On 7^th February, this year, the Terminated Employees (Welfare) Bill, 2020 was introduced in the Rajya Sabha. It is a Private Member Bill which seeks to provide welfare measures for the employees who have been terminated by the employers and the matters connected with it.

In the present era where the role of the private sector has escalated substantially and the role of the public sector is going down, the questions connected to the welfare of private sector employees have started gaining importance. The threat of losing the job always looms over the head of every private sector employee and hence, to reduce the impact of sudden termination and to ensure job security for the employees, a private member Bill- Terminated Employees (Welfare) Bill, 2020, was introduced in the parliament by Mr. Rakesh Sinha, Member of Parliament. The statement of objects and reasons of the Bill describes – “At present there is no law to ensure that the employers provide terminal benefits in time and which makes provision for education, medical facilities etc., to the families of employees who have been terminated. The Bill seeks to achieve this objective.”

Key highlights of the Bill are:-

1. Eligibility: An employee will be eligible to avail unemployment benefits in case his/her employment is terminated owing to winding up of the establishment. The establishment can be winded up owing to several reasons including change in technology, orders of the court, economic slowdown or change in government policy.
2. Duration: An employee will be able to avail the benefits of the Bill only if the benefits are not part of the contractual agreement. The employee can use benefits for a period of nine months (including notice period) or till he gets employment at some other place, whichever is earlier.
3. Severance Package or Unemployment compensation: The Bill states that the unemployment compensation shall not be less than 60 percent of the gross salary of the terminated employee or the compensation shall be in accordance with the employer-employee agreement, whichever is higher, and the entire cost of the compensation shall be borne by the employer himself. The Bill also states that unemployment compensation can be dispensed with in a case where the employer is providing the employee with a severance package, provided that the severance package is higher than the unemployment compensation.
4. Corpus fund: The Bill also states that the employer must create a corpus fund for the benefit of terminated employees. According to Bill every employer must set aside at least 5 percent of the net profit towards the corpus fund for the welfare of terminated employees. The fund created will also be utilized for looking after the medical expenditure as well as educational expenditures of the terminated employees’ family.
5. Interest payment: If the employer fails to provide the benefits conferred upon the employee by the Bill, then he would be liable to pay penalty in form of interest payment which will be at the rate of 12 percent per month from the date of delay in paying benefits.

No employee will be eligible to avail the benefit of the act if the employer has terminated his employment because of reasons like indulging in cheating, found guilty by the court, using fraudulent means to appropriate money or having been found guilty by a criminal court of justice.

The Bill correctly highlights the cavity in the prevailing system related to the termination of a private sector employee where unemployment compensation is absent. Though the Bill is a beneficial piece of legislation, the enforcement of the Bill seems to be highly unfeasible.

Foreseeing the impact of Coronavirus pandemic (COVID-19) leading to global slowdown and industry players must also be praying that the Bill remains at its present stage itself. The Bill also goes against the government’s intention of improving India’s ease of business doing ranking and such provision will be seen as creating unnecessary hurdles for the businesses as implementation of the Bill would require substantial policy changes. Clarity must be provided in regards to certain terms of the Bill and exceptions must be made for loss incurring organizations.

Also, the requirement of having 5 percent of corpus funds for the welfare of the employees seems too high and may be brought down owing to competitive economic market. The Bill may also have an impact on employment generation as the industry might be cutting down on hiring owing to the costs involved in termination of an employee due to the anticipated slowdown in the economy by the Coronavirus disease spread in the country in the coming days.