Frequent question: What is salary in retrenchment compensation?

What is salary for retrenchment?

Amount of severance pay is equal to 15 days’ wages for each completed year of service. Under the Industrial Disputes Act, retrenched workers are entitled to 15 days’ wages for each completed year of service.

How is retrenchment compensation calculated?

Severance pay – a retrenched employee must at least be paid 1 week’s pay for each completed year of ongoing service. … if the employee was employed for more than 6 months but less than 1 year, s/he must be paid 2 weeks’ notice pay; if the employee was employed for more than 1 year, s/he must be paid 4 weeks’ notice pay.

What is the maximum limit of retrenchment compensation?

Exemption for retrenchment compensation

If retrenchment compensation is received by a ‘workman’ defined under Industrial Disputes Act, then it is exempt up to Rs 5 lakh as per Section 10(10B).

What is retrenched employee?

“Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees. … It is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business.”

What are the benefits of retrenchment?

What payments can you expect as retrenchment benefits?

  • Severance pay – this should be at least one week’s remuneration per completed year of service. …
  • Outstanding leave must be paid out in full.
  • Notice pay may vary depending on your employment contract.
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Can a company hire after retrenchment?

In summary, there is no duty on an employer to re-employ a retrenched employee, nor is there a duty to enter into an agreement that provides for preferential re-employment. The employer is, however, obliged to discuss the possibility of re-employment during the consultation process.

What are the legal requirements for retrenchment?

The retrenchment package

The employer is legally obligated to pay retrenched employees “severance pay”, being one week’s pay for each completed year of service. This amount may be higher if the employee’s contract says so, or if the industry rate is higher due to a Collective Agreement.

When should retrenchment compensation be paid?

While effecting retrenchment of the workmen, it is obligatory on the part of the employer to pay retrenchment compensation at the rate of 15 days wages (for every completed yaer) to be calculated at the last drawn salary of an employee.

Is retrenchment pay taxable?

Accordingly, the separation pay to be received by the retrenched employees as a result of their separation from the service is exempt from income tax and consequently from the withholding tax.

Is retrenchment money taxable?

If you are retrenched, you should still be paid your notice period. Of your severance package, your severance pay will be taxed like a lump sum in the same way that a retirement fund is taxed.