Author: indiafreenotes

Employee Termination

Termination of employment refers to the end of an employee’s work with a company. An employee may be terminated from a job of their own free will or following a decision made by the employer.

An employee who is not actively working because of an illness, leave of absence, or temporary layoff is still considered employed if the relationship with the employer has not been terminated formally with a notice of termination.

Termination of employment is an employee’s departure from a job and the end of an employee’s duration with an employer. Termination may be voluntary on the employee’s part, or it may be at the hands of the employer, often in the form of dismissal (firing) or a layoff. Dismissal or firing is usually thought to be the fault of the employee, whereas a layoff is usually done for business reasons (for instance a business slowdown or an economic downturn) outside the employee’s performance.

Firing carries a stigma in many cultures, and may hinder the jobseeker’s chances of finding new employment, particularly if they have been terminated from a previous job. Jobseekers sometimes do not mention jobs from which they were fired on their resumes; accordingly, unexplained gaps in employment, and refusal or failure to contact previous employers are often regarded as “red flags”.

How Voluntary Termination Works?

An employee may voluntarily terminate their employment with a company. An employee who decides to terminate employment with a company usually does so when they find a better job with another company, retire from the labor force, resign to start their own business, or take a break from working.

Voluntary termination of employment could also be a result of constructive dismissal, also called constructive discharge. This means that the employee left the company because they had no other choice. They could have been working under significant duress and difficult working conditions at the employer—which could include a too-low salary, harassment, a new work location that is farther than the employee can reasonably commute, increased work hours, and so forth.

A forced discharge of an employee, whereby they are given an ultimatum to quit or be fired, also falls under constructive dismissal. In these cases, if the employee can prove that the employer’s actions during the worker’s tenure with the company were unlawful, they may be entitled to some form of compensation or benefits.

An employee who voluntarily leaves an employer may be required to give advance notice to the employer, either verbally or in written form. Most industries usually require a two-week advance notice of an employee’s termination. In some cases, the employee gives notice at the time that they terminate, or they give no notice at all, such as when an employee abandons the job or fails to return to work.

How Involuntary Termination Works?

Involuntary termination of employment occurs when an employer lays off, dismisses, or fires an employee.

(i) Layoffs and downsizing

Companies decide to lay off workers or downsize their organizations to lower their operating costs, restructure their organizations, or because they no longer need an employee’s skill set. In a layoff, employees are usually let go through no fault of their own, unlike workers who are fired.

(ii) Getting fired

An employee is usually fired from a job as a result of unsatisfactory work performance, poor behavior or attitude that does not fit with the corporation’s culture, or unethical conduct that violates the company’s policies. According to at-will employment laws recognized in some states, a company may dismiss without warning any employee who is performing poorly or violating some form of the company’s rules. In fact, the company does not need to give a reason for the employee’s termination.

(iii) Illegal dismissals

Although employment-at-will contracts do not require an employer to warn or give a reason for a dismissal, an employer cannot fire a worker for certain reasons. An employee who refuses to work more than the hours specified in the contract who takes a leave of absence, reports an incident or a person to the Human Resources department, or whistleblows to industry regulators cannot be fired for these reasons. An employer who discharges an employee for exercising their legal rights has done so unlawfully and may be liable for wrongful termination in the courts.

Other illegal dismissals occur when an employer lets an employee go for discriminatory reasons such as religion, race, age, gender, disability, or nationality. An employer who has been found guilty of wrongful termination may be required to compensate the wronged employee and/or reinstate them into the company.

(iv) Termination for cause

Other than at-will conditions of employment, an employer could fire an employee for a specific cause. A termination-for-cause clause may require the employer to put the employee on an improvement schedule, of 60 or 90 days, during which the employee is expected to improve their work ethic. If the employee has not improved by the end of the probationary period, they could be terminated for cause and dismissed with prejudice.

In some cases, an employer may dismiss an employee without prejudice. This indicates that the employee was let go for reasons other than incompetence, insubordination, or misconduct in the workplace. In such situations, the employee may be rehired for a similar job in the future.

Termination Compensation

In most cases where an employee who has worked with a given company for at least three months and has their employment involuntarily terminated, the employer may provide them with a notice of termination and/or termination pay (or severance pay). A company that offers severance does so following an agreement made privately with the employee or because severance is specified in its employee handbook.

 Under the Fair Labor Standards Act (FLSA), a company is not mandated to provide severance packages.

Also, employers are not required by federal law to give the terminated employee a final paycheck immediately. However, state laws may operate differently in this regard and may mandate that the employer must not only immediately provide the affected employee with a final paycheck, but also include accrued and unused vacation days.

Special Considerations: the Coronavirus

As of April 2020, millions of workers have been laid off as businesses struggle with government-ordered stay-at-home orders during the coronavirus pandemic. Some companies have furloughed workers, a move that is meant to be a temporary arrangement until the company can reopen. The CARES Act makes unemployment compensation available not just to those who have been laid off, but to furloughed employees as well as part-time workers, freelancers, independent contractors, and the self-employed—workers not usually eligible for unemployment benefits.

Employee Layoff

A less severe form of involuntary termination is often referred to as a layoff (also redundancy or being made redundant in British English). A layoff is usually not strictly related to personal performance, but instead due to economic cycles or the company’s need to restructure itself, the firm itself going out of business or a change in the function of the employer (for example, a certain type of product or service is no longer offered by the company and therefore jobs related to that product or service are no longer needed). One type of layoff is the aggressive layoff; in such a situation, the employee is laid off, but not replaced as the job is eliminated.

In an economy based on at-will employment, such as that of the United States, a large proportion of workers may be laid off at some time in their life, and often for reasons unrelated to performance or ethics. Employment termination can also result from a probational period, in which both the employee and the employer reach an agreement that the employer is allowed to lay off the employee if the probational period is not satisfied.

Often, layoffs occur as a result of “downsizing“, “reduction in force“ or “redundancy“. These are not technically classified as firings; laid-off employees’ positions are terminated and not refilled, because either the company wishes to reduce its size or operations or otherwise lacks the economic stability to retain the position. In some cases, a laid-off employee may eventually be offered their old position again by their respective company, though by this time they may have found a new job.

Some companies resort to attrition (voluntary redundancy) as a means to reduce their workforce. Under such a plan, no employees are forced to leave their jobs. However, those who do depart voluntarily are not replaced. Additionally, employees are given the option to resign in exchange for a fixed amount of money, frequently a few years of their salary. Such plans have been carried out by the United States Federal Government under President Bill Clinton during the 1990s, and by the Ford Motor Company in 2005.

However, “layoff” may be specifically addressed and defined differently in the articles of a contract in the case of unionised work.

Employee Attrition

Attrition in business describes a gradual but deliberate reduction in staff numbers that occurs as employees retire or resign and are not replaced. The term is also sometimes used to describe the loss of customers or clients as they mature beyond a product or company’s target market without being replaced by a younger generation.

How Attrition Works?

This type of reduction in staff is called a hiring freeze. It is one way a company can decrease labor costs without the disruption of layoffs.

Reducing staff by attrition naturally is less devastating to company morale. However, it can still have a negative impact on the remaining employees if it leads to an increase in their workload. It also can limit promotional opportunities and movement within the company, resulting in an unhappier workplace or more attrition than was intended.

About Customer Attrition

Attrition can also refer to a shrinking customer base. This, of course, is not deliberate. The word is most pertinent when used to describe a product whose customer base is shrinking because its loyal customers are aging and younger consumers are not taking their place.

Customer attrition is usually found when a company has failed to adapt its product to changing trends. The Sears department store chain and the Oldsmobile car brand might be examples of products that failed to capture a younger generation of customers.

 Because attrition is voluntary, as opposed to layoffs, it is seen as a less disruptive way for a company to decrease labor costs.

Attrition versus Layoffs

Changes in management, company structure, or other aspects of a company’s operations can cause employees to leave voluntarily, resulting in a higher attrition rate.

Laying off employees results in attrition as long as the company doesn’t immediately hire as many new employees as it laid off. For example, a company might reduce its administrative staff by six in order to create a new internet team of six.

Turnover occurs in a company for many reasons. It can only be called attrition if the company decides not to fill the vacated position.

When a company is faced with a financial crisis, it must make tough calls and cut back its workforce in order to stay afloat. In these cases, the company might implement a layoff with no intention of filling those positions again.

In less drastic cases, such as changes in the company structure or business model or a merger, certain departments are trimmed or eliminated. This usually requires layoffs rather than attrition.

Unlike layoffs, a reduction in staff due to attrition is voluntary. The employee has decided to take a new job, retire, or move to another new city. An attrition policy takes advantage of this inevitable changeover to reduce overall staff.

Employee Retrenchment

Retrenchment is a form of dismissal due to no fault of the employee, it is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees.

The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making such a decision or the retrenchment may be considered unfair.

How retrenchment laws work in India?

The original legislation of 1947 does not have the definition of the word retrenchment; it was in 1953 that with an amendment Act this definition was inserted. It would also be interesting to know that till 1983 the courts of law used to consider termination of service due to nonrenewal of the agreement of employment as the act of retrenchment in pronouncements like of Hindustan Aluminium Corporation v. State of Orissa. later, the judgment was held to be a bad one and with the Amendment 49 of 1984 the provision of (bb) was inserted in the definition of retrenchment declaring such kind of termination not to be included within the ambit of retrenchment.

Retrenchment refers to discharge of surplus labour by the employer. It may be due to inevitable reasons including rationalization or installation of new labour-saving machinery. Retrenchment may also be said as the right of an employer. An employer has a right to organize his business in any lawful manner he considers best and courts cannot question its proprietary. If reorganization results in surplus employees, no employer is expected to carry their burden. There is a consensus of judicial opinion in deciding retrenchment on the facts and circumstances of each case. Courts have decided that termination of services is due to loss.

In the landmark case of State Bank of India v. Sundara Money, the Supreme Court adopted the literal meaning of retrenchment, which is exhaustive and comprehensive, and held that the expression “for any reason whatsoever” was very wide and admitted almost no exceptions to it. Therefore, the word retrenchment means termination of a worker’s services for any reason whatsoever other than those specified in section 2(oo) of the Industrial Dispute Act (IDA), 1947.

 Chapter V-A of the IDA requires an establishment employing 50 or more workers, in case of valid retrenchment to provide the workers with 30 days’ notice and 15 days’ pay for every year of continuous work by the workmen at the firm. In case of closure or sale, it must fulfil the same conditions unless the successor takes on these obligations. For an establishment employing 100 or more workers, the IDA, under Chapter V-B, requires prior permission from the Government before the firm’s closure or retrenchment.

The procedure of retrenchment has been given under Section 25G. It is when any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, than in the absence of any such agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. Section 25F of the IDA provides mandatory conditions for retrenchment of workers. It prescribes conditions to be obeyed for terminating services without conferring any right on the worker for permanent absorption. Any employee working in a firm for 240 days or more in the previous 12 months can in principle claim retrenchment compensation.

The employers in India have responded to the restrictive retrenchment laws in several ways including the greater use of contract, temporary and/or casual labour, the use of golden handshakes and setting up of production in the States where labour is not organized. The Government is pursuing privatization and disinvestment. Any anomaly in retrenchment laws, which addresses the basic functioning of companies, needs the immediate attention of lawmakers.

The legal requirements with respect to termination of services are more onerous once a company employs more than 100 employees. In terms of the IDA, if an industrial establishment employs more than 100 employees, it may not retrench, that is, terminate the services of any employee who has been in continuous service for not less than one year unless the (i) the employee has been given three months’ notice indicating the reason for retrenchment and the period of notice, and (ii) the prior permission of the concerned State Government has been obtained for the retrenchment (Section 25N of the IDA).

Moreover, if the permission is not obtained, the retrenchment will be deemed to be illegal from the date on which the notice was given and the employee will be entitled to all the benefits under law as if no notice had been given to him. From a practical standpoint, obtaining the State Government’s approval for retrenchment is considered nearly impossible due to the implications of the resulting unemployment. Therefore, companies rarely apply to the State Government for permission for retrenchment. Penalty for contravening the aforesaid provisions on retrenchment is imprisonment up to one month or fine which may extend to Rs 1,000, or with both. Assuming that the State Government’s approval is obtained, the services of the employees can be terminated upon provision of three months’ prior notice and payment of 15 days’ average pay for each completed year of service in excess of six months.

HRM stands for Human Resource Management, and human resource management strategies are the plans that lead to implementing different functions in the human resources department of an organization. Typically, these strategies are guided by the overall strategies of the business and serve to help the business attain its long-term goals via its staff. These strategies can be divided into four key areas:

1. Talent and Human Capital

Talent represents the human capital of an organization and is crucial to the success of that business. It is an important asset that the business should strive to maintain. How does the human resources management system help with these? By having a comprehensive staffing blueprint. The human resources department should forecast the staffing needs of the business in the future while also recruiting, hiring, and keeping the best talent in the organization. The most successful businesses in the world pride themselves in hiring the best talent in the world.

In order to do this effectively, the HRM department needs to identify the various competencies required for each job, such as the skills, abilities, and knowledge required to perform various tasks effectively. This will allow them to draw detailed job descriptions that will ultimately guide them to find the best people for the job.

2. Leadership of an Organization

The leadership of the organization is likened to what the head is to a body. It is through leadership that a business succeeds or fails in its endeavors. The HRM department plays a key role in the leadership of the organization because it is tasked with finding the best executives to steer the business in the right direction.

An HRM department that can boast past success in choosing the right executives will generally find it easier to convince the board of its recruits the next time an executive is required. In order to do this job effectively, HR managers need to be active in an advisory capacity when engaging with other organizational leaders so as to give their input on what is best for the company’s future.

3. Human Resources Planning

The HRM department plays an important role in helping the business to plan for the future. Take employees, for example: by conducting regular surveys of the employees to determine employee satisfaction, the HRM department can give important insights to business leaders on what needs to be done in the future to contribute to a happier workplace.

4. Performance Metrics and Corporate Culture

An organization with well-defined performance metrics is an organization with high potential for success. The HRM department plays a role in this, as well. Through developing well-defined performance metrics, regular performance evaluations, and schemes to reward employees for high performance and creativity in accomplishing their tasks, the HRM department will create a high-performance culture where the interests of the employees are aligned with those of the business, and they are genuinely motivated to do their best. Employees who feel appreciated by their companies and receive recognition for their achievements in the workplace are likely to want to do more.

As a result of the scarcity of qualified managers which can lead to constraints on global office expansion for businesses, an effective global human resources strategy can be vital in building and securing a sustainable advantage over their competition. Good HR management requires an integrated approach, which begins to merge into career management. A cohesive network will ensure that the right people are in the right jobs, and that all costs are attributed appropriately. This can ultimately allow the business to identify good ideas on a global scale. Ultimately, the building of this network comes down to an effective global human resources strategy, and here, we’re taking a look at the ten steps businesses can take to ensure this is in place.

1. Ending favouritism

One of the fundamental steps towards building a global human resources strategy should be to end favouritism towards managers that are nationals of the country in which they are based. Whilst many companies consider nationals of their headquarters country as potential expatriates and refer to everyone else as ‘local nationals’, this should be reconsidered for numerous reasons. Ethnocentric companies put the most confidence in nationals of their headquarters’ country, and thus this is the reason why these nationals receive the better assignments and climb the ladder much faster. Most surprisingly, big contrasts can be found between expatriate and local national pay, including the bonuses and benefits they receive. In order to create an effective global human resources strategy, businesses must weigh up the advantages and disadvantages of using expatriates and local nationals to determine the best solution according to the desired outcome.

2. Identify activities that achieve success

The next step towards an effective global human resources strategy is identifying activities that best achieve success across the globe and identify the positions that held responsibility for ensuring their success. The positions that hold the responsibility for performing these good acts represent the ‘lifeline’ of a company. Once the activities that achieve success have been identified, businesses can then revisit the lifeline and role descriptions on a regular basis to ensure they accurately represent the business strategy.

3. Finding who & where your talent is

Once a company has identified the activities that achieve success, they can find who and where their talent is via a global database, focusing on more than just the top of the organization and considering middle managers in the country markets and potential stars leaping through the ranks. Organizations seeking to build a useful global human resources database must start with an array of personal-profile templates that ask questions that go beyond each manager’s experience to determine cultural ties, language skills, hobbies and interests. For overseas assignments, especially, Human Resources Directors must consider these skills and adaptability to be as important as functional skills if not more so!

4. The mobility pyramid

Another way for businesses to build an effective global human resources strategy is by constructing a mobility pyramid to easily evaluate managers regarding their willingness to move to a new location to gain experience. Whilst many human resources departments refuse to look at mobility beyond ‘movable’ and ‘not movable’, it is paramount that there is more behind the decision to transfer an employee abroad should they need to relocate, and even more so because managers can move up or down the mobility pyramid at various stages during their career. By constructing a mobility pyramid, businesses can find different ways to effectively use available in-house talent and encourage an increased number of managers to consider saying yes to an overseas assignment.

5. Leadership capital

The next step businesses need to take to create an effective global human resources strategy is to identify their leadership capital. One of the best ways for businesses to identify their leadership capital is by building a database of their company’s mix of managerial skills by requiring people to provide more information on their CV’s regarding their experience in management and skills they possess. This way, HR departments can kick-start the process by holding senior meetings and those in lifeline posts to complete the form first, prior to adding others from across the globe with the potential to progress in their career.

6. Bench strength & skills gap

The following step businesses must take towards an effective global human resources strategy is to assess their bench strength and skills gap. To do this, businesses must ask each executive to compare their skills and characteristics against the requirements identified for the executive’s current position. Not only is this an effective way to compare skills with ease, but it can also help close personal skills gaps through in-house training or by participating in outside courses to heighten global success.

7. Regular recruitment

In order to construct an effective global human resources strategy, businesses must search for new recruits on a regular basis in the local market, as well as in the headquarters’ country. Whilst this can be challenging from time to time, one of the best ways to attract national recruits is by demonstrating how far they can climb up within the organization, as this is one of the most appealing aspects job seekers look for. Recruitment and selection not only helps to ensure that the business has the necessary knowledge and skills required to fulfill objectives, but it also forms part of the strategic management of human resources.

8. Advertising internally

As mentioned previously, regular recruitment is a great way to attract new talent, but when a business advertises their posts internally, it allows a competitive internal job market to work across nationalities and genders alike, and proves to employees that they can in fact broaden their horizon and make a future in the company. Moreover, advertising internally helps attract those that may be in the process of finding an alternative job, and thus reduces employee retention and creates a positive work environment.

9. Succession planning

In regard to regular recruitment in order to construct an effective global human resources strategy, managers in a lifeline role should nominate at least three candidates who could take over that position in the upcoming week, three months down the line or within the next year. Whilst this will not resolve all succession questions, it will certainly go a long way and significantly help everyone involved to identify potential future leaders with ease. Moreover, succession planning provides businesses with the bigger picture and is paramount to sustain income and support expenses should a disaster occur.

10. Challenging & retaining talent

Lastly, another step to an effective global human resources strategy is to challenge employees in order to retain talent. The need to retain talented employees is increasing every day, and for good reason. Retention of talent is crucial for the continued growth and success of any business, which is why is it paramount that colleagues are provided with consistent and regular communication about what needs to be done, and feedback to ensure the business moves with the market. One of the most effective ways to retain talent is by being open to employees about their potential and future within the future, paying well and not pondering over promoting people who have shown rock-solid ability.

Businesses often struggle to construct an effective global human resources strategy because they are unaware of what an effective global human resources strategy should include, but with these ten steps, businesses can create a beneficial global human resources strategy with ease and confidence.

Performance appraisal is a process that needs to be undertaken meticulously if obtaining desirable results is anything to go by. Many managers conduct this kind of evaluation on their employees from time to time majorly because it is an organizational tradition or requirement but not necessarily because of its impact on the future.

However, there are those who do it for a purpose but in some instances tend to face a myriad of challenges along the process. There are various problems with performance appraisal that managers often face. These problems include;

Some of the Problems with Performance Appraisal

1. Compare/contrast error

When appraising employees, it is important never to compare their abilities and using it to make a judgment.

Each employee is gifted in their unique way and thus has different strengths and weaknesses. When you try to compare or contrast their abilities, it means that you will not get a fair review because high performers will certainly make relatively low performers for particular tasks to look below average, which on some occasions is never the case.

Of essence is to ensure that you appraise every worker by their performance against established standards and criteria, individually.

2. Similarity error

In every organization, some employees have a resemblance of different aspects with the manager. Now some managers usually find it easy to reward such employees highly compared to those who portray contrasting behaviour or opinion.

As a manager, it would be significant to ensure that you perform your employee appraisal objectively and considering that diversity should be respected, try to carry out the appraisal process based on performance and results that they provide and not primarily by similarity/dissimilarity that you have.

3. Bias

Bias is also one of the problems with performance appraisal managers often encounter. As a matter of fact, everyone has some biases towards someone or something irrespective of how we portray them. However, as a manager, it is imperative not to let the biases hinder the manner in which you approach performance evaluation process.

Your biases can manipulate the objectivity of appraisal hence it is important to ensure that you keep it off as much as possible to make sure that you do not compromise the results of your findings. Biases may also lead to inconsistencies among different employees bearing in mind that the key element for attaining best results from appraisal is consistency.

If you do not like someone it will not be right to use that feeling in making review judgment, it is unprofessional.

4. Stereotyping

Stereotyping is closely related to biases only that in this case, you tend to make your judgment by your predetermined mindset towards a particular employee’s race, gender, political affiliation, religious background, culture and other characteristics.

Stereotyping is problematic when assessing employees’ performance because it implies that you will only be able to provide judgment based on what you label the group similar to one that the particular employee belongs to.

What you need to know is that stereotyping can also be positive or negative and thus can significantly influence your judgment respectively. It is only ideal to look beyond the labels and evaluate the employee by set standards and performance.

5. The Halo effect

This is also known as the horns effect. It is a situation where you let your positive or negative feelings towards an employee to influence your evaluation easily. It is necessary to judge each criterion independently without compromising what you feel for the employee.

You should also be careful when doing appraisal evaluations so that in the event you realize that most criterions are coming out with similar appraisals, you should halt and check yourself for the halo effect. It is a fact that each employee will always portray certain areas as their weakness and others as their strengths.  What you need to do is to ensure that you do not colour the entire evaluation with a particular impression

6. Recency effect

This is majorly about carrying out an appraisal for a short period before it takes place. As stated earlier, an appraisal is an activity that takes place continuously, which means that the focus should not only be for the short period before it happens but rather the entire time of the year.

In many organizations, problems with performance appraisal usually arise when a manager decides to determine results by basing their evaluation on what an employee has achieved just before the assessment. In this case, it sounds unfair to employees who have been outstanding throughout but later faulted few days to assessment and vice versa because the appraisal will not be able to reveal the actual reality.

7. Attribution error

This is one of the trickiest problems with performance appraisal. It involves making your independent belief on possible causes of some behaviours or outcome and letting that influence your judgment.

It is never a good idea to develop an assumption of what transpired or made the employee behave in the manner that he or she did and later use it as a basis for reviewing the appraisal process. It is only essential if you stick by the stipulated standards and criterion and how the performance of each employee compares to such standards. It only becomes a fair when the employee is judged on their performance in line with the set standards rather than preconceived notion.

8. Leniency and Severity tendencies

These mistakes usually arise as a result of distribution errors, which imply that the overall dissemination of appraisal does not stand firm to the classic bell. This means that some managers are too lenient and will end up appraising all employees above average, others will give average whereas others would provide below average.

In the typical occasion, the results need to reflect the classic bell curve where some employees are graded as high performers; others average while other poor performers. But in the unlikely event that all appraisal results come out as similar, you need to ensure that entire performance measures are given sufficient consideration. It helps in a great way of making sure that fair appraisal has been carried out.