Employment Termination in India After the Labour Codes: What Changes the Legal Analysis

Reviewed by Manu Shankar, Advocate, ManAT Legal

There is no single notice period or severance formula for every employment termination in India after the labour codes. The legal analysis changes with the person’s statutory classification, the nature and size of the establishment, the reason and legal category of separation, the contract and standing orders, the appropriate government, applicable rules and state law.

India’s four central labour codes became operative on 21 November 2025, according to the Government of India announcement. For termination and industrial-relations questions, the Industrial Relations Code, 2020 is central, but it does not turn every salaried person into a covered “worker” or every separation into “retrenchment.”

Six questions should be answered first

1. What is the person’s legal status?

The employment title is relevant but not conclusive. Actual duties, authority, managerial or administrative functions, supervisory role and wages may affect whether a person falls within the Code’s definition of “worker.” Another statute or contractual remedy may apply even where the Industrial Relations Code’s worker protections do not.

2. What establishment and industry are involved?

Coverage may depend on the nature of the undertaking, location, number of workers and whether the Central or a State Government is the appropriate government. A rule applicable to a factory cannot simply be applied to every office, shop, platform or professional establishment.

3. What event actually occurred?

“Termination” may describe legally different events:

• retrenchment;
• dismissal following alleged misconduct;
• discharge for performance, incapacity or another stated reason;
• expiry or non-renewal of a fixed-term arrangement;
• termination during probation;
• resignation;
• abandonment allegations;
• retirement or superannuation; or
• mutual separation.

The label in the letter is not necessarily decisive. The definition, facts and substance of the event require review.

4. What do the contract and policies say?

The appointment letter may address notice, pay in lieu, probation, disciplinary process, garden leave, confidentiality, return of property and post-employment duties. Policies may be incorporated by reference. Contract terms remain subject to mandatory law and cannot be read in isolation.

5. Do certified or model standing orders apply?

Standing orders can govern classification, attendance, misconduct, disciplinary procedure and termination for covered industrial establishments. Section 28 of the Industrial Relations Code addresses the standing-orders chapter for industrial establishments meeting the statutory worker threshold. The current central rules and Model Standing Orders, 2026 must be read with coverage, adoption/certification and the appropriate-government position.

6. Does state law add another requirement?

State shops-and-establishments legislation, local rules and state industrial-relations procedure may apply alongside central law, depending on the establishment and employee. For example, section 39 of the Karnataka Shops and Commercial Establishments Act, 1961 addresses removal or dismissal of a covered employee who has completed at least six months’ continuous service. It requires reasonable cause and one month’s notice or pay in lieu, while its proviso deals separately with misconduct proved at an enquiry. Coverage, exemptions, the actual reason and interaction with central law still need case-specific review; this is not a notice rule for every person working in Karnataka.

Retrenchment is a defined legal category

In everyday speech, retrenchment can mean downsizing. Under the Industrial Relations Code, it is a statutory term with a definition and exclusions. The facts must be tested against that definition before its notice, compensation or permission provisions are applied.

For a covered worker with the required continuous service, section 70 of the Industrial Relations Code sets conditions precedent to retrenchment in the circumstances it covers. These include one month’s written notice stating reasons, or wages in lieu; compensation equivalent to 15 days’ average pay for every completed year of continuous service or part exceeding six months; and notice to the appropriate government or specified authority in the prescribed manner.

This is not a universal severance rule for every employee or every termination. Coverage, “worker” status, continuous service, the statutory definition and exclusions must all be established.

Larger establishments: Chapter X and prior permission

Chapter X applies to specified industrial establishments. Section 77 provides the chapter’s threshold framework, including factories, mines and plantations in which not less than 300 workers were employed on average per working day during the preceding twelve months, or a higher number notified by the appropriate government.

For retrenchment within that chapter, section 79 contains a three-month notice/pay-in-lieu framework and a prior-permission process, along with compensation provisions. The calculation, application, service and deemed consequences should be taken from the current statute and applicable rules for the establishment.

An employer should not use headcount informally. The relevant worker count, reference period, establishment definition and government notifications need evidence.

Misconduct dismissal requires a different analysis

A dismissal based on alleged misconduct is not analysed simply as retrenchment. The enquiry turns to the alleged rule or standing-order breach, notice of charges, opportunity to respond, evidence, impartiality of the process, findings, proportionality and the applicable contract, standing orders and law.

The correct procedure depends on coverage and facts. A disciplinary process should not be treated as an empty formality, and a termination letter should not use misconduct language unsupported by the record. For the individual, an immediate response should preserve objections without deleting or taking records unlawfully.

Performance, probation and contractual termination

Poor-performance termination should be distinguished from misconduct. The file may include objectives, reviews, warnings, support offered, response opportunities and the stated basis for separation. Probation affects contractual terms but is not a universal exemption from mandatory law or fair procedure.

For a person outside a particular worker protection, the contract, applicable state law and civil or other statutory remedies may carry more weight. A notice clause answers only part of the question: termination may also affect accrued pay, leave, incentive conditions, gratuity where applicable, confidentiality, intellectual property and return of property.

Resignation and mutual separation

A resignation should be voluntary and clear. Notice, waiver, acceptance, relieving documentation, handover and final settlement should be recorded. Allegations that a resignation was forced require close review of the communications and circumstances.

A mutual-separation agreement can define the last working day, payments, claims, property return, confidentiality and reference/announcement terms. A release should not be presented as automatically extinguishing rights that cannot lawfully be waived.

Fixed-term expiry is not always the same as early termination

The expiry of a genuine fixed-term contract at its agreed end date must be distinguished from ending it early. Renewal conduct, continued service, the statutory definition, standing orders and the actual reason may affect the result. Merely inserting a fixed end date does not answer every coverage or remedy question.

A practical review process

For an employer considering termination

1. Classify the person, establishment, proposed reason and legal route.
2. Confirm the appropriate government, current rules, standing orders and state law.
3. Review the contract, policies and prior record.
4. Identify notice, enquiry, consultation, permission or filing requirements before acting.
5. Check decision-maker authority and consistency with comparable cases.
6. Calculate dues and statutory payments using verified inputs.
7. Prepare an accurate letter that matches the actual route.
8. Preserve records and plan lawful system/property access changes.

For a person who has received a notice or termination

1. Preserve the letter, contract, policies, pay records and relevant communications.
2. Record the chronology and the duties actually performed.
3. Request the stated reason, calculation or documents where legally appropriate.
4. Do not sign a release or settlement without understanding its effect.
5. Observe response, appeal, conciliation and limitation deadlines.
6. Avoid taking confidential or personal data without authority.

Final dues are separate from the validity question

Even where the parties disagree about termination, the final settlement should identify each component: earned wages, approved expenses, leave or incentive amounts under applicable terms, notice pay, retrenchment compensation where applicable, gratuity where due, deductions and tax treatment.

Payment of some dues does not necessarily prove that the termination was lawful. Conversely, a procedural challenge does not justify withholding amounts that are undisputed and payable.

Which forum may hear the dispute?

Possible routes include an internal appeal or grievance process, conciliation, an Industrial Tribunal, another labour authority, a civil or commercial court, arbitration for an arbitrable contractual issue, or a writ remedy in an appropriate public-law case. The person’s classification, employer, relief, statutory scheme and dispute clause shape the route.

The Industrial Relations Code’s institutional and transition provisions must be read with the Industrial Relations Code (Amendment) Act, 2026, which addressed repeal, savings and continuity matters with effect linked to 21 November 2025. A pending or transitional case requires separate analysis.

Common mistakes

• Applying one notice period to every role and establishment.
• Treating the job title as conclusive of worker status.
• Calling every employer-initiated separation retrenchment.
• Using misconduct language without a defensible process and record.
• Ignoring standing orders or state law.
• Calculating headcount without the statutory definition and reference period.
• Combining notice pay, retrenchment compensation and final dues into an unexplained figure.
• Asking an individual to sign an immediate release without review time.
• Missing a statutory or contractual response deadline.

Frequently asked questions

Are all employees entitled to one month’s notice?

No universal rule should be stated. Section 70 contains a one-month notice/pay condition for the retrenchment circumstances it covers. Other people and separation routes may be governed by different statutory, standing-order, contractual or state-law requirements.

Does an employer with 300 workers need government permission for every termination?

No. Chapter X coverage and section 79 concern specified establishments and retrenchment situations, not every separation. Worker count, establishment type, legal category and applicable notifications must be established.

Can an employer pay notice and terminate for misconduct without an enquiry?

Payment of contractual notice does not automatically cure a failure to follow a legally required disciplinary process. The governing standing orders, law, contract, allegations and actual basis for termination need review.

What if the appointment letter gives either party the same termination right?

A mutual clause is relevant but does not displace mandatory law or answer whether the stated reason and procedure engage statutory protection. Enforceability and remedy depend on the whole legal relationship.

Which law applies to an employee in Bangalore?

Potentially central labour-code provisions, current central or Karnataka rules, Karnataka shops-and-establishments law, standing orders, contract and other subject-specific statutes. The answer depends on the establishment, actual duties and separation type.

Related ManAT resources

• Employment and labour services in Bangalore
• Essential clauses in employment contracts
• Unpaid wage and overtime claims
• Legal notices for salary non-payment

This article is general information, not legal advice. The current statute, rules, notifications, state law, standing orders and contract should be verified against the specific establishment and person before action is taken.