out in case of Jet Airways